00:00So it's clear that optimism is reigning supreme right now, that people are, that the markets are kind of looking
00:05forward to a continuation of the ceasefire and potentially a long-term negotiated agreement between Iran and the United States.
00:13But just as you highlighted, I think we can't lose sight of what is actually happening and the risks that
00:18remain.
00:18The blockade that is now in effect obviously is still relatively new, but if it maintains, you know, removes potentially
00:26up to 2 million barrels a day of Iranian oil that was still exiting the Strait of Hormuz and, you
00:32know, Bloomberg's own estimates put that at, you know, impacting prices at close to 7 to 8 percent, which we
00:36did initially see a rise to that effect.
00:39But we've lost much of that today in optimism, and in addition to what's currently happening and the risk it
00:46poses to oil prices, the reality is that while everyone is optimistic today, there is the broader risk of re
00:53-escalation in this conflict and the potential of Iran seeking to retaliate against energy infrastructure in the region or potentially
01:00going after energy infrastructure in the Red Sea, particularly Saudi Arabian,
01:05that has been so important to escape valve for oil getting out of the Gulf.
01:10You know, it's interesting, too.
01:12One of the things, Adam, we're increasingly talking and thinking about is the upcoming meeting between the United States and
01:17China.
01:18Javier Blas of Bloomberg Opinion has a really interesting column out, and he talks about his first line is the
01:25black market for Iranian oil wouldn't exist without China.
01:28Before the war began, Beijing bought 95 percent of all the crew Tehran shipped via network of sanctioned tankers, mysterious
01:36traders, and shadowy financial links.
01:39Hence, President Trump isn't just targeting Tehran with his blockade of the Strait of Hormuz.
01:44He's aiming at Beijing, too.
01:45So I do think about sending a message to Beijing ahead of those talks, but also, you know, how that
01:54greases the wheels, perhaps, on those upcoming negotiations.
01:57We talk about these global choke points, right?
02:00What you need to exist as a country going forward for economic or national security reasons, and oil is certainly
02:09a choke point for China.
02:12So that's absolutely true.
02:13And I think he's keying in on an important aspect of the situation that even before the crisis, China relied
02:20on Iran for upwards of 13 percent of its imported seaborne oil.
02:24And the fact that you had two million barrels still getting out, much of it going to China, was a
02:29welcome relief for Beijing as it's been heavily exposed to the closure of the strait.
02:33Because not only is it relying on Iranian oil, but also Gulf oil representing together close to 40 percent of
02:39its imports.
02:39But the reality right now, I think, you know, to be clear, the Trump administration's focus was very much on
02:45pressuring Iran.
02:47And I think their hope was actually that moving forward with this blockade would allow for some short-term pain
02:52to force Iran back to the table.
02:54With the idea that while it might pressure others, the intent is to focus it on Tehran and hopefully not
03:00lead to retaliation from countries like China that do have significant leverage theoretically over the U.S.
03:05Is it working, Adam?
03:07I mean, I think we're going to have to wait and see, right?
03:10We're only a few hours into this initial blockade.
03:13Now, on one hand, I think we have seen initial signs from Tehran that they're a little reticent to try
03:18and push the blockade and test the United States.
03:21There's some conversation about whether or not they will refrain from exports in the short term as they push towards
03:27further negotiations.
03:28But the proof will be in whether that actually moves forward, right?
03:32Whether Vice President Vance gets on a plane and heads to Pakistan or any other location to continue those discussions.
03:39And again, the discussions are important, but it really is about whether they can find a way to reach a
03:45new agreement that goes to areas that neither side has so far been willing to go on compromise.
03:50You know, Adam, I'm just wondering about the blockade and what you and the team have been able to glean
03:56from the open source intelligence, what the U.S. government has said.
04:01What are the mechanics of this blockade? Like, how does it work? Where is the U.S. doing it? What
04:06are the assets that are required? What can you tell us?
04:09So, I think the first important note is to understand that this is not physically stopping ships from transiting the
04:15Strait of Hormuz.
04:16The United States has set forward what they say is an inspection and potential seizure regime that takes place east
04:23of the Strait in a much more open body of water in the Gulf of Oman and potentially into the
04:28Arabian Sea itself.
04:29And so they're pushing the U.S. military assets further away from the Strait of Hormuz choke point and hopefully
04:36limiting their exposure to Iranian weapons, although they are still at risk.
04:41Now, the first goal, though, and the first tool they have in this operation is actually just, you know, shipborne
04:48communications, reaching out and telling ships that they shouldn't attempt to either enter an Iranian port or attempt to leave.
04:54And in fact, that's what U.S. Central Command said today was successful, is reaching out to these ships, warning
05:01them that if they do attempt to leave, they will be boarded and seized.
05:04And supposedly several of those vessels chose not to exit and actually return to port.
05:10Yeah, it's just kind of fascinating to watch this happen and try to figure out, you know, whether this is
05:16all working and whether it leads to a different outcome.
05:19You know, one of the things, Adam, that we were thinking about just China in general, their draw on global
05:24commodities, be it oil or what have you.
05:27Right. We talk often about, you know, copper usage.
05:30If we see numbers down, we think about what's going on in China in terms of manufacturing.
05:35I mean, it is a great global economic indicator.
05:38And you do wonder for China alone, its economy, it needs to make sure that it has access.
05:46That's absolutely true. And I think, you know, so far in this conflict, what we've seen is that China has
05:51been relatively well insulated from the short term impacts.
05:55And that's because of a massive oil, strategic oil reserve that they built up both from a government side and
06:01commercial side over the past several years with, you know, the risks of such a conflict in mind.
06:07And also very large moves on energy transition that they've made with a movement towards renewables and the electrification of
06:15their automobile industry, all of which has given them a lot more space to move and operate in this crisis.
06:20But over time, they will feel more pressure if this war continues and particularly if the Strait of Hormuz remains
06:27completely blocked, including of Iranian oil.
06:30And that's when they may choose to start pressuring all sides further and start using their leverage, whether that be
06:36pressuring Tehran or pressuring the United States to try and at least get the flow of oil moving again.
06:41Adam, what would you say the status of the Strait is as we speak?
06:45Currently, all signs point to it being virtually closed.
06:49You know, as you mentioned at the top, we had one vessel, sanctioned vessel, move through the Strait itself and
06:55transit eastbound this morning.
06:57But that vessel then subsequently seems to have turned around and stopped outside of Amman.
07:02So it's unclear where it's going, but it certainly hasn't left the area.
07:05And it's, you know, remains uncertain whether the U.S. actually already engaged that vessel.
07:09But considering we were used to see over 130 vessels a day of varying types moving through the Strait, one
07:15vessel certainly doesn't count for much.
07:17You know, I was talking to some friends about this and, you know, people who aren't even like, you know,
07:22studying geoeconomics of the region are now understanding the effect of a closed Strait of Hormuz.
07:27And I think one area that's also understanding the power of it is Iran right now.
07:32And this goes to show, one of my friends said, that Iran can actually wield this power that essentially was
07:42never tested in the past.
07:44So what's to stop if it does open up? What's to stop Iran from from saying, wait a second, this
07:49worked so well for us in the past.
07:50We're going to go ahead and and close it again.
07:53I think that's a major concern is going to increase uncertainty for those who want to operate in the region
08:00moving forward, regardless of the outcome.
08:02And simultaneously, I think, despite the vice president Vance and the president emphasizing this question of uranium enrichment, the status
08:10of the Strait as an outcome of negotiations is key and certainly essential for markets and Gulf countries.
08:17And right now we don't have any sense for what Iran has or has not been willing to put on
08:21the table and what the United States position actually is in the room.
08:25And clearly, Iran, though, as you had stated, they understand the leverage they hold and the fact that the Strait
08:30itself represents their greatest leverage over the international community.
08:34And so, you know, it seems less likely they'd be willing to give that up without substantial gives from the
08:39other side.
08:40But we're going to have to wait and see. But it really is the issue to watch.
08:44Yeah, I do wonder, too, coming on the other side of this, what this means for China in terms of
08:49its access to energy.
08:50Does it create new alliances, perhaps with the United States, who is a net export?
08:54Like, I just wonder kind of where this all goes ahead of those meetings and those talks between the United
08:59States and China, Adam.
09:01So I think China is certainly going to work to further diversify its its input of energy from all sources,
09:07not only its imports, but domestically.
09:09And in the short term, that may mean importing more from the United States to deal with any crisis.
09:14But the reality is they don't want to expose themselves to U.S. leverage either.
09:18And so the question really becomes, how do they find a way to increase their energy independence and security?
09:24And that really looks towards renewables, nuclear energy and, you know, even going back towards some of their coal power
09:32plants.
09:35So I do think in the short run you could see purchases towards the U.S., but they don't want
09:39that exposure either.
09:40And then you could see them who are in the U.S. trade in China.
09:40So, you know, this is how if you use it then?
09:40You can see or if you're going to buy a little bit, you get a little bit better.
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