- 2 days ago
Category
🗞
NewsTranscript
00:00I mean, deal or no deal, I guess whatever it is, it is better than status quo.
00:04Yes, the status quo isn't great.
00:06And, you know, we spend a lot of our time out talking to corporate clients.
00:09We work for 80 percent of the Fortune 500.
00:10And the initial stockpiles that people have for supply chains and energy, those are running low.
00:15So, indeed, in the corporate world and obviously countries as well,
00:18everybody has an interest in having the Strait of Hormuz open and this conflict ended.
00:22I think the challenge with this deal, of course, we have to see it and see the details.
00:26But, you know, first of all, who's negotiating on the Iran side?
00:28We're not entirely sure about that.
00:30But regardless of who it is, Iran now has been able to activate the lever that they've potentially had for
00:35years,
00:36which is monetizing and controlling the Strait of Hormuz.
00:39And it's unclear that they would give that up so easily.
00:41I mean, they've set up the Persian Strait authority, as it were,
00:45to kind of think about how to actually formalize, you know, a system for people to be able to go
00:50through.
00:51So it does appear that even the U.S. may be approaching these negotiations with that as a given,
00:57that there may be some, you know, control that Iran has to even cede.
01:02I mean, the fact that it has it on the negotiating table is significant in and of itself, I guess
01:06I would say.
01:06So all to say, it's unclear, of course, what's in the deal.
01:09But the key thing is, is that Strait of Hormuz going to be open?
01:12And what will the U.S. agree to?
01:14That's above and beyond where we were when we started in late February.
01:16So there is no peace and there is no war.
01:20As long as there is no escalation, it's better for the world.
01:22Well, it is good that there's no escalation.
01:25We do have an onshore ceasefire that's largely held.
01:27In both parties, there's been some shooting back and forth.
01:30But as people have agreed, you know, this largely, we're saying that that's holding.
01:35But the issue we have in our House view is if we were to continue for another, let's say, three
01:39to six months of the status quo,
01:41which is, again, not an escalation, which is great, but the Strait of Hormuz is such a critical juncture point
01:47for the global economy,
01:49we have a massively different situation if that were to be somehow permanently closed or limited in some way.
01:56So our House view is that there would be a higher chance of escalation if we do keep this status
02:01quo for a period of months.
02:02So we can't stay this way for the long term, that's for sure.
02:04How might a successful deal look like?
02:07What might both sides be willing to give, you think?
02:10Well, that's a challenge because the original fundamentals, at least on the U.S. and the Israeli side,
02:16are not even close to being met.
02:17I mean, you know, we're talking about moving out the highly enriched uranium out of Iran.
02:21We're talking about, you know, certainly the U.S. doesn't want to be able to pay war reparations into Iran.
02:26But Iran is coming apparently with an investment fund that they're asking for money to be put into that for
02:30their development.
02:31So the fundamental core issues that were in play before the U.S. and Israel bombed are still there.
02:37I think the landscape has shifted a bit to figure out, you know, what is it that could a deal
02:43be.
02:43But again, critical pieces of that would be the opening of the strait and then optics really around the rest
02:50of it and certainly compromises on all those other areas.
02:53But we've been here before. We've had a lot of, you know, tentative deals in the past, but it tends
02:59to fall apart on when details are actually put forth.
03:02And I would say as well, remember, both the U.S. and Iran have to also pledge to a domestic
03:06audience, right?
03:07I mean, both the citizens of those countries are in a lot of pain economically and we'll be looking for
03:12the hardliners in both of those countries.
03:14We'll be looking for a better deal than probably what's on paper right now.
03:17The truth of the matter is that Trump has been looking for an exit for a while now.
03:21It's gone longer than he thought it would be.
03:23It's three months and perhaps another three months to go.
03:25It is possible that he decides enough is enough.
03:29I'm just going to say Riff succeeded in containing Iran and he says the war is over.
03:36Yeah, I think that's right.
03:37Certainly he is he is keen to have hostilities cease.
03:42That seems clear from all the concessions that have been put forward and also the language he's been using.
03:48I think the challenge is, you know, in a negotiation, if you do have the other party, in this case,
03:52Iran, really understand how much the U.S. does want to end this war.
03:57Then do the concessions on the Iranian side get so limited that it then falls apart?
04:03Because, again, things like, OK, we're actually not going to move highly enriched uranium out of the country.
04:08And also, again, we want an investment fund.
04:10And also, again, I just keep coming back to the Strait of Hormuz.
04:12Are you going to have a system there where you're actually going to have Iran effectively controlling it in some
04:17way through licensing or fees?
04:18And so, you know, do you have Iran understanding that President Trump wants to end this so much that they're
04:24actually still going to be able to happily give away all the cards that they have?
04:28And as a sense now, the Strait of Hormuz is about the only leverage that Iran has at the current
04:34time.
04:35Well, it does.
04:35Yes.
04:36But also remember, they also have the ability to strike back on all those countries in the Gulf, especially those
04:41hosting U.S. bases.
04:42And that becomes another geopolitical impact, right, which is if you're a country that's been happily hosting U.S. forces
04:47on your shores, does that become – does that stay a nice deterrent, security deterrent for adversaries?
04:53Or does that then become actually a risk for you?
04:55So, indeed, it's not just a Strait.
04:56It's the ability for Iran to expand even potentially beyond the Gulf with their military capabilities.
05:02Surprisingly, three months since the war started, and the world seems to be pretty resilient.
05:06Growth is pretty resilient.
05:08Earnings have seemed, I guess, pretty much intact.
05:11Correct. But can that be sustained?
05:13I mean, how are businesses coping, and how do they anticipate in the coming months?
05:17Yeah, you're exactly right.
05:18Markets have been hotter than we expected.
05:20Oil price has been, you know, not – it's been in a margin that we would have wanted to see.
05:25That's not too crazy.
05:26But you're hitting the nail on the head.
05:27I mean, we work with, again, a lot of corporate clients that have been forward planning their second half of
05:312026 and into 2027, hoping that this trade opens.
05:35But if it doesn't, you're starting to see, again, both countries and corporates with their stockpiles of either energy or
05:41supply chain inputs.
05:42Those stockpiles are going down.
05:43I mean, we have some clients say to us, we had a certain stockpile and we're able to kind of
05:47play through, but we're really down kind of less than 30 percent of what's left that we need to do.
05:52So what is going to happen there is a question, and also, especially around Asia, it's not just the energy
05:58prices.
05:58It's the actual just availability period of energy for, again, summer travel months is a key conflict juncture point, as
06:07is as we get into the autumn, and the heating needs in some countries as well will become acute.
06:12So all to say, corporates are struggling, doing better now, and certainly more globally resilient economically than we expected, but
06:19that's not going to last forever, and there's a period of weeks still to go until corporates start to say,
06:24we're really struggling, and we're seeing demand destruction in energy, and also demand destruction from our either B2B or consumer
06:31actual clients of what they're buying from corporates.
06:34How painful and how ugly might it get in the second half, and perhaps even the first half of next
06:39year?
06:39Well, if we keep the strait closed as it is now, I mean, you already have countries around Asia where,
06:44you know, kids aren't going to school, food security is becoming a real issue.
06:48That's becoming a real rising issue, especially as fertilizers, we know, can't get out, and so that's impacting crops, for
06:54example, in South Asia and the harvest season going forward.
06:57So, yes, we're expecting to see not just prices rising for, you know, goods and services that you'd buy, but
07:03real critical issues around energy and electricity grids.
07:07You know, I know, for example, the platform tech companies and the data center companies are also very conscious of
07:13the energy and water usage that they have in certain footprints and how that's then going to be a rising
07:19issue in terms of competing with the grids for, you know, citizens in a certain location.
07:25What does it mean for a country's fiscal position?
07:27Can they still afford to subsidize energy for citizens, or can they not, and what does that look like?
07:33So, it's going to get, if we continue in this way, it's going to get significantly worse, and we see
07:39this in the IMF and also the European Central Bank projections.
07:42They just came out a couple of days ago saying that they expect, you know, given these U.S. policies,
07:47a big impact economically.
07:48So, expansion plans in countries like Indonesia and the Philippines would take a back seat?
07:53For some companies, but to be clear, there is an opportunity in this as well, right?
07:56So, to be clear, there is, depending on your sector, there are certainly opportunities to be had, again, particularly in
08:00tech and tech-adjacent sectors,
08:01and we're seeing this, you know, variable geometry that we've been discussing as it relates to geopolitics, since the Davos
08:08speech by the, you know, Canadian prime minister,
08:10we're seeing that now being applied also to trade and to resiliency among countries and what they're doing to trade,
08:16you know, ensure they have food security and whatnot.
08:18So, all to say we're expecting things to get significantly worse, but there is opportunity for some sectors in there.
08:24Certainly, I have, for example, a logistics client that says they're actually doing quite well just in terms of helping
08:30countries bring back onto their shores things like food and vaccines and energy grid components.
08:36And so, really driving that national resiliency.
08:38If you're in business in a space that's working to support those areas, there's a lot of demand for you.
08:43So, Singapore's hosting the Shangri-La Dialogue this weekend.
08:48We're expecting the defense chiefs from 44 countries.
08:51What do you think is the key thing that they'll be looking out for, and what kind of messaging do
08:54you think we'll hear from Pete Hegseth to the rest of the world?
08:57Yeah, so, Pete Hegseth's speech will be watched by many, looking closely for what he's going to say, clearly in
09:05the wake of, you know, an Iran deal that may be imminently, you know, forthcoming.
09:09But remember, he was also just on this trip to China with President Trump, which usually the defense secretary doesn't
09:15go on.
09:15So, that's actually quite interesting that he was just there.
09:17It's notable.
09:18So, it's going to be very interesting to watch what he's saying about Iran, but also what he's saying about
09:22China, because, again, that summit, from the U.S. point of view, seemed to go quite well.
09:27You know, some would say that China came out of that summit with more concessions than the U.S. did.
09:33But certainly, we expect to see messaging where the U.S. is continuing to have a floor in the U
09:40.S.-China relationship.
09:41And so, you know, they're now moving towards looking at the next Trump-Xi meetings later in the fall.
09:46So, we're not expecting to see something too dramatic from Pete Hegseth.
09:50You remember last year, he had quite a fiery speech, and, in fact, the Chinese government came out and said
09:54that he had vilified China.
09:55We're not expecting to see anything like that.
09:57But I do think, to your point, a lot of attendees will be watching for what is the U.S.
10:03going to say as it relates to security hotspots here and, frankly, U.S.-led disruption as it relates to security
10:09issues and then knock-on impacts to the economy.
Comments