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Jeremy Hutton: Milford Asset Management expert on what the Middle East crisis is doing to oil prices · Best of Business

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  Speaker 2: With that now as Jeremy Hutton, Milford Asset Management.
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  Speaker 3: Hi, Jeremy, Hi Heaver, Hew you doing.
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  Speaker 2: I'm very well, thank you. Now, all the financial market's
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  Speaker 2: attention has been on the Middle East. What's going on there?
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  Speaker 2: I'd imagine oil and energy prices are leading the moves
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  Speaker 2: across many asset classes globally.
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  Speaker 3: Yeah, yeah, that's right. There are a few moving parts here.
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  Speaker 3: But unsurprisingly oil has shot up aggressively over the past
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  Speaker 3: few days. Recruit oils up almost fifteen percent since the
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  Speaker 3: Iranian strikes began on the weekend. Now, this is important
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  Speaker 3: for many areas of financial markets, as it does flow
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  Speaker 3: through into many areas. But I suppose all the markets
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  Speaker 3: are trying to grapple with at the moment is how
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  Speaker 3: long this disruption in energy delivery is going to be.
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  Speaker 3: And I suppose that's really important for global inflation and
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  Speaker 3: for how long we could have a little spike up
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  Speaker 3: of inflation. And we know the straight up for moves
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  Speaker 3: by Iran that carries about twenty percent of the world's
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  Speaker 3: daily oil supply and If this stays closed or impacted
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  Speaker 3: for a while, then we could get some persistent higher inflation.
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  Speaker 3: We'll get high costs flown through into economies, and central
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  Speaker 3: banks may have to increase interest rates and response to this.
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  Speaker 3: And this could happen at a time where economic activity
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  Speaker 3: is falling. And that's what the market fares is a
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  Speaker 3: slightly ugly stakeflationary environment. Now Iran they've declared the straight closed.
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  Speaker 3: You know, Trump was trying very hard this morning to
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  Speaker 3: reassure markets and reopen it. But I think many countries
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  Speaker 3: around the world will want this energy flow to continue
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  Speaker 3: pretty soon.
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  Speaker 2: So how have the major market indicy has been faring
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  Speaker 2: so far?
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  Speaker 3: At a headline level in the US markets, the SMP
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  Speaker 3: five hundred and NASDAK, they've both opened down around one percent,
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  Speaker 3: which which doesn't seem like much given the situation. But
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  Speaker 3: below the surface in certain sectors there's been some huge
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  Speaker 3: shifts and a lot of volatility, but I suppose the
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  Speaker 3: mood has generally been very risk off. Some of the
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  Speaker 3: economically sensitive sectors like airlines, travel tourism unsurprisingly has been hit.
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  Speaker 3: Commodities that are linked to economic growth have also fallen.
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  Speaker 3: The US Staller There's been plenty of discussion on this,
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  Speaker 3: but at the moment, it's still acting as we expected
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  Speaker 3: it as a safe haven, and gold is probably the
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  Speaker 3: most interesting one. I mean, this is down sharply. Normally
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  Speaker 3: gold would be up in an event like this, but
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  Speaker 3: I suppose, just given how hot it's been, how much
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  Speaker 3: positioning and risk has moved into gold, it's actually moved
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  Speaker 3: the other way. In this risk of environment, I.
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  Speaker 2: See the European and the Asian markets are getting hit
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  Speaker 2: a lot harder.
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  Speaker 3: Yeah, this is arguably the story that markets are a
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  Speaker 3: little bit more concerned about. I mean, the European and
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  Speaker 3: Japanese main indexes they're both down of five percent, and
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  Speaker 3: Korea that's down around seven percent. And again this is
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  Speaker 3: linked to energy and the flow of LNG and gas
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  Speaker 3: this time, but it does show that how reliant these
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  Speaker 3: countries are on Middle Eastern energy, and a lot more
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  Speaker 3: so than the US. You're seeing spot gas prices in
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  Speaker 3: Europe rise very sharply, and this is sort of reminiscent
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  Speaker 3: of the of the Russia Ukraine crisis in twenty twenty two.
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  Speaker 3: And then Japan and Korea, you know, they've got some
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  Speaker 3: very valuable industrial and chip production that relies on the
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  Speaker 3: flow of this Middle Eastern gas, so investors will get
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  Speaker 3: a little bit more nervous on these markets if disruption
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  Speaker 3: continues for an extended period of time.
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  Speaker 2: Jeremy, can we quick run down on how we're doing
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  Speaker 2: here on the INSIDEX.
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  Speaker 3: Yeah, Insiet it's been a little holding up recently well,
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  Speaker 3: but it is still down one and a half percent
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  Speaker 3: over the past few days and travel stocks are leading
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  Speaker 3: leaving the falls like Circo and tourism holdings I'm in.
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  Speaker 3: In fact, there are only a few companies in the
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  Speaker 3: green so far this month or over the last few days.
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  Speaker 3: So yes, the Inside X under a bit of pressure
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  Speaker 3: as well.
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  Speaker 2: Good stuff mate, good to talk to you. Thank you,
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  Speaker 2: Jeremy Hutton, Milford Act Management.
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