Latest / The Fourcast / Middle East at war: will conflict lead to global economic collapse?

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Middle East at war: will conflict lead to global economic collapse? · The Fourcast

0:00
Bryanian regime is trying to extract the maximum economic
0:04
damage here. They they want energy.
0:06
That's the policy. To go up as high as possible.
0:08
I mean, basically what Donald Trump has done, you know, he's
0:11
gone and broken this country and he's gonna walk away from that.
0:14
Country and it's 1/5 of the world's oil going through the
0:17
Straits of Hormuz. And this is the M25 of the
0:19
tanker route. How many tankers go through it
0:21
every day on average? Typically 70 to 80 tankers. 70
0:24
to 80 tanker, that's right. And at the moment. 0 Nothing.
0:32
Hello and welcome to the forecast.
0:34
Is the war in the Middle East going to crash the global
0:36
economy? Gas prices are spiralling, the
0:39
cost of a barrel of oil is surging, tankers are stuck in
0:42
the Straits of Hormuz. Jones have been slamming into
0:45
Saudi Arabia's biggest oil refinery, the terminal is on
0:48
fire in the UEA, energy prices are soaring, stock markets are
0:52
tumbling. And we're only days into this
0:55
conflict. What is the economic outlook if
0:58
this war continues for weeks, as Donald Trump has suggested,
1:02
Perhaps even months? And there's the increased fiscal
1:05
headroom that Rachel Reeves has just proclaimed in a spending
1:08
review about to be decapitated. Joining me to discuss all this
1:12
is our economics correspondent Helia Ibrahimi and Doctor Neil
1:15
Quilliam, Middle East energy policy specialist at the
1:18
geopolitics think tank Chatham House.
1:20
Welcome to you both. Let me start with you, Helia.
1:23
Bad day, worse than yesterday. It's definitely starting to look
1:26
much nastier. I think yesterday there had been
1:29
this hope from the market that yes, it's a geopolitical crisis,
1:34
but that it would be resolved by the end of the week.
1:37
Why on earth do they think that? Well, you know this hope that
1:40
you know, you have a president, the Taco president that might
1:43
change his mind and get bored and move away and things would
1:48
start to slow down. Today.
1:50
Those energy prices are starting to look much, much nastier.
1:54
And I guess the the key component here is that they're
1:57
looking at what the Iranians are doing to the Gulf states.
2:00
They're looking at what the Gulf states are either already doing
2:03
or threatening to do to Iran. They're looking at what Israel
2:06
is doing to Lebanon. And suddenly this thing is no
2:08
longer just, you know, between Israel, the United States and
2:12
Iran. It has become a regional
2:13
conflict. It's looking like a very complex
2:16
regional war. Regional war is a strange,
2:19
strange term to use. But absolutely, Israel, Iran,
2:24
US, Iran, now the Gulf states never really saw themselves as
2:28
being part of this, but they're all being dragged into it.
2:32
We'll talk about that in a minute, but just in, in terms of
2:34
the indicators, the things that we really need to look out for
2:37
and what's looking particularly wobbly today.
2:39
So let's just go them briefly through them briefly the the
2:42
dollar. Well, I, I think I would start
2:45
with oil. You know, the first, the first
2:48
thing you, the obvious 1, you know, the, the thing that people
2:51
have in their mind over the weekend, people will say, could
2:54
you get to a situation where oil hits $100 a barrel?
2:58
That's a kind of breakthrough moment.
3:01
And yesterday it went up a bit, but not a huge amount.
3:05
Today it's gone up over $85 a barrel.
3:08
So that is a significant move. But even trickier than that is
3:12
what's happening to natural gas prices.
3:15
Yesterday we had Qatar closing its energy company.
3:21
Qatar produces that one company, produces 20% of the world's
3:24
global and natural gases. It closed that down today and
3:29
yesterday. The price of natural gas in
3:32
Europe has gone up by 100%, OK. Now also, I've just read, I
3:36
mean, things develop all the time, of course, but that the
3:39
Iranians are going to hit the oil city of Dakaran.
3:43
Now that would be be a massive deal, wouldn't it?
3:45
Absolutely. I mean that that's, that's the
3:48
centre of the Eastern Province that, you know, that's the crown
3:50
jewels for Saudi Arabia. I mean, just just the sheer
3:55
threat that it's going to strike that, you know, sends shivers
3:58
down the down the oil market. You had that fire in Rastanura
4:04
yesterday, Saudi Aramco, but that would be even more
4:08
devastating to them. Another hit to that, and that's
4:10
what people are worried about, is, is the oil capacity,
4:13
capacity in the region going to be stuffed?
4:16
Saudi has some pipeline. So there's some ways of getting
4:20
oil that bypasses the Straits of Hormuz.
4:23
But for example, when it comes to LNG, when it comes to natural
4:26
gas, Qatar has no other option but to use the Straits of
4:30
Hormuz. So when it's closed, that
4:32
effectively means no business. And it's 1/5 of the world's oil
4:36
going through the Straits of Hormuz.
4:38
China is a massive recipient of that oil.
4:40
That's where they get a lot of their oil from.
4:42
They must be wired, presumably. Well, listen, the reason so you
4:46
said to me why yesterday were the markets relaxed?
4:49
Well, winter is over. February has just finished.
4:54
So all of the oil shipments had gone on to super tankers just
4:59
days before. And places like China have a
5:02
huge kind of oversupply. In fact, the world has an
5:06
oversupply, a glut of oil right now.
5:08
So if you were going to be planning a war, a conflict in
5:13
the Middle Middle East, you know the beginning of March was the
5:17
perfect time for it, as long as it stays within a short period
5:22
of time. Because if it's a week, the glut
5:24
of energy allows you some cushioning.
5:28
If it becomes a conflict that gets drawn out over weeks, over
5:32
a month, then that glut of energy isn't going to be enough
5:35
cushioning. And Neil, just remind us of the
5:37
geography of the Straits of Hormuz.
5:39
I mean, it's a sort of kink, this elbow, you know, of water.
5:42
So you, I mean, you've had you've, you've got Iran on one
5:45
side, you've got Oman on the other side.
5:48
You know, there's a pinch point. It's it's a 21 mile stretch.
5:51
But, but because of shorelines, because of the rockiness, there
5:54
are just two lanes and those two lanes are two miles wide each.
5:58
So you're talking about a four mile distance between which, you
6:02
know, these very large crude carriers and LNG tankers have to
6:06
pass. So it's relatively small space
6:09
and. This is the M25 of the tanker
6:11
route. How many tankers go through it
6:12
every day on average? Typically 70 to 80 tankers. 70
6:15
to 80 tankers, that's right. And at the moment. 0 Nothing.
6:20
Nothing is going. And is that because the Iranians
6:22
have officially said this is now closed and if you go through,
6:24
we're going to blow you up? I mean, they've been slowing
6:27
since, since the weekend and, but, but basically, yes,
6:29
because, but because no ship wants to pass through there, no
6:33
insurer wants to ensure those ships are the passing through
6:36
there. So it's this is the scenario
6:38
we've all been sort of predicting for a long time.
6:41
This is the closure of the Strait which is.
6:43
The scenario really, you know, and you've got people like
6:47
Lloyds Lists in London who ensure a lot of these shipping
6:50
lines today coming out and saying we designate that a war
6:54
zone, basically making ships uninsurable even if they could
6:58
get through passage. I mean, the iron is that, you
7:00
know, the first Gulf War, you know, with George HW Bush in
7:03
charge, was started because the Americans were worried and the
7:06
Saudis were worried that the Iraqi Saddam Hussein would
7:09
invade Saudi oil fields and, you know, not stop in Kuwait, but go
7:13
beyond that. And now we have a war that was
7:16
started by the Americans and the Israelis, as a result of which,
7:20
you know, the oil industry, you know, is in danger of shutting
7:22
down the. The Americans are fine.
7:24
That's that's the that's the dynamic that's massively shifted
7:28
since they're more self. Sufficient than they were
7:30
before. Not just more self-sufficient,
7:32
they are the number one oil producer in the world.
7:35
It is no longer Saudi Arabia. So the US is in a very good
7:40
position, actually, the if the price of oil goes up, it might
7:45
not be within Trump's, you know, inflation target.
7:48
But if the price of oil goes up, they are a beneficiary of that.
7:52
OK, so but the politically this is important, isn't it?
7:56
Because the Texas oil companies are going to make a ton of
7:58
money. You know, Trump's mates in the
8:00
oil industry in Houston or wherever else they are.
8:03
But the average consumer, the guy that he and gal, he was
8:06
supposed to protect in the election campaign, they're going
8:08
to pay more the pump. Well, no, but but this is my
8:10
point is that they are fairly insulated.
8:13
The people of the going to be hurt the most are people in
8:17
Europe because we are not energy sufficient.
8:20
So the American consumer has a bit more buffer than we do in
8:25
Europe. In in Asia, for example,
8:28
countries like Japan are really in a a bit of a pickle as well
8:33
as is India. They are reliant on Middle
8:36
Eastern oil and it will be a hit to them if this continues.
8:40
But the the US, interestingly, is probably in a stronger
8:44
position than it's ever been, which allows it to shield its
8:48
consumers. In fact, I was just looking at
8:50
this afternoon before coming to the podcast, the LNG contracts,
8:56
that's natural gas contracts for American companies.
9:00
We're at record levels, the highest level since 2022.
9:04
Neil, do you agree with that, that America is more
9:06
self-sufficient now and therefore can afford to do this,
9:08
or? I mean, it is it, it is
9:10
self-sufficient, but it does still need to import refined
9:14
products. So that's so that that's where
9:16
the pinch point comes. It can export it's crude, but it
9:19
doesn't have the, the refining capacity to produce enough for
9:22
it for its own, you know, factories for its own
9:24
consumption. So that's so that's where the
9:26
costs will transfer effectively from, from higher oil prices
9:30
into, into the market space. And it's just interesting that,
9:33
you know, Secretary of State for Energy Chris Wright had said, I
9:35
think, I think it was about a month ago, I heard him saying
9:38
that, you know, President Trump is not, he's not the president
9:41
of the oil companies. He's the president of of the
9:44
people is there to deliver low oil prices.
9:46
So I do think we're going to see, you know, we are going to
9:49
see an increase at the gas pump. But but more importantly, tell
9:53
us about the impact in the Gulf states, you know, in Qatar, in
9:55
Bahrain, in Kuwait, in the UEA, you know, in, I mean, in Saudi
10:01
Arabia, these countries rely heavily, actually Dubai probably
10:04
lesser, but the others rely heavily on oil and gas.
10:08
This is existential for their economies.
10:10
Isn't it? I mean, it really is.
10:12
I mean, all of those countries that you've named have been, you
10:14
know, diversifying away from oil.
10:17
They've been transforming their economies, but they are still
10:20
heavily, heavily dependent on oil.
10:22
So, so, so this, I mean, existential is a strong word,
10:27
but if they have no, no, no way of exporting their, of their, of
10:32
their main product, you know, product, their main commodity,
10:34
then then their income's going to dry up.
10:36
Saudi Arabia does have the, the capacity, as you said, to export
10:40
5 million barrels a day from east to West.
10:42
That's never really been tested. The Emirates can can export 1.6
10:47
million barrels a day through Fujairah, but these this is
10:50
peanuts compared to what they're actually.
10:51
Supposed to, and when I said existential and I didn't use the
10:54
term lightly, uh, it was more in terms of what they, what they,
10:57
those Gulf states have become and what they see themselves as,
11:01
which is these safe business hub, service industry hubs.
11:05
There are 250,000 Brits living in Dubai and, and not because
11:10
they love oil and gas, but they're living there because
11:12
it's a great lifestyle. They pay hardly any tax at all.
11:15
They're making tons of money. You know, you just look what's,
11:18
what's happened to the airlines, right?
11:19
So that whole business model for those countries is in danger of
11:22
being blown up as well. Yeah, no, no, AB, AB absolutely.
11:25
And their visions, which, which are there to transform, you
11:29
know, transform the countries, these countries have started to
11:32
sort of very much kind of punch very, you know, very hard and,
11:35
and above and, and see themselves as these rising metal
11:38
powers very attractive to, you know, to, to external
11:41
investment. It's, it's, it's a little Oasis
11:45
literally for, you know, for businesses, for expatriates to
11:48
go. But no, Absolutely.
11:49
The very sort of raison d'etre is now really, really under
11:52
threat. There's 5000 UK businesses based
11:56
in Dubai, for example. Yesterday I was speaking to the
11:59
guy that heads up the UAEUK business group and he was
12:05
interestingly cowering in a corner because they can't be
12:08
anywhere close to a window, but saying don't worry, we're really
12:12
into the probe entrepreneur probusiness environment in this
12:17
area. It's not going to change.
12:18
But obviously the reality on the ground is very different because
12:22
when we talk about insurance costs going up, it's not just
12:25
shipping insurance that's going, it's skyscraper insurance, it's
12:29
executive insurance, there's a whole series of additional
12:33
overheads and costs. But I wanted to come on to the
12:36
issue of costs and supply because we were talking about,
12:40
you know, do you get a chokehold?
12:42
Do you get a stranglehold where we don't get energy in the UK,
12:46
for example, when it comes to natural gas, which we are
12:50
reliant on, although we have diversified away from Qatar as
12:55
about 1.9% of our energy consumption comes from Qatar,
13:00
the natural gas. But when we go to North Sea and
13:03
we go to the US, but gas is priced.
13:07
Globally. So when the when the price goes
13:10
up, even if your supply is there, the price you pay is much
13:16
higher. When yesterday I was speaking to
13:17
some energy bosses who were saying don't worry about supply,
13:21
we've got that. That's not a problem, but it is.
13:24
The same with oil, right? It's the same with oil.
13:26
Unless you're producing this stuff, you're going to be paying
13:28
more for it as a consumer. Absolutely.
13:31
But in the UKI mean, this is what the Chancellor was saying
13:34
today. I'm meeting the North Sea
13:36
representatives to discuss, you know, to discuss how they're.
13:40
Handling this. Crisis, I mean, completely
13:43
unravels everything. You know, today the OBR says in
13:48
its forecast. We think that, you know, gas
13:51
prices, I think it's there's going to be a fall of 15% in gas
13:56
prices. Well, that might not materialize
13:59
at all. So do you think one of the
14:00
stories you might be covering the next week or you'll you'll
14:02
be covering is the reopening of North Sea oil pipelines and and
14:06
the rigs? I'm sure there'll be companies
14:09
that are saying that there is, there is a group of people who
14:11
are saying we need to look again.
14:13
There are Scandinavian countries that have changed their tactic
14:17
when it comes to the North Sea. Is the UK missing a trick by not
14:22
going back to the North Sea? Clearly the, you know the what?
14:26
There has been a discussion about it, but I think at this
14:29
point the, the chancellor wouldn't confirm that that's
14:32
happening. I think the problem for us is
14:35
that the outlook that the UK government has proposed, which
14:39
is everything's more or less OK. Growth is a little bit down
14:43
today, productivity is a bit better, tax receipts are a bit
14:46
better. All of that starts to unwind if
14:50
inflation goes higher and consumers are crushed again by
14:55
energy prices. I was going to ask you
14:56
specifically about Rachel Reeves a spring statement in a minute
14:59
because, I mean, you know, she was, I think she was hoping to
15:01
be quite optimistic about it. And suddenly this massive, this
15:05
massive, you know, bolder in the puddle just on, on our oil
15:09
versus other people's on. I mean, is it a viable option
15:12
for this country to start, you know, digging and pumping again
15:15
and, and what are we up against in terms apart from domestic
15:18
politics? I mean it's negligible to be
15:20
honest. I mean what we can get out of
15:22
the ground is negligible in terms of contributions to, you
15:25
know, to, to world crude supplies.
15:29
It's not going to make a massive impact on on price.
15:33
It's going to take a long. Time because the price is set
15:35
globally. Because the price is set
15:36
globally and because what we can produce is going to be
15:38
negligible. I mean, you know, we've, we've
15:40
seen the US go go up from whatever it was 3 million to
15:43
being, you know, 12 million barrels.
15:46
These are old fields. These are fields that, you know,
15:49
need, need a lot of love, a lot of care to, you know, to, to
15:53
lift that. And to be honest, very few large
15:55
companies at least are going to be very interested in investing
15:58
in that. They want, they want to go to
15:59
places like Libya where where you know the situation on the
16:02
ground is shifting and changing and the value underground is, is
16:06
much greater. So do you think when Rachel
16:08
Reeves announces that he's going to meet these oil bosses in #10
16:12
or #11 is that just performative?
16:14
I think it's performative, really.
16:15
Yeah. Yeah.
16:16
No, I do, no. Don't be so cynical just to get
16:19
back to, you know, the overall picture in the Gulf, which I'm
16:22
fascinated by. So you've got these safe havens
16:24
that were making tons of money. You know, there's not much
16:27
politics, but that's OK because we're allowed to drink
16:29
margaritas at 6:00 in some places, not everywhere.
16:32
But then you've got this potential Libya right to the
16:35
north of you, except it's much, much bigger than Libya.
16:38
And by Libya, I mean, a country that was decapitated.
16:41
Colonel Gaddafi was removed from power by, you know, the Brits
16:45
and the French and the US back in the day.
16:48
And then he was killed. And ever since then, I think it
16:51
was, what was it, 2011, 2012? That country has been stuck in a
16:54
civil war. Now imagine that with 90 million
16:57
people, Iran, you know, more weapons, more people who are
17:02
fundamentally engaged in, you know, in violence as a daily
17:06
business pursuit. That is really troubling for
17:08
that neighborhood. Is that I mean a nightmare
17:10
scenario? It is a nightmare scenario,
17:13
absolutely. And this is also a country that
17:16
that could export 2.53 point 3,000,000 barrels a day.
17:20
So it's, it's a nightmare scenario to have an unstable
17:23
country that is effectively at war with itself maybe for
17:27
another decade that you know, that there are regional impacts
17:32
on, on the states around there, on those safe havens as, as, as
17:35
you've called them. I mean, basically what Donald
17:38
Trump has done, you know, he's gone and broken this country and
17:42
he's going to walk away from that country.
17:44
There is, there is. Maybe his best friends, and they
17:46
are his best friends, floundering.
17:48
Maybe they won't give him that plane after all.
17:49
The Qataris, Who knows? What about the Russians, Helia,
17:53
are they? Are they having a field day with
17:54
all this? Well, I mean, the, they're,
17:56
they're a key beneficiary of the oil price going up.
18:00
You know, it's, it's the, the income that allows them to
18:05
pursue the war in Ukraine. Where does it come from?
18:07
It comes from oil, but not. Everyone is buying.
18:10
Russian oil. Because.
18:11
So you've got 2 things that they're winning on here. 1 is
18:15
that they don't have competition from Iranian oil selling to
18:20
Chinese selling sanctioned oil, you know, against the rules.
18:25
And then #2 just the income, every, every cent that oil goes
18:29
up is a cent in the Kremlin's pockets.
18:32
So you know, they are huge beneficiary of this chaos.
18:36
So just some other global indicators that might be
18:38
affected by this because I think we should think of this as sort
18:41
of row of dominoes and the first dominoes have fallen.
18:44
I just wondered to what extent the others will fall.
18:46
So I mentioned the dollar briefly, which is having having
18:48
had a terrible year has ticked up quite a bit actually,
18:51
especially compared to the pound.
18:53
Not the most important indicator, but it tells you
18:56
something, doesn't it? I can tell you that U.S.
18:58
Treasuries, yes, are are are up not quite as much as 10 year
19:03
gems are, but you can see that how that, as you said, the
19:08
domino, the pieces are going across from energy prices to
19:12
equities to bond yields where markets are starting to worry
19:17
about the inflationary impact. So there was a there's an asset
19:21
manager this morning that put together 3K scenarios where if
19:25
it finishes by the end of this week, don't worry, it'll all you
19:29
know, run below. If it if it, if it goes on for a
19:33
week and a half, two weeks, you could still have 0.2 percentage
19:38
points in developed countries of higher inflation, which is going
19:42
to just tip interest rate cuts down the line a little bit.
19:48
Just this month we were expecting last week the Bank of
19:51
England to cut interest rates. I think there was an 80% chance
19:55
that that was going to happen today, 25% chance, you know,
20:00
it's not 0 yet, but it's significantly reduced.
20:04
It means inflation is likely to stay longer and interest rates
20:08
are likely to stay higher, and that is a combination that is
20:11
very bad. For consumers.
20:13
I guess what I'm asking is that we've had an extraordinary year
20:16
ever since Donald Trump came back into power where he's done
20:19
some really dramatic things, including the 12 day war between
20:24
Israel and Iran last summer, which Americans got involved in
20:27
briefly, including, of course, famously, Liberation Day on the
20:31
2nd of April when the tariffs went up and that trade war with
20:34
China. These were really, really
20:36
dramatic events. And yet the markets kind of
20:38
almost shrugged their shoulder, right?
20:40
It strikes me as if the shoulder shrugged.
20:42
Meeting days are over because of what's happened.
20:46
Absolutely, absolutely. I mean, no one I think could
20:50
have anticipated this unfolding in in the way it's done.
20:55
No one would have imagined that Iran would be striking every
21:00
single Gulf state and we will be looking at some form of regional
21:04
war. I mean, that that was almost
21:06
unimaginable. And as I said earlier, you know,
21:09
working for different companies and for think tanks, we would
21:12
always kind of game out and think about, you know, the what
21:15
the closure of the straight itself would mean.
21:17
And there was always, well, it's not really going to happen.
21:19
You know it's it's. A nightmare scenario never
21:22
material is. That the last time they were
21:23
closed. By the way, when did they last
21:25
close? I don't remember them ever being
21:27
closed. What about doing the the second
21:28
Gulf War? No, I mean they temporarily but,
21:31
but, but they weren't, but they weren't closed in, in this, in,
21:34
in this nature. But there's one of the little
21:36
thing I just want to touch upon and that is 30% of the world's
21:40
urea, which is the core constituent fertilizer, passes
21:43
through the Strait of Hormuz. There's a knock on impact on
21:48
food security from this crisis as well we might.
21:51
And fertilizer was already impacted by by the Russia war in
21:53
Ukraine. Absolutely.
21:55
So, so we need to think about that too.
21:57
And then also for those for those Gulf states in particular
22:00
that have managed to sort of sit outside many of the region's
22:03
conflicts. I mean, they're now right,
22:05
right, bang in, in, in the centre of that, but 70% of their
22:10
foodstuffs and goods comes into the Strait of Hormuz.
22:13
So, so there's a food security issue looming in the Gulf too.
22:17
So this is something that's that's going to play out through
22:19
the world economy. We have done quite a few
22:21
podcasts about the AI bubble and whether it would burst.
22:25
Is there a scenario where the stuff that's happening in the
22:27
Gulf has got nothing to do with AI whatsoever or big tech
22:30
companies in the United States that that fire could spread to
22:33
them and that could ignite some kind of crash?
22:37
Well, look, the the easiest thing to say is you've, you've
22:40
got a very turbulent marketplace at the moment because everybody
22:44
is wondering whether the AI bubble is going to burst or it's
22:48
going to make them a multi millionaire, which allows the
22:51
market to go for these wild swings that we've seen this year
22:54
already. The second is that you've got
22:57
energy costs. You know these AI companies.
23:00
Are huge. Amount of energy guzzlers.
23:03
So if energy costs go up, it does have a direct correlation
23:08
with this, you know, half a trillion dollars worth of
23:11
spending they want to do on data centres.
23:13
Let's talk about Rachel Reeves. So today's lead story.
23:16
Was going let's, let's make that happen.
23:18
I love that you know, there comes in every podcast there
23:20
comes a point when we say let's talk about Rachel Reeves.
23:22
So that was going to be our lead story today.
23:24
If the last four days have hadn't hadn't happened and they
23:27
have happened. She gave her spring statement
23:29
today. What did she hope to say?
23:32
What did she say? And how much of that will
23:35
survive the test of reality? Has to say very little.
23:38
Remember, the government has been trying to underplay the
23:41
spring statement altogether, but they wanted to say spring has
23:45
kind of come in, you know, spring is here, you know,
23:48
growth, OK, it's a little bit down this year, but overall it's
23:53
more or less the same. Net migration has fallen quite
23:57
significantly. In fact it's I think the
24:00
population will be down 200,000 by the end of the period.
24:05
We need more people to come. In but actually young people
24:08
that are leaving, they don't earn very much money.
24:11
So it's boosted our productivity because higher earners are
24:14
staying. So there is some good news.
24:17
January was a very tax rich month for the government so tax
24:22
revenues have come in a lot. You were talking about what are
24:25
the indicators one of their biggest tax revenues was from
24:28
the FTSE tax, you know, taxing. Money in the stock market.
24:32
People making money on the stock market, well that's great if the
24:35
stock market is going up, it's less good for the government
24:39
when the stock market is going down.
24:41
So the, the, what they were trying to say is nothing really
24:45
to look at here. Our headrooms a little bit up.
24:48
It's not too bad. I'm giving away money, £150 in
24:52
people's energy bills and we've got stability, everybody,
24:56
nothing. To look at apart from that
24:58
massive cloud on the horizon, you know that's.
25:00
Moving very fast, very much like budgets that we saw in 2022 as
25:05
well, where they become almost immediately completely
25:09
irrelevant in the Obr's document.
25:11
They are anticipating a world where gas prices are falling by
25:16
15%, where oil prices are falling.
25:20
That reality is really under strain right now.
25:23
So, but just to sum it up, I mean it, it all depends on the
25:26
timing here, doesn't it Neil, if thing, this thing is over in 12
25:30
days or two weeks or maybe you know, if there's some sense of
25:33
finality here, we might be OK. But if it's open-ended.
25:37
Absolutely. But it, it's hard to see how
25:40
it's going to be, how it's going to end, how it's going to close.
25:43
You know, you're not dealing with two adversaries here.
25:45
I mean, you've now got, you've got 2 adversaries on one side,
25:48
you've got Iran, but you've got 6 Gulf states.
25:53
They're, they may well be dragged into this conflict.
25:56
I mean, they are I, I, I think they are chomping at the bit to,
25:59
to get involved and, and how you bring, how you bring that to a
26:02
close, I'm not sure. And certainly the Iranians are
26:05
going to want to keep firing those missiles and rockets
26:08
because they are not going to want to demonstrate that they're
26:10
submitting at all, even if there's a ceasefire.
26:13
But how do you negotiate the terms of those ceasefires?
26:15
And of course, you've got European nations, you know,
26:18
increasingly getting involved on the defensive side.
26:20
So Starmer yesterday saying we're not going to attack Iran,
26:23
we will be defending our air bases and our positions and our
26:26
allies. That is a very nuanced line.
26:29
I can see that getting trodden on quite easily.
26:32
Definitely, I mean, I can, I can see them, you know, stepping
26:35
over that very, very easily. But the other thing to think
26:37
about in all of this is the UK relationship with the Gulf
26:40
States. It doesn't look very good when
26:42
you say, well, we we might come in to defend our interests or
26:45
defend our people when we've always talked, spoken about, you
26:48
know, security guarantees when we've talking about we will be
26:50
there to defend. He's not coming out and saying
26:54
we're going to defend our our allies or our partners when this
26:57
does all calm down. Those Gulf states are not going
27:00
to look upon the UK quite so favorably.
27:02
The Iranian regime is trying to extract the maximum economic
27:06
damage here. They they want energy.
27:08
That's. The policy.
27:09
To go up as high as possible. It's not.
27:11
Also because they're not benefiting from it hugely
27:13
themselves, are they? Because of sanctions.
27:15
So I mean they're, I mean, is that a point they've been
27:18
insulated to some extent by the sanctions?
27:20
Well, I mean, they, they still get out.
27:22
You know, the 3% of the world's oil market comes from Iran, 90%
27:27
of that goes to China. So they are still selling.
27:30
But their buyer, I guess what they're trying to do that is
27:35
demonstrate that if they are being attacked, they can unleash
27:39
some weapons. And because they don't match the
27:42
US and Israel anymore militarily, what they are trying
27:46
to do is extract an economic price.
27:48
Just a quick one before you wrap up.
27:50
I mean, if you look at the skyline of London, most of it is
27:53
owned by Gulf states or by the Saudis.
27:55
What, what pain could they inflict on our economy?
27:59
You know, if they either because they're upset with what, what we
28:01
haven't done to defend them or because you know, they're,
28:04
they're, they're missing a few pennies, quite a few pennies.
28:07
I mean, we do. We were talking about Dubai
28:09
earlier. I think we do about 25 billion
28:11
of trade with Dubai. We've got all.
28:14
We could sell the Emirates Stadium and make Arsenal lose.
28:16
You know well. They could do that.
28:19
There's been worse things than have happened, man.
28:21
You know I don't. Know about that, You know, the
28:25
Prime Minister would beg to differ on that I.
28:26
I think. I think more than in terms of
28:30
direct investment, I think the impact would be in higher
28:34
inflation. You cannot underestimate that if
28:38
you're talking about a world where oil has gone above $100 a
28:42
barrel, that inflationary pressure comes and it just
28:47
crushes down on household incomes and goes into secondary
28:51
impacts. And what we saw in Ukraine was
28:53
that it takes years to unwind. We are only just unwinding right
28:58
now from what happened in Ukraine.
29:01
So Rachel Reeves is the unluckiest woman in the world
29:05
today because of what's been happening.
29:07
We'll park that to one side. You're the second unluckiest
29:10
woman because I'm going to ask you to predict best case
29:12
scenario, worst case scenario. The best case scenario is it's
29:16
over by Friday, yeah. You know, does everyone recover
29:19
or is this underlying? I, I, I mean, I'm talking in
29:23
terms of economics, you know, not as an Iranian.
29:26
I'm talking as that's another, that's another discussion.
29:30
I'm talking in terms of global economics and the kind of
29:33
economic damage that would spill to Europe, that would spill to
29:38
UK households. I think if it if, if this is
29:42
concluded by the end of the week, it it it's a negligible
29:46
impact. Neil, final on to you then worst
29:48
case scenario. This this just continues beyond
29:53
four weeks. The Saudi Arabia, you know,
29:56
launches his own missiles, gets his aircraft flying into Iranian
30:01
airspace. Worst case scenario though is
30:03
those 6 Gulf states actually intervene as well.
30:08
That's going to be very, very difficult to to manage to unmesh
30:12
as one of my colleagues talk talks about that becomes
30:15
fratricide because we're not sure that the GCC have the
30:18
capability to fly those jets and coordinate with the Australis.
30:22
And that's, that's it. But that goes way beyond the
30:24
and. Then we talk about a Shia Sunni
30:26
war there and which is something that we've always dreaded and
30:28
talked about, but has never fully happened on that scale and
30:31
if that were to happen, that worst case scenario in the
30:33
region for the global economy. I mean, for the global economy,
30:38
I mean, you've got nothing coming out.
30:40
You've got, you've got no Georgia, no LNG, you've got no
30:43
oil coming out, you've got no urea coming out.
30:46
I mean, it's a big sinkhole that's dragging the global
30:48
economy down. And everyone's affected.
30:51
I mean, maybe America less, but China's affected, Europe's
30:54
affected we're. Affected there's only so far the
30:57
glut in global oil can take you people.
31:00
Countries have supply at the moment and then it's going to
31:03
become a disaster and it will take, you know, only a couple of
31:07
weeks extra to push people from a position where they are
31:11
self-sufficient to 1 where they start to become desperate.
31:14
On that cheerful note, Heli Ibrahimi, Neil Quilliam, thank
31:17
you very much to both of you for coming in.
31:18
That's it for the forecast, I hope you enjoyed it.
31:22
Don't get too depressed, we'll see you soon.