US-Iran MOU Soothes Market Stress: Markets Snapshot

[00:00:00]On the Iran deal. We now have the MoU signed, it seems.

[00:00:03]And are you pleasantly surprised how the global economy has coped with this, in the sense of how high oil prices got, how stocks managed to keep performing or in any terms? You define a huge, pleasant surprise.

[00:00:16]I thought we had probably 6 to 8 weeks after the war started, before we would start to see visible rationing in Europe once the ships stopped arriving.

[00:00:28]And the reality is, households businesses market have made numerous incremental adjustments as a result of the supply dislocations and continue to expand production. The markets have passed a major test, right? I mean, if the Hormuz Street is going to be shut for three and a half months and the oil prices sort of peak at 120 and then settle at about 80 success, that's success.

[00:00:50]That's a major test pass, right? If this genuinely holds, you look at earnings, right. I mean, it's certainly better than any of us around the table would have thought.

[00:00:58]Here we are with earnings having been upgraded and with corporate showing resilience. So, you know, we're thinking about this world where effectively the more chaotic the politics becomes the more government spend. Fiscal stimulus is driving growth.

[00:01:12]That's driving corporate profitability. Whilst the conflict has been occurring, fuel prices have been incredibly high. The short term, we might see some some sharper pricing. But I think that what we are going to see is that the market will normalize quite quickly in terms of geopolitical tension. What is the price of that for crude for Brent? I'm not sure that we're going to see a return to the pre conflict pricing. I think there will now be always an inherent risk premium attributed to go barrels to any barrel that has to transit through the Strait of Hormuz. Iran has shown how effectively it can use that mechanism to control the markets and to affect not only supply, but pricing. Some people note that the extremely low reserves we've got, and that the need for future stockpiling, combined with the risk of of the deal holding, means that it feels that the risk is very much the top side. There are other people kind of going that, hey, the fact that oil prices didn't kind of go much, much higher, given that the strait was closed for so long, shows the excess supply at their shows the resilience of supply chains.