Iran: War in Middle East rattles global markets

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What's the global cost of strikes on Iran? It's world business express from the BBC World

Service. I'm Leana Bern. We'll also take a look at how this war is affecting financial markets,

energy prices, shipping insurance, and travel too.

Airlines have granted flights. One of the world's busiest airports has shot and oil prices

are climbing after strikes in the Middle East. Investors are reacting in real time to the US

Israel war with Iran. Jan Sidnam has investment director at Rothbones Investment Management.

Jan, can you just bring us up to speed? Where are the major global indices right now?

So, unsurprisingly, all negative today. London's down about 1.3%.

We've got falls of just over 2% in Europe and the United States a little bit less,

and sort of half a point, quarter of a point also there, but generally negative.

What's happening to oil and gas prices?

Well, those are unsurprisingly spiking upwards. So Brent Crude is up nearly 8%.

The Doha gas price is up nearly 14%. This has been a strike on a refinery there.

So, really, we're averaging about 8% across the board.

And interestingly, Saudi Arabia had to close its biggest oil refinery and guitar.

Actually, stop production of liquefied natural gas. I'm sure that's all in the play, right, Jane?

Jane, you stay right there. Let's hear more from Carol Naclay.

She's she's executive of crystal energy and an energy economist. She says she's concerned about

longer term instability in the region. Anything that is lasting beyond few days or maybe

at the worst couple of weeks is not a good scenario. Energy markets can adapt because

we have lots of supplies in the market and demand is not really booming. So, I'm not worried

about oil prices going into the three-digit territory, like 100, 200, or even 300, as some

may predict, that is unlikely to happen. I'm more worried about the overall stability

of the region and also its impact on global economic growth and global trade that is more worrying.

It's not just oil, isn't it? Now, the gas prices have jumped as well.

Absolutely, the threat of harm was extremely important not just for oil trade, but also for

liquefied natural gas, what we call LNG, because you do have Qatar at the second largest

exporter of LNG after the USA sending its ships to the rest of the world. And any disruptions

in those supplies can also make natural gas prices higher, though not everyone will feel them,

because it depends on the kind of contracts and agreements you have in place, but those who are

expecting LNG supplies to come to their country and they want to pay for them today,

they are definitely going to pay higher prices. If we bring it back to everyday people,

if oil and LNG stay elevated, where does the pain show up first?

Oil and gas are very important for not only not to produce energy and heating and filling our

cars, but you have the products that are deducted from hydrocarbons, like what we call the

petrochemical products. We use them everywhere, plastic, lots of medicine, oil, even makeup and

perfume. So if we see sustained higher energy prices for oil and gas in particular,

we are likely to see inflationary pressure and higher prices almost everywhere.

I was Carol Nakle of Crystal Energy. There's another market reacting very quickly,

and that's insurance. The Middle East is a hub for global shipping, as the fastest route between

Europe and Asia. Operators will be looking closely at coverage and war risk premiums.

Marcus Baker is the global head of marine and cargo from Marsh MacLanon, which specialises

in insurance brokerage. There is a committee that meets to decide parts of the world that are

considered to be in-hards to risk, where there is activity that might lead to damage to ships

caused by war, incidences and war-like incidences. They get advised by a number of different parties

that help them to a pine about this. And what they do, then they have a number of different areas,

which if you go into that area as a ship, you pay an additional premium to recognize that in-hards

to risk. Those rates start to fluctuate, depending on the severity of the activity that's

taking place. So do premiums rise across the board or only for ships passing through certain

choke points or ports? Only for ships passing through certain areas that are of enhanced risk.

Every ship owner gets an element of war covering their hull insurance anyway,

but clearly there are areas like Venezuela, for example, with activity that's taken place over

the last few months. The Middle East at the moment is something that they are looking at,

and they are meeting today to take a decision on whether they're going to expand the area

that it is currently recognized as enhanced risk. How does this compare to previous flashpoints

at the Red Sea attacks, Ukraine, the tanker wars? Is this already more serious? This feels like

it could be a little bit more serious. I mean, Ukraine, of course, the Russians didn't deliberately

attack shipping. They were after hitting infrastructure, and I think, unfortunately, ships were hit

in that stage. But the rates there went up to about 5 percent at one stage on the value of a ship.

So if you've got a $20 million ship, that's costing a million dollars to trade into the Ukraine

for each voyage. At the moment, the rates in the Gulf are less than half a percent, but they're

likely to go up. I was Marcus Baker from Marshmickland and there. But for millions of passengers,

the immediate impact is travel disruption. On Monday, so far, 79 percent of flights to Qatar,

and 71 percent of flights to the United Arab Emirates have been cancelled. Lela Hamud and Matthew

McGinn are a British couple on honeymoon with their little boy in Dubai. Their hotel was hit by a

missile. They've been telling the BBC their keen to get back home. As soon as the air space is open,

we're on the next flight home. It's up the edge of it for us. People are telling us just a

relax and stay calm. But after what we've witnessed, especially for our little boy and I've got

two little boys at home, we just want to get back to the UK. Jane Sedan and we're from Rathbone

are still with us. What are you seeing in airline and travel stocks right now? They're very

sensitive to this. So we've seen four of five percent or so from I.A.G. with theirs down

six and a half percent, interestingly Ryanair, which is really only European flights, much less

sensitive down to an a half percent. So they're just pricing in that people aren't going to be

traveling? Absolutely. And these businesses are very, very geared to activity. If they don't fly,

they've still got all the costs. And so, you know, it's their profits are very sensitive to inactivity.

Jane Sedan, thank you so much. So what does this mean for passengers and the wider travel

industry? Paul Charles is a travel industry consultant and CEO of the PC Agency.

Just yesterday, nearly 4,000 flights were cancelled going into the Middle East region as the whole.

And if you assume there are 200 people on each flight, then that's well over two million people

affected. And of course, for those people, for those passengers who are stranded right now,

what happens to them? Many citizens are in the region from many countries around the world and

listening to their government's own advice on whether they should stay put, whether they could

be airlifted out over the coming days, which is certainly a possibility. And also listening to

the airlines advice, but the airlines themselves, they can only rely on what governments are saying

about how long this conflict may continue and nobody has an answer. And whilst airspace remains

shut, then the airlines simply cannot operate any of their flights. And what does this mean

financially for airlines? If you think about the practical implications,

airlines like Qatar Airways, for example, have aircraft on the ground all over the world that

can't fly anywhere, same with Emirates. These aircraft are waiting for airspace to open,

so they're in the wrong places. The pilots are in the wrong locations. The cabin crew,

you've got cargo sitting in the belly of planes that can't go into the Middle East.

All of this is costing millions of dollars a day and the total bill will be billions of dollars

if this continues for much longer. Now with Paul Charles, a travel industry consultants

and CEO of the PC Agency, and that is it from World Business Express from the BBC World Service.

If you want more updates on the US-Israel war with Iran, there is a live page on the BBC

news website and don't forget to subscribe to World Business Express wherever you get your podcasts.

I'm Rihanna Bern, thanks so much for listening.

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