Oil prices ease as Trump says Iran war over “pretty quickly”

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Chumps, very complete war comment,

sends oils sliding and lifts global stocks,

but ordinary people are worried about what it means for them.

It's going to get worse before it gets better,

and I don't know how long that worst period is going to last.

And it's not just gas prices that are at stake.

I think everybody's feeling a pinch everywhere.

I think from tariffs to gas prices.

It's World Business Report from the BBC World Service.

I'm Vashala St. Puffmer.

On the way, we hear about what this means for the global economy

and what governments and banks might do to ease the load.

So oil markets have slid sharply.

After President Donald Trump told US broadcaster CBS

that the war against Iran was very complete pretty much

and that there was nothing left in a military sense in Iran.

Those comments triggered an immediate market reaction.

Traders appeared to take them as a signal

that the conflict may soon wind down,

sending Brent and WTI oil prices back below $90 a barrel.

Here's President Trump speaking at a press conference

in the last hour.

As we continue operation, epic fury

we're also focused on keeping energy and oil flowing to the world.

And I will not allow a terrorist regime to hold the world hostage

and attempt to stop the globe's oil supply

and if Iran does anything to do that,

they'll get hit at a much, much harder level.

I will take out those targets that were easy.

That was President Trump at a press conference

that wound up a couple of minutes ago.

But while that's a steep fall from the days earlier high,

the oil price that we were talking about,

oil is still far more expensive than before

the war in the Middle East began just 10 days ago.

And that drop may say more about market hopes

than about what happens next.

Now following Trump's remarks that were earlier today,

US stocks were higher suggesting traders

are betting the worst may be over.

Now it could reflect genuine confidence

that Washington is prepared to wrap up its operation

or is it just simply wishful thinking from them.

Well, in the meantime, the conflict has led to higher oil

and petrol prices feeding through to households and businesses.

These drivers at a gas pump in Los Angeles and New York

were speaking about how Americans are feeling

about the increased prices.

What is four bucks right here?

It's just kind of insane.

And it's happening so fast, it's only going to get worse.

And like, this is a Sienna, just great on gas.

But even then, I don't know how much further

we can continue paying these prices.

It's going to get worse before it gets better.

And I don't know how long that worst period is going to last.

I definitely am feeling the pinch.

I travel a lot.

I travel a lot for work in my car.

And yes, this is very expensive.

I think everybody's feeling a pinch everywhere.

I think from tariffs to gas prices

to our mental health with everything that's going on,

I think it's more than just a pinch.

Well, we work for construction.

You know, gas prices, we use machinery,

heavy machinery, diesel, stuff like that.

We definitely do see it.

We feel it to, you know, especially remember back then,

it used to be maybe 250, the gas to gallon.

And, you know, we've come a very long way from that.

Well, you know, I look at the new prices and I expect them to go down.

But, I mean, obviously they're going up.

And I just don't understand being that we're both in Iran

and in Venezuela.

You would think something beneficial will come out of it.

But it looks not like it's not.

We're going to start feeling it soon.

And I'm already looking at the prices here.

You got $4.99 for regular.

So, in this manhand.

So, yeah, it's going to happen soon.

Well, said drivers there in New York and Los Angeles.

So, price increases are already being felt

to cutely in countries all around the world.

Particularly those that rely on imports of oil and gas.

The Philippines and Bangladesh have both introduced fuel rationing.

I'm planning to use half my fuel allowance.

So, we're on up to worry in the coming days

in case the war in Iran continues and affects the shipments of gas.

Seeing the rush over the last two days,

it seems there is no oil in the country.

People who need fuel are purchasing it

and those who don't need it are also purchasing it.

Those who used to buy fuel for four US dollars

are now buying it for 17 US dollars.

Those who need only half a tank

are filling a full tank

and then coming back again after living it at home.

Now, earlier, there was a gathering of finance ministers

from the G7 group of leading economies.

Here's the UK Chief Finance Minister,

Chancellor Rachel Reeves,

who talked about what's at stake for global economies and the UK.

The economic impact of the situation in the Middle East

will depend, of course, on its severity and its duration.

The movements that we have already seen

are likely to put upward pressure on inflation in the coming months.

But I also want to confirm to the House

that our financial markets are functioning

and I'm in regular touch with the Governor of the Bank of England.

So, that was the UK Chief Finance Minister,

Rachel Reeves, speaking earlier today.

Lots have happened in the last few hours

that we are joined now by Sarah Blume Raskin,

who's a Professor of Law at Duke's University

and a former member of the Federal Reserve Board of Governors

and Deputy Secretary of the US Treasury.

Thank you very much for joining us, Professor Raskin.

Happy to be here.

This is an incredibly fluid situation.

The last few hours we've seen all these comments come

from President Trump during that conference

in which he mentioned an easing of sanctions,

the war ending, but not necessarily this week.

Where does this leave central bankers and policy makers?

Well, you're certainly right that the impact

has been a real roller coaster.

So, the volatility is extraordinary.

In the last week alone, we have seen just the price at the pump in the US,

go up 16%.

I think the average price of gas is something like $3.48.

The impact, though, is going to have to be evaluated

country by country, right?

It will depend on the ways in which the energy markets are functioning

in particular, in particular countries.

And for countries that might be, for example,

tipping towards recession, there is a possibility

that central banks won't rush to raise interest rates.

Obviously, fearful that such a premature raising of interest rates

could actually slow future growth and deepen a recessionary possibility.

At the same time, central banks don't want to be too slow

in responding to what might appear to be an inflationary threat.

So, the evaluation, I think, is going on.

We'll go on a central bank by central bank, and it will depend

really on the conditions in that country, not just the duration

of the war, but essentially how persistent the fall in energy supply is

and how that persistence is experienced in each particular country.

So, there are lots of moving parts here.

Some commentators have compared this level of uncertainty

to those early days of the pandemic.

Do you see any parallels there, or are the pressures on central banks

and policymakers fundamentally different this time?

Well, there is, you know, that there is clearly lots of moving parts,

and there is a lot of uncertainty.

I think at this stage, it is premature to actually expect central banks

to know precisely what to do.

The duration of the persistent fall in energy supply isn't quite known.

Central banks do not like to act immediately

until they have a sense as to the longer-term consequence.

And I think that given the composition of energy markets,

country by country, the response will be different

in terms of the inflation metrics that get followed

by a particular central bank, and then the central bank's ability to act on it.

And are central banks equipped for potentially a prolonged period

of this sort of supply side shock, do you think?

Certainly. Yes, when there are, you know, persistent supply shocks,

they want to time their response in such a way that they would tighten interest rates.

It is a painful kind of process because, of course,

if it's accompanied by a reduction in employment, in demand,

you can actually have an effect where you are significantly slowing an economy.

So the reaction is one that does have consequence.

It is felt by households and businesses when a central bank responds

in that way to a supply shock.

And ultimately, what the central bank has to decide is whether the supply shock is one

that is bleeding through to effects on inflation and household and business price levels.

Okay, thank you very much for joining us, Professor Raskin there,

Professor of Law at Deeps University.

Jillian Tett is with us. She's an author, a columnist as well, for the financial time.

Thank you very much for joining us, Jillian.

Delighted to be with you.

Jillian, we've seen the oil price climb down quite significantly after those comments from

President Trump. Is this sort of a natural reaction to anticipating that the war potentially ending?

Well, in many ways, the most dramatic oil price swing we've ever seen in history.

I mean, we've had a 31% move up and then down.

And it's really dramatic to see this kind of swing so quickly.

What a trade has appeared to be betting on is the wonderful acronym TACO,

which stands for Trump always chickens out.

That's a meme that's gone around the markets in recent months after one of my colleagues at the FT

launched it. And so people have been betting that with oil above $100 a barrel,

Trump would panic and basically do a big climb down and that does appear to be roughly what's

happening. However, the problem is no one actually knows whether he alone is going to be able to

open the state of whole moves where the tankers actually go through, whether the Iranians will

agree to some kind of climb down or not.

Yes. And even if President Trump is right and the war is almost over, although he did say

in that press conference that it wouldn't be over this week, the effects of this conflict could

continue for some time. Absolutely. I mean, there are at least three problems here. One is that

a certain amount of energy infrastructure in the region has been destroyed or at least damaged

and it's going to take a bit of time for that to come up the speed. Secondly, you've got the problem

that at any one time the cogs of the global economic machine need to keep turning and if you stop

them for a week or two or longer if Iran doesn't play ball, then you begin to get all kinds of

unexpected chain reactions. And of course, the third big problem is around the question of confidence

because essentially what this crisis has done is remind the world's businesses that they are very

dependent on some choke points in the global economic system. And if there's choke points

break down, then the whole system freezes up and that's very bad for confidence. And of course,

on top of that, you've had a lot of big multinational companies that have been putting

investments into the Gulf region who will be now thinking twice about whether they should continue

that or not. So has his comments today changed the trajectory economically, globally,

place, and also sort of on a domestic front for different countries? Or is it very much the same

free press conference when he sort of declared potential or potentially at the war might be over?

Well, the honest answer that we just don't know because Trump has changed his mind so many times.

I mean, it seems almost a lifetime ago that he was threatening to invade Greenland. In fact,

it wasn't a lifetime ago. It's just that so many other dramatic things have happened since then

that it's easy to swing from one dramatic headline crisis to another. But what's clear is that

we're living in incredibly volatile unstable times, which is not good for business confidence.

It's also clear that you have this incredible great power game going on around these choke points,

around these particular points of economic leverage. And that's going to make businesses nervous

because we've seen it around rarest minerals. We've seen it around energy. There are all kinds of

other commodities like fertilizers affected by what's been happening. And that's not good for

comedians either. And then the other big problem that no one knows the answer to right now is that

even if Trump turns around and says, I'm going to back down, or he won't say that, he'll say,

I've won, I've won, I'm going to stop now. We just don't know whether the Iranians are going to

actually play ball or not. And we've had some quite ominous statements coming out from the

Iranian regime. It seems in the last hour or two suggesting that they will let ships

sail through the streets of Hormuz if they are affiliated with the country that expels the US

and its razily ambassador. And the implications is they won't otherwise let ships

sail through the streets of Hormuz. So just because President Trump has said it's over,

or it's going to be over soon, the tankers can get moving. The reality is that no insurance

company in the world is going to suddenly say, yes, I believe the President, let's go back to

businesses normal until they see more evidence that it really is safe. And right now we're certainly

not seeing that evidence in a practical way. And you can just one last question on that meeting

that gathering of G7 finance ministers. Now nothing really substantial came out of it,

but do you think we're going to hear from them again? I think we probably are. It's a very

interesting group. It's 32 member countries that have about 1.2 billion dollars worth of

barrels of strategic reserves, which can be tapped in an emergency. It's only been done about

half a dozen times since the oil crisis back in the 1970s. So you have to have a real emergency

for the actual agreement to be activated. They haven't actually activated it yet. What they've said is

they seem to be moving towards that. And of course, if oil prices fall sharply and if the

streets of Hormuz actually gets opened, then they may never act at all. But the fact they've

actually said this has certainly helped to reassure people in the market that there is something

of a backstop, particularly because one of the really shocking things that emerged in the last

week is that President Trump did not replenish the American strategic reserves during his time in

office, although he promised to do that. And so it really does a lot depend now on the IEA reserve,

which is now the main buffer, if you like, against more oil price swings.

I think I'm sure we'll be hearing much about that this week. Thank you very much,

joining us, Jillian, Ted there, an author and columnist for the financial times.

Joining us now is Walter Todd, who is President and Chief Investment Officer for Greenwood Capital,

which is based in South Carolina. Thanks for joining us, Walter.

That got to be here. It's been an interesting end of the day with the markets. We saw

it end on a positive in terms of the wider index and also oil prices sliding at

tennis courts and going on. Yeah, it's a case of whiplash. I feel like I need a neck brace

over here watching these markets. But yeah, as you said, as it was alluded to earlier in your

conversations, extremely volatile day in the energy markets, the biggest swing we've seen in one

day, 30% up, 30% down, and that 30% down is sparked a rally in stocks. And so we ended up for

the day, as you said. But I think despite what was said today by President Trump and the press

conference, I think this is a very fluid and dynamic situation. So I don't feel like we're maybe

through this yet. So I expect another volatile day tomorrow. And yes, you say we expect another day

tomorrow to be volatile because even in those kind of comments just after we saw oil slived

downwards below $90. We had some more comments about sanctions and more comments about the time

nine of this more. Do you think that we're going to see a specific industries here as we have

done over the last 10 days? Yes, I guess a couple of things. One, I would just remind you that oil

still up about 45 to 50% from where we were a month ago, just with the pullback that we saw today.

So you've seen a lot of travel related industries or airlines, cruise lines have been some of the

hardest hit areas in the stock market so far. But it's really kind of touched every corner because

you have secondary effects here at the cost of transportation for a lot of different industries.

And it's not just oil, it's liquefied natural gas, as well as some other commodities that are being

squeezed here with the straight-of-home news. Okay, Walter, thank you for joining us. You'll stay with

us on the program. Walter taught that. The best B2B marketing gets wasted on the wrong people.

So when you want to reach the right professionals, use LinkedIn ads. LinkedIn has grown to a network of

over one billion professionals, including 130 million decision makers. And that's where it stands

apart from other ad buys. You can target your buyers by job title industry, company, role,

seniority, skills, company revenue. So you can stop wasting budget on the wrong audience.

It's why LinkedIn ads generates the highest B2B return on ad spend of major ad networks.

Spend $250 on your first campaign on LinkedIn ads and get $250 credit for the next one.

Just go to LinkedIn.com slash broadcast. That's LinkedIn.com slash broadcast. Terms and conditions

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You're with well-visit report from the BBC World Service.

Now staying in the United States, artificial intelligence firm anthropic is

taking the Trump administration to court, accusing the Pentagon of wrongly branding it as

supply chain risk and pressuring the company to loosen safety limits on its AI models.

Now the lawsuit, which was filed in California quarter move, unprecedented and unlawful.

Our North America tech correspondent Lily Jamali is in San Francisco. Hi, Jit, Lily.

Hi, hey, so I mean, this is a really interesting case because it's been rumbling for a while.

What exactly is anthropic accusing the government of hair?

Yeah, it's been rumbling for many months, frankly, but we've only seen the public view of it

for the last two weeks or so, and it has been pretty wild. Specifically, anthropic is saying that

the Pentagon tried to strong arm this AI developer based here in San Francisco into allowing

red lines of the company is not okay with, namely that it be allowed to use its

Claude AI technology in classified military settings for things like master valence and for

human targeting targeting decisions that are made without human intervention.

The Pentagon has said that that's not the case and now this morning in California,

anthropic has taken this case to court in federal court. It's interesting because the bone of

contention here isn't entirely clear is it because it feels part technical, part political, parts

of regulatory. That's right. I mean, it does feel extremely political anytime you have

president Trump weighing in on a social media post calling your company a woke, you know, left wing

type of organization that that's that's a big red flag for you, right? But it does have a legal

aspect to it certainly of the company saying that the actions taken by the Pentagon basically

blacklisting it as a national security risk saying it's a supply chain risk. They call those

actions unprecedented and unlawful and they say that it actually violates their constitutional

rights to protected speech saying that there's been no federal statute out there that authorizes

these punitive actions that they allege the government is taking here.

And just quickly, what does the administration say in response to anthropic saying that it was

pushed to move these safeguards? Well, they haven't given us a response to this particular case

because it's pending litigation now, but in the past, Emil Michael of the Pentagon has said,

anthropic is flat out wrong. They deny that they've been asking for these red lines. They said

that they were happy, you know, they were on the same page and something obviously fell apart in

the communications here. It's hard to know if it is purely a legal problem or if something just

really got lost in translation in the discussions between the two sides here. Okay, Lily, we'll check

in with you a bit later on this week. Thanks very much, Lily. Jamali there, our North America

technology correspondent. Well, today marks 250 years since Adam Smith published his landmark book,

The Wealth of Nations. That was first released in 1776. It helped shape the way we think about markets,

competition and trade, ideas that still influence governments and businesses today. But in a world

of tariffs, industrial policy and powerful global companies, some are asking how well those

ideas still fit the modern economy. Well, Dr. Manson Peer is a co-founder and president of the

Adam Smith Institute. First of all, he said, economics is about consumption. The aim of

all production is consumption. And we talk globally today about, oh, we've created 60,000 new jobs.

Jobs are a cost that what you do to get the goodies that they produce. Secondly, he said,

people have supposed that nations get rich by selling more than they buy and storing bars of

gold under the monarch's throne. No, he said, it's the productive capacity of their peoples

that makes them rich. And he said, you could, of course, produce wine in rainy Scotland at 30 times

the cost of producing it in France. The difference is that if you bought it from France, you'd have

29 left in your pocket for the one you'd spent on the wine. You'd get richer by trading.

The other thing that Smith said that everyone should know is that he said, it's not from the benevolence

of the butcher, the brewer and the baker that we get our dinner. It's from their own design for

their self-interest. The baker wants to make money, so does the brewer, so does the butcher.

They do that by giving us stuff we want to buy. So one criticism, for example,

is that while it boosts growth overall, some workers and communities lose out. Do you think

that Adam Smith underestimated that? No, he knew it was true and he knew that specialisation

would cost jobs, but he also knew that specialisation makes goods cheaper. His famous

example is the pin factory. How many pins could one person produce in a day? Well, the answer is,

maybe one or two, given all of the processes that go into making a pin. But Smith said, if one man

one person makes the heads, another one makes the spine, another one sharpens the point.

Between them, they can produce 40,000 pins in a day. Now, that means that there are fewer jobs

because fewer people can produce the total quantity of pins that's required without needing to

employ so many workers. Yes, but the point is that more jobs are created by the wealth that's

generated by that specialisation. Lots of countries in Europe like the UK have long been

a champion of free trade, but there's now more debate about sort of protecting strategic

industries. Where would Adam Smith stand on that, do you think? Oh, he was unequivocal. He wanted

free trade and the rise of, first of all, GAT, the general agreement on tariffs and trade,

and then the World Trade Organisation has largely vindicated him. The world has become spectacularly

richer and the people who've become more rich are the poorest in poor countries. They've had

opportunities to raise their standard living above subsistence and starvation because they're now

part of the global trade network. Now, of course, not everybody wants free trade. If you're in the

business that you've been in for years and you're enjoying a position, people buy your products,

you want to protect yourself from competition and governments are there or should be there to stop

that. But with free markets, I mean, criticism of free markets could be that it's generated

inequality as well as wealth. Well, it's not equality that matters. It's a rising standard of

living. But some people will feel that equality does matter when they see that people have benefited

from capitalism and enjoy hugely rich lives whilst they perhaps are working to prop them up. That's

the view of lots of people. It might be their view, but it's not, in fact, a correct one.

Trade lifts everybody. They say a rising tried lifts all vote. And it's not equality we should

be concerned about. It's improvement in the standard of living. Now, we've only three decades ago,

something like 90 percent of the world was classified as poor. Now, it's only 10 percent.

Now, that's very good for the 80 percent who've gained from it. Now, is there more inequality

as a result? It doesn't matter. What matters? This is that everybody is better off. I don't want

myself for equality. I want opportunity for everybody to get richer. But free trade, I mean,

it does leave some industries in a country unable to compete. Is that a good thing?

Well, my favourite example is the Lancashire cotton trade, which was supported by tariffs and

subsidies for many years, all of which meant we would deny access to the cheap textiles coming

out of Asia. Now, we abandoned those subsidies and tariffs and lo and behold, people bought cheap

textiles from Asia. That made them all richer because they had money left in their pockets when

they bought it. It was very bad news for the textile workers of Lancashire. And just one last

question. If Adam Smith were advising governments today, what would his message be, do you think?

Oh, his message would be stop this tariff nonsense. It's making everybody poorer. It's

dislocating the world economy. It's stopping trade. It is stopping enrichment. Stop it now.

That would have been his message. That was Dr. Madsen. Peary, the co-founder and president of the

Adam Smith Institute, ending this episode of Well Business Report.