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This week, energy supply itself became a target in the war in the Middle East.
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Plus, fed policy makers think it cut to still on the table for this year.
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And in Europe, central banks prepared to hike.
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This is Wojtek's morning bid, bringing you unfiltered market news and analysis
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straight from the Wojtek's newsroom seven days a week. I'm Elena Kasas in London.
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And I'm Peter Devlin, it's Saturday, March 21st.
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So, Elena week three of the wars officially wrapped up, and I'm sorry to say even more escalation this week.
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Seems that energy facilities across the Gulf are no longer off limits.
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I mean, we saw attacks in Iran as well in Qatar.
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This does seem like a major escalation this week, doesn't it?
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Well, we thought the threat to energy supply was really about disruption to shipping.
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And of course, the strait of hormones through which about a fifth of the world oil and gas
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would normally transit remains blocked.
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Iran allowed a handful of tankers through on Friday, but the majority of supply still can't go anywhere.
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But then really the stakes became much higher this week when energy supply itself became a target.
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The U.S. and Israel targeted Iran's major gas field and Iran responded by hitting Qatar's,
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which has been described by some analysts as an absolute worst case scenario for Europe's gas supplies.
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The Qatar energy CEO told Reuters this week that 17% of the country's production has been knocked out by those strikes.
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And it could take three or four years to get back online.
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So really, that changes the timelines in this crisis because a disruption to shipping can be resolved relatively quickly.
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But if we're talking about the destruction of facilities and those timelines become much longer.
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I mean, it definitely feels like maybe a doomed day scenario is starting to come through.
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Let's remember at the start of the year, we were at a glance in terms of gas prices.
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And now I'm more instantly noticed that all it takes is about a month for disruption until you start seeing a deficit.
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It really looks like those prices are going to keep rising, doesn't it?
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In some ways, it still looks like traders are being too optimistic.
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I mean, Brent crude hovering just above $100 a barrel.
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Gas in Europe is still nowhere near the levels that we saw after Russia's invasion of Ukraine in 2022.
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But the physical disruption is much worse.
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Just look at the actual prices that you would be paying to buy barrels of oil that are in transit now.
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So when we talk about Brent crude being around $100 a barrel, we're talking about futures contracts.
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If you physically buy a barrel of oil now that's on a tanker leaving Dubai, the price of that has jumped to $166 a barrel.
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If you're buying refined products, jet fuel traded in northern Europe is selling at 220 on Friday.
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That is an indication of just how high energy prices could go if the disruption goes on.
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And it really does make it seem the oil traders are perhaps being too optimistic about how quickly this could be resolved.
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But let's talk about the pain at the pump because it's really hitting Americans, isn't it?
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And that's coming through with the US administration with their efforts to bring down their prices.
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We saw a US Treasury Scott percent saying an unprecedented move that they might be unsanctioning a reneoil on the water,
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which is about 140 million barrels.
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And by 10 to 14 days of supply, a really scatter shot of a policies here, isn't it?
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Well, yes, somewhat bizarre. I know that as they continue to bomb around the US,
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may partly drop sanctions on Iranian oil.
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And Iran, of course, continues to export its own oil via the Strait of Hormuz and enable it to finance the war by selling this.
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Of course, as we've pointed out a number of times already on this,
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the price of gas at the pump is less of a factor in Americans' budgets than it was even 10 or 20 years ago.
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It takes up less of Americans earnings, but it remains this hugely politically salient issue.
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It was very interesting this week, though, to see that despite this spike in inflation,
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there was of course a fed meeting at which policymakers still project that they will be able to cut this year,
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which was really quite a surprise.
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It was quite surprising. I mean, it did seem like a bit of a turning point,
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though, for a central bank meeting for the Fed.
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The dog plot still showed one cut this year.
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It definitely felt maybe a bit of a hawker short.
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Absolutely. Of course, the other interesting thing was that Jerome Powell suggested that he may be sticking around.
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This was supposed to be his second to last ever meeting.
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By June, President Trump's pick, Kevin Warsh, is supposed to be in the chair.
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But of course, he still hasn't been confirmed. Powell said that he would stick around if that isn't happening,
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and then he might keep his board seat.
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Even after Warsh has taken over, so that also is a very hawkish signal to market.
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Let's talk about inflation, though, because that's the big worry here for the Fed.
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I mean, Powell was saying that was frustration seeing some areas of inflation coming down,
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and this is even before the energy price shock is really feeding through.
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Powell joked as well that some colleagues didn't really want to bring out price forecasts this week
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because of the disruptions and sort of fog of war that they're muddling through.
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There's problems with inflation even before this, isn't there?
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Yes, and we don't get any data remember that has come out after the start of the war,
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after the energy price shock until next week,
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or we will at least get some figures that show us how it's feeding through into businesses.
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But inflation is incredibly stubborn in the US even without this.
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Powell also mentioned tariffs, which of course remain the subject of huge amounts of legal wrangling.
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But again, we're still waiting for them to mark their way all the way through to the prices that Americans are paying.
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We're already seeing some markets repricing of where central banks are going to go now.
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B&B Paraba already saying that a talk of a hike in April, maybe for the Fed,
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they're pointing that an interim meeting with no economic projections coming out.
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This is the time to really maybe discuss and see what's going on with the markets.
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But what really saw throughout Europe this week as well,
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the Bank of England ECB, big talks of Hikes, isn't there?
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Absolutely, just a couple of weeks ago we were expecting the Bank of England to be cutting twice this year.
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The market now expects it to hike twice.
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And as you say, the ECB could be talking about a hike in April and actually doing it in June.
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This is a dramatic repricing and we've seen it across the bond market.
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We've seen big sell-offs in European bonds and especially in the UK.
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America leads the world in medicine development.
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We get new medicines first, nearly three years faster.
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Five million Americans go to work because we make medicines here at home.
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And not relying on other countries keeps us safe.
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But China is racing to overtake us.
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Will we let them or will we choose to stay ahead?
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When America leads, America cures.
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Let's start Washington to keep us in the lead.
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Learn how at americacures.com.
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Pay for it by Farmer.
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Well, it's Saturday, so it's quid's time.
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Oil has been the major focus of morning bed in recent weeks of course,
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but looking back on another conflict,
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just how high did Brent crew rise after Russia's full-scale invasion of Ukraine in 2022?
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We'll have the answer for you in tomorrow's show.
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And for more of any of today's stories, head to rotors.com or the rotors app.
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Follow us on your favourite podcast player and if you're on a smart speaker,
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just ask for the latest market news from rotors seven days a week.
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And we'll be back tomorrow.