Speaker 1: With the later situation that's going on. We knew it
Speaker 1: was going to affect the cost of petrol. Where are
Speaker 1: we at with this?
Speaker 2: So oil prices have literally collapse back to where they
Speaker 2: were before Israel started in Iran, and that of course
Speaker 2: I saw that seen the sher market bounced back by
Speaker 2: about one percent, similar to one percent bounce back in
Speaker 2: the US.
Speaker 1: So that's good news.
Speaker 2: It's removed the threat of higher petrol prices in Australia
Speaker 2: for now. Of course, the issue is whether the sea
Speaker 2: is fiabile stick and whether we'll see the issues creeping
Speaker 2: back up again. And that's always been the big fee
Speaker 2: here that Iran might retaliate by blocking shipping oil shipping
Speaker 2: through the straight offor moves which goes Pleasuan Golf basically
Speaker 2: into the Gulf of Oman and then all goes out
Speaker 2: of the world. So if they do that, then they
Speaker 2: would disrupt about twenty percent of oil supplies, which could
Speaker 2: push oil prices sky high, possibly above one hundred dollars,
Speaker 2: maybe one hundred and fifty dollars, pushing our petrol prices
Speaker 2: up above two dollars a leter. Fortunately that's been avoided,
Speaker 2: but obviously that risk is still there.
Speaker 1: So once the knock on effect, then if that happens.
Speaker 2: Look if we had that worst case scenario, then I
Speaker 2: think yes, there would be a knock on effect.
Speaker 1: Obviously inflation would.
Speaker 2: Get a boost from the higher petrol prices, but it
Speaker 2: would be the headline motion rates, so the RBA wouldn't
Speaker 2: necessarily raise interest rates on the back of it. They'll
Speaker 2: focus on the underlying measures of inflation. I think that
Speaker 2: it may cause them if it occurred, it would cause
Speaker 2: them to delay interest rate cuts, but I think ultimately
Speaker 2: the Reserve would probably say, well, if people have got
Speaker 2: to pay two dollars or more a leter for petrol,
Speaker 2: that chops into household spending power because it means people
Speaker 2: have less money to spend in the shops in Australia,
Speaker 2: So they ultimately, I think, would still cut interest rates,
Speaker 2: but it may be delayed a little bit.
Speaker 1: But hopefully we don't go down that path and your
Speaker 1: market now settles down again.
Speaker 2: And if that's the case, then I think we're still
Speaker 2: on track for a rate cut from the Reserve the
Speaker 2: Reserve Bank at the July meeting.
Speaker 1: Of course, in the next day.
Speaker 2: In the day ahead, we'll get another another CPI reading,
Speaker 2: so that will impact things, But so far it seems
Speaker 2: as if the worst case scenario on petrol prices has
Speaker 2: been averted, which means the Reserve Bank probably still on
Speaker 2: track for a cut in July.
Speaker 1: Did that surprise you how quickly things bounce back?
Speaker 2: It certainly surprised me how quickly the situation in the
Speaker 2: Middle East is settled down, although history tells me that
Speaker 2: it's not that unusual. The First and second Golf Wars
Speaker 2: when the US and others attacked Iraq. In the first one,
Speaker 2: Iraq had invaded Q what mad and disrupted oil supplies,
Speaker 2: leading to a lot of uncertainty at the end of
Speaker 2: nineteen ninety, and the second one was when the US
Speaker 2: attacked Iraq seeking regime change on the basis that there
Speaker 2: might be weapons of mass destruction in Iraq. Interestingly, ahead
Speaker 2: of both of those events, prices rose lots of uncertainty,
Speaker 2: just like we've seen recently, But as soon as the
Speaker 2: US got involved, the old price collapsed and share markets
Speaker 2: took off again. Maybe we're seeing history repeat, maybe on
Speaker 2: a smaller scale because there's been no disruption to oil supplies,
Speaker 2: but it is similar to what we've seen in the past.
Speaker 2: Once the US gets involved with missiles and things, it
Speaker 2: seems to settle down. Of course, there's a long term
Speaker 2: issue as well here. This situation may have further disabilized
Speaker 2: things in the Middle East.
Speaker 1: That's the negative take on things.
Speaker 2: That Iran may not be too happy what happened, and
Speaker 2: that can lead to further issues down the track. But
Speaker 2: for now, what we've seen is consistent with what happened
Speaker 2: back in nineteen ninety one with the First Golf War
Speaker 2: and the Second World War in two thousand and three.
Speaker 1: If we see another military escalation, how quickly will that
Speaker 1: affect the prices?
Speaker 2: I think if you see another military escalation, suppose Iran
Speaker 2: is just biding its time here, just regroups, and then
Speaker 2: in a few weeks time there's an attack on ships
Speaker 2: through the Middle that the Gulf of the straight upfor moves.
Speaker 2: Rather that I think would quickly see all prices spiked
Speaker 2: back up, because the whole equation would change. So far,
Speaker 2: financial markets oil markets are thinking, well, there hasn't acted
Speaker 2: spottle the noise. There hasn't actually been a disruption to
Speaker 2: oil supplies. Now the threat is receiding. If that threat
Speaker 2: quickly came back and there was an actual attack disrupting
Speaker 2: oil supplies, then I think you'd see a quick spike
Speaker 2: higher in oil prices and share markets would have a
Speaker 2: fairly significant fall on the back of that.
Speaker 1: But that would require some concrete action.
Speaker 2: By Iran to disrupt the flow of oil after the
Speaker 2: rest of the world coming from the Middle East. So
Speaker 2: far we haven't seen that, but if that did happen,
Speaker 2: then it would cause a big scare in markets.