WEBVTT - Bloomberg Surveillance TV: March 24th, 2026

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<v Speaker 1>Bloomberg Audio Studios, Podcasts, radio News.

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<v Speaker 2>This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along

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<v Speaker 2>with Lisa Bromwitz and Amrie Hordert. Join us each day

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<v Speaker 2>for insight from the best in markets, economics, and geopolitics

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<v Speaker 2>from our global headquarters in New York City. We are

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<v Speaker 2>live on Bloomberg Television weekday mornings from six to nine

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<v Speaker 2>am Eastern. Subscribe to the podcast on Apple, Spotify or

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<v Speaker 2>anywhere else you listen, and as always on the Bloomberg

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<v Speaker 2>Terminal and the Bloomberg Business app. Stephen Kirk of the

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<v Speaker 2>Council on Foreign Relations right in the following, President Trump

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<v Speaker 2>must get clear, verifiable constraints on a Rand's nuclear program

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<v Speaker 2>and re establish freedom of navigation through the strain offormos,

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<v Speaker 2>or it is a strategic defeat for the US. Stephen

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<v Speaker 2>joins us now from more. Steve, welcome to the program.

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<v Speaker 2>If I want to call Iran, who do I call

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<v Speaker 2>right now? Who do I speak to?

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<v Speaker 3>Well, that's a very good question. The report is that

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<v Speaker 3>the United States was able to reach the speaker of

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<v Speaker 3>Iran's parliament, who is quite powerful. He of course, has

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<v Speaker 3>denied that any negotiations are going on. There's also some

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<v Speaker 3>indication that the Egyptian Foreign Minister was able to reach

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<v Speaker 3>people within the Islamic Revolutionary Guard Corps. They have also

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<v Speaker 3>denied the fact that there are going to be negotiations,

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<v Speaker 3>regardless of whether there are there aren't, it does seem

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<v Speaker 3>that the President is in keeping with his timeline of

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<v Speaker 3>four to six weeks looking for a way to wind

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<v Speaker 3>this conflict down.

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<v Speaker 4>Steven, you know these countries really well, especially when it

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<v Speaker 4>comes to Egypt, Pakistan, I know, Turkey, you spent a

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<v Speaker 4>lot of time. And who do you think could be

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<v Speaker 4>a real viable intermediary right now between Tehran and Washington.

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<v Speaker 3>Well, it seems that the Pakistanis are taking the lead

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<v Speaker 3>with a lot of help from the Egyptians. The Egyptians

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<v Speaker 3>have improved their relations with Pakistan. Pakistan has improved this

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<v Speaker 3>relations with Iran, and the Egyptians have also improved their

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<v Speaker 3>relations with Iran and the run up to this content.

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<v Speaker 3>So those are the countries that seem to be playing

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<v Speaker 3>the most behind the scenes role in trying to establish

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<v Speaker 3>some type of communication between Washington and Tehran. But the

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<v Speaker 3>Iranian position is we've been negotiating with Trump and twice

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<v Speaker 3>in the middle of negotiations, he is taking military action.

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<v Speaker 3>So there's going to be a tremendous amount of skepticism

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<v Speaker 3>within Tehran about getting to the table. And as we've seen,

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<v Speaker 3>the Iranians still have a lot of fight in them.

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<v Speaker 3>There doesn't seem to be a lot of incentive on

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<v Speaker 3>their part despite what the President is saying to engage

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<v Speaker 3>in negotiations to bring this to an end.

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<v Speaker 4>Picking up in our point that they want that the

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<v Speaker 4>US needs to re establish the freedom of navigation in

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<v Speaker 4>the Strait of Hormuz or it is a strategic failure.

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<v Speaker 1>How do you perceive the.

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<v Speaker 4>Strait of Hormus will be basically operate in the future,

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<v Speaker 4>Because the President said yesterday is a little bit tongue

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<v Speaker 4>in cheek, but he did say maybe me and Iatola

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<v Speaker 4>will do it together.

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<v Speaker 3>Yeah, this is a huge problem. The United States cannot

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<v Speaker 3>come out of this war with the Iranian regime intact,

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<v Speaker 3>the Iran's ability to fire on its neighbors, no clear

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<v Speaker 3>verifiable limits on Iran's nuclear program, and the Iranians in

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<v Speaker 3>control of the Strait of Remooves.

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<v Speaker 1>That would be a worse.

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<v Speaker 3>Position than the United States was in before the President

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<v Speaker 3>started hostilities. On February twenty eighth. They're going to have

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<v Speaker 3>to re establish freedom of navigation through the strait. That

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<v Speaker 3>means that the Iranians will have no control over who

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<v Speaker 3>goes through that waterway.

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<v Speaker 4>Isn't that genie already out of the bottle. The Iranians

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<v Speaker 4>have control it is.

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<v Speaker 3>And it's going to be extremely difficult to put that

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<v Speaker 3>genie back into the bottle. And it seems to me

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<v Speaker 3>that the way to do that is going to be

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<v Speaker 3>through military action. It's hard to imagine a negotiation given

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<v Speaker 3>the position that the Iranians are in right now, where

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<v Speaker 3>they have established essentially a new regime for passage through

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<v Speaker 3>the Strait of Remoovese, that they're going to go back voluntarily.

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<v Speaker 2>Stay with US, Multilanpex, saveillance coming up off to this,

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<v Speaker 2>This is what the Department of Energy has got to

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<v Speaker 2>say bad things right now. The US Energy Secretary Chris

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<v Speaker 2>Right down playing the market impact of the war, urging

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<v Speaker 2>energy companies to ramp up production.

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<v Speaker 5>Marcus, do what markets do.

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<v Speaker 6>Prices went up to send signals to everyone that can.

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<v Speaker 1>Produce more, please produce more.

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<v Speaker 6>The prices have not risen high enough yet to drive

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<v Speaker 6>meaningful demand destruction, but Americans and energy entrepreneurs around the

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<v Speaker 6>world are in genius, so are things are being done.

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<v Speaker 6>But these are mitigants of a of a situation that's temporary.

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<v Speaker 2>So Brent is holding there one hundred dollars a barrel

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<v Speaker 2>as uncertainty linkers around the conflict's outcome. Vicus to a

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<v Speaker 2>Ada of Macquarie, writing, if the stratiformers remains effectively shut

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<v Speaker 2>until the end of April, Brent could still reach one

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<v Speaker 2>hundred and fifty dollars a barrel. Vecus joints it's now

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<v Speaker 2>before more Vecus, welcome to the program. Can I start

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<v Speaker 2>with this? What is your base case at the moment,

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<v Speaker 2>and perhaps more importantly, what informs that base caps?

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<v Speaker 7>Yeah, our base cases for Brent to revisit the one

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<v Speaker 7>twenty range. You know, as you mentioned earlier, you know

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<v Speaker 7>there is a big disconnect between the physical and the

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<v Speaker 7>financial markets. We think that disconnect will close if the

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<v Speaker 7>strait remains you know, largely shut. It's not completely shut,

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<v Speaker 7>so we think one twenty maybe one twenty five is

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<v Speaker 7>kind of the the most likely area that price will revisit.

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<v Speaker 7>But to your other point, if the straight remains largely

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<v Speaker 7>shut through April, you know, even if you get a

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<v Speaker 7>single day resolution right like, hey, we're done, you won't

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<v Speaker 7>get flows back to normal till May. By then, the

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<v Speaker 7>amount of oil that didn't make it to refiners and

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<v Speaker 7>petrochemical plants will have been so large that, you know,

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<v Speaker 7>we think one fifty brent something that closes in on

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<v Speaker 7>Oman pricing to Baio pricing. Some of the physical markets

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<v Speaker 7>that you as mentioned are considerably above rent.

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<v Speaker 5>We think that gap will have to close.

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<v Speaker 4>That's the base case if the strait of Hermose opens

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<v Speaker 4>in the short term. What happens if it doesn't open

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<v Speaker 4>in the short term and countries like Saudi Arabia or

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<v Speaker 4>the UAE also engage in a more material way in

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<v Speaker 4>this conflict.

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<v Speaker 7>Yeah, in that scenario, there are numerous mitigations that can

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<v Speaker 7>come to the market to limit oil from going to

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<v Speaker 7>two hundred on the futures market. You know, we've seen

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<v Speaker 7>refined products go well above that already, but global strategic

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<v Speaker 7>petroleum reserve releases we think could reach about three million

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<v Speaker 7>barrels a day. The East West pipeline that crosses across

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<v Speaker 7>Saudi Arabia to circumvent her moves.

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<v Speaker 5>You know, that could do another three and a half.

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<v Speaker 7>You know, you've got refining run cuts, which will then

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<v Speaker 7>translate into even higher refined product prices, but it will

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<v Speaker 7>alleviate some of the crude shortages. So there's a a

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<v Speaker 7>bunch of big ones, right and OPEC also has about

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<v Speaker 7>two hundred million of stores outside of the Middle East.

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<v Speaker 5>They can use that.

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<v Speaker 7>So we have If everything can come to the market

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<v Speaker 7>in a timely way without all the normal bureaucratic friction,

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<v Speaker 7>you can actually rebalance the market largely, not fully. You

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<v Speaker 7>still are cutting refining runs, so that's a you know,

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<v Speaker 7>Peter to pay Paul situation, But you can close that

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<v Speaker 7>deficit from what we estimated about thirteen million a day,

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<v Speaker 7>you can close it down to about three million, much

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<v Speaker 7>more manageable. But you can't do that forever, right Like,

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<v Speaker 7>even that has a time limit.

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<v Speaker 4>The East West Pipeline, I'm glad you mentioned it. It's

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<v Speaker 4>looking very prudent of Saudi Arabia to have invested billions

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<v Speaker 4>of dollars of this to bring their crew to Yanboo,

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<v Speaker 4>to the Red Sea. But individuals I'm talking about are

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<v Speaker 4>putting higher probability now that the Houthis would get involved

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<v Speaker 4>and cut some of that production off. Are you starting

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<v Speaker 4>to bake some of that concern in.

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<v Speaker 5>Absolutely. Yeah, we think that should be a big concern.

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<v Speaker 7>You know, we think where it's where, where Yambu is,

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<v Speaker 7>the pipeline route, all of it is at risk. And

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<v Speaker 7>to your point that who these have in strangely quiet,

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<v Speaker 7>The Red Sea issues have been strangely quiet. We don't

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<v Speaker 7>know any reason why those cannot flare back up again

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<v Speaker 7>and cause a real problem. So yeah, that's a and

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<v Speaker 7>you know, if you knock that out in any in

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<v Speaker 7>any manner, suddenly, you know, roughly six million, five and

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<v Speaker 7>a half million a day of the mitigation around Hormuz

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<v Speaker 7>would be gone, right, And then that's a whole different

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<v Speaker 7>complexion to this market.

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<v Speaker 2>Again, because I think we're all thankful we're not there

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<v Speaker 2>this morning, and hopefully we don't experience that in the

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<v Speaker 2>coming days and weeks, because what we hear a lot

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<v Speaker 2>about on this program is that even after this war

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<v Speaker 2>has resolved itself, that from here we will have structurally

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<v Speaker 2>high demand through stockpiling. The countries will become conditioned to

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<v Speaker 2>avoid this situation happening to them again, that particularly the

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<v Speaker 2>nations in Asia, the big oil importers, like what we've

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<v Speaker 2>experienced with China will see our swear. Do you see

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<v Speaker 2>that increase in structural demand a regime shift following this experience?

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<v Speaker 5>We do, we do? We think this will.

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<v Speaker 7>You know, if this didn't send the signal, then nothing

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<v Speaker 7>would have to any country saying hey we need ninety

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<v Speaker 7>days inside our own borders, right or whatever day they picked,

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<v Speaker 7>But that nineties are typical, and now China looks extremely

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<v Speaker 7>prudent in doing what they did. I know there are

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<v Speaker 7>a lot of theories about, you know, are they doing

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<v Speaker 7>it for an eventual Taiwan? But what they said is, look,

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<v Speaker 7>we've imported an enormous amount of oil and as far

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<v Speaker 7>away we have a fragile supply chain. We need the

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<v Speaker 7>extra storage, right, And it looks very prudent today. I

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<v Speaker 7>think everybody will follow.

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<v Speaker 2>That model because I know this is difficult to put

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<v Speaker 2>a number on, but what kind of premium does that introduce?

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<v Speaker 2>What kind of new flaw does that introduce for this

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<v Speaker 2>market for the time ping.

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<v Speaker 7>Yeah, you know, we think it could add all lsequel

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<v Speaker 7>about half a million a day of extra demand as

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<v Speaker 7>countries refill and add new spr storage. You can translate

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<v Speaker 7>that to somewhere between five and seven dollars a barrel

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<v Speaker 7>to what your previous base case might have been. So

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<v Speaker 7>that would move us, you know, kind of into the

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<v Speaker 7>mid sixties instead of the high fifties low sixties.

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<v Speaker 4>But does that mean this is for the rest of

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<v Speaker 4>the world barring the United States?

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<v Speaker 7>Yeah, yeah, you know, we think you know, there might

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<v Speaker 7>be aggregation as well, right, where countries decide to have

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<v Speaker 7>like a joint storage between themselves, right, so they don't

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<v Speaker 7>necessarily all have to build new tanks in every single country.

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<v Speaker 5>But there's a cooperation in the US.

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<v Speaker 7>You know, we we're at four hundred million, four hundred

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<v Speaker 7>and twenty million. We're a net exporter but of a

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<v Speaker 7>petroleum so technically we don't need anything by that normal

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<v Speaker 7>rule of thumb.

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<v Speaker 5>But there again it would be improved.

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<v Speaker 7>Right, we probably should be around the five hundred million

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<v Speaker 7>range at all times.

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<v Speaker 2>Stay with US mult Bloomberg surveillance coming up after this,

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<v Speaker 2>Emily Rodent of John Hancock Investments right in the following.

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<v Speaker 2>We are trying to minimize geopolitics as an asset allocation input,

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<v Speaker 2>especially now with talks moving markets so significantly. One thing

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<v Speaker 2>we're sure of is that sentiment can change on a dime.

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<v Speaker 2>Emily joins us now for more. Emily, welcome to the program.

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<v Speaker 2>How avoidable is some of that at the moment.

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<v Speaker 8>It's so tricky right now, John, I mean my heart

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<v Speaker 8>sank when I saw it was going to be on

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<v Speaker 8>the show this morning. Only kidding, but it's just so

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<v Speaker 8>difficult to determine what's going to happen next in this market.

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<v Speaker 8>You know, yesterday we're watching really mixed messages across asset classes.

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<v Speaker 8>You have you know, the dollar declining, You've got gaset's surging.

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<v Speaker 8>It's back to the momentum darlings of the past twelve

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<v Speaker 8>months or so. European banks, the costs be and meanwhile

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<v Speaker 8>bonds are telling you a different story that the war

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<v Speaker 8>is still going to be ongoing, with yields remaining elevated here.

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<v Speaker 8>So we're trying to control the things that we can

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<v Speaker 8>control in this environment, and we're looking for opportunities and

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<v Speaker 8>areas that have great earnings growth prospects. We're looking for income,

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<v Speaker 8>We're trying to find things on sale. We're looking for

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<v Speaker 8>diversifiers and portfolios in a world where the macro environment

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<v Speaker 8>just remains sort of dazed and confused.

0:12:31.960 --> 0:12:33.800
<v Speaker 2>Well, bonds are on sale, and I know you like

0:12:33.840 --> 0:12:35.839
<v Speaker 2>the bond market coming into this. You like it more

0:12:35.880 --> 0:12:37.520
<v Speaker 2>now we do?

0:12:37.600 --> 0:12:41.280
<v Speaker 8>I mean, we would you look at opportunities where yields

0:12:41.280 --> 0:12:44.439
<v Speaker 8>are backing up as an opportunity to lean in. Obviously,

0:12:44.480 --> 0:12:47.760
<v Speaker 8>the myopic focus here is on energy prices and the

0:12:47.800 --> 0:12:52.000
<v Speaker 8>potential impact to inflation, but we're focusing on the old adage.

0:12:52.120 --> 0:12:56.640
<v Speaker 8>The cure for higher oil prices is higher oil prices,

0:12:56.720 --> 0:12:59.079
<v Speaker 8>and what I mean by that is that it will

0:12:59.200 --> 0:13:02.840
<v Speaker 8>likely lead to demand destruction. We're hearing from Asian economies

0:13:02.880 --> 0:13:08.480
<v Speaker 8>that there's hoarding of oil resources there. People are being

0:13:08.480 --> 0:13:11.040
<v Speaker 8>told not to go to work. We're seeing it impacted

0:13:11.040 --> 0:13:14.760
<v Speaker 8>in airline prices. I was hoping for a vacation coming

0:13:14.880 --> 0:13:16.559
<v Speaker 8>up here and those prices aren't looking good.

0:13:16.600 --> 0:13:17.920
<v Speaker 1>So at some point people are going.

0:13:17.840 --> 0:13:20.679
<v Speaker 8>To pull back in terms of demand as oil prices

0:13:20.760 --> 0:13:21.320
<v Speaker 8>move higher.

0:13:21.320 --> 0:13:21.560
<v Speaker 1>Here.

0:13:21.600 --> 0:13:25.679
<v Speaker 8>The other element, John that we're watching is the bigger

0:13:25.720 --> 0:13:29.720
<v Speaker 8>components of inflation, which we think are significant, especially around.

0:13:29.600 --> 0:13:30.679
<v Speaker 1>Shelter or howsing.

0:13:30.880 --> 0:13:34.760
<v Speaker 8>Nillo has home prices up zero percent year over year.

0:13:34.920 --> 0:13:37.320
<v Speaker 8>Rental prices are down about one and a half percent

0:13:37.440 --> 0:13:41.760
<v Speaker 8>year over year. We think that transmission into headline inflation

0:13:41.880 --> 0:13:44.719
<v Speaker 8>and core inflation readings. There is going to be significant,

0:13:44.960 --> 0:13:48.559
<v Speaker 8>and it could be enough to overcome any potential inflationary

0:13:48.640 --> 0:13:52.120
<v Speaker 8>impact we see here from commodity prices. For that reason,

0:13:52.160 --> 0:13:54.880
<v Speaker 8>we think eventually that bonds are going to our bond

0:13:54.920 --> 0:13:59.360
<v Speaker 8>investors will kind of wake up and smell that disinflation coming.

0:13:59.440 --> 0:14:02.120
<v Speaker 8>But for now, we're just continuing to see more volatility

0:14:02.160 --> 0:14:03.280
<v Speaker 8>on the rate side.

0:14:03.320 --> 0:14:05.840
<v Speaker 2>Everything kind of just heard Emily was an argument for

0:14:05.920 --> 0:14:09.400
<v Speaker 2>lower growth. It was a big argument for much lower growth,

0:14:09.720 --> 0:14:11.880
<v Speaker 2>reflected in your call to buy the bond market. Now,

0:14:11.880 --> 0:14:13.840
<v Speaker 2>this is where the stock market starts to get interesting.

0:14:14.360 --> 0:14:17.079
<v Speaker 2>What's going to keep earnings insulated as you put a

0:14:17.080 --> 0:14:18.600
<v Speaker 2>big bet on lower growth.

0:14:19.440 --> 0:14:22.240
<v Speaker 8>Yeah, you know, we're not saying that growth is falling

0:14:22.280 --> 0:14:24.520
<v Speaker 8>off a cliff, but we're seeing it in places like

0:14:24.560 --> 0:14:25.360
<v Speaker 8>the labor market.

0:14:25.400 --> 0:14:28.920
<v Speaker 1>It's not great. We had six negative jobs reports.

0:14:29.680 --> 0:14:32.400
<v Speaker 8>The labor market you know, is you know, holding in

0:14:32.440 --> 0:14:34.200
<v Speaker 8>as it relates to things like initial claims.

0:14:34.240 --> 0:14:36.040
<v Speaker 1>It's not terrible, but it's.

0:14:35.960 --> 0:14:41.320
<v Speaker 8>Just difficult to see accelerating economic growth in this in

0:14:41.520 --> 0:14:43.520
<v Speaker 8>you know, with a jobless backdrop.

0:14:43.600 --> 0:14:45.280
<v Speaker 1>So we want to be really mindful of that.

0:14:45.360 --> 0:14:48.360
<v Speaker 8>It's a key reason we still like quality in a

0:14:48.480 --> 0:14:50.160
<v Speaker 8>decelerating growth environment.

0:14:50.320 --> 0:14:53.480
<v Speaker 1>Quality sectors. Quality stocks should hold up better.

0:14:54.320 --> 0:14:58.520
<v Speaker 8>Things like looking at return on equity, looking at cash balances,

0:14:58.560 --> 0:15:02.960
<v Speaker 8>free cash flow, companies that can really maintain that earnings

0:15:03.000 --> 0:15:06.800
<v Speaker 8>growth prospect even in the despite despite slowing growth. And

0:15:07.080 --> 0:15:09.600
<v Speaker 8>that's not what we're seeing get rewarded in this market.

0:15:09.640 --> 0:15:12.240
<v Speaker 8>It's been about lower quality. It's been about technical as

0:15:12.360 --> 0:15:15.880
<v Speaker 8>momentum sentiment sort of driving these riskier parts.

0:15:15.560 --> 0:15:16.800
<v Speaker 1>Of the market.

0:15:16.840 --> 0:15:18.920
<v Speaker 8>And we want to trim into that strength and think

0:15:18.920 --> 0:15:22.400
<v Speaker 8>about redeploying assets into more defensive parts of the market

0:15:22.760 --> 0:15:26.000
<v Speaker 8>and higher quality areas. We're looking at areas like infrastructure

0:15:26.040 --> 0:15:31.240
<v Speaker 8>related equities, utilities, you know, even alternative type strategies that

0:15:31.320 --> 0:15:34.000
<v Speaker 8>can do well in that slow and growth environment.

0:15:34.320 --> 0:15:37.240
<v Speaker 4>Emily, when you mentioned the fact that when it comes

0:15:37.240 --> 0:15:39.680
<v Speaker 4>to the energy market, the cure is going to be

0:15:39.720 --> 0:15:43.200
<v Speaker 4>potentially demand destruction, do you have prices in mind about

0:15:43.240 --> 0:15:45.720
<v Speaker 4>how high prices we need to go until that we

0:15:45.760 --> 0:15:47.240
<v Speaker 4>actually see that demand destruction.

0:15:48.200 --> 0:15:50.600
<v Speaker 8>Yeah, that's the question of the day. You know, I

0:15:50.680 --> 0:15:53.160
<v Speaker 8>look back at history in two thousand and eight and

0:15:53.240 --> 0:15:55.680
<v Speaker 8>twenty twenty two were the last time is that we

0:15:55.760 --> 0:15:59.360
<v Speaker 8>saw significant spikes and oil prices. It's right around one

0:15:59.440 --> 0:16:01.560
<v Speaker 8>hundred and twenty eight dollars a barrel that we've seen

0:16:01.640 --> 0:16:03.200
<v Speaker 8>that demand destruction set in.

0:16:04.120 --> 0:16:06.960
<v Speaker 1>You know, we're not there yet, but you know, certainly the.

0:16:08.560 --> 0:16:11.560
<v Speaker 8>War escalating could potentially bring us there. That's sort of

0:16:11.600 --> 0:16:13.920
<v Speaker 8>the general price point that we'd be looking at.

0:16:14.760 --> 0:16:18.320
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0:16:18.320 --> 0:16:21.880
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