Transcript
A (0:00)
This is the Guardian. Stock markets reacting really violently. Steep falls around the world. Iran has basically said that anything that passes through the Strait is fair game. They'll set it ablaze, I think was the phrase that they used. It's effectively like the world's gas station and there's a huge queue outside it and nobody can get in, nobody can get out. It feels like a net result of all of this is you have a far more uncertain world and all that feeds through to higher prices.
B (0:35)
War in the Middle east is sending shockwaves through the global economy. But why does the price of oil and gas matter so much from the Guardians today? In focus, this is the latest. With me, Noshi Nikbal. Joining me today is the Guardian's head of business, John Collingridge. John, thank you so much for joining us. We are now on day five of this war and from the perspective of the global economy, it doesn't look great, does it? Now you're our head of business. I'm hoping you're going to walk us through this in the most simplest terms. But how have the markets been responding to all the turmoil in the Middle East?
A (1:15)
What we've seen over the last few days since the attacks over the weekend, stock markets reacting really violently, steep falls around the world. So overnight, the Asian markets fell really sharply. And in fact, in South Korea, they had to stop. They used a circuit breaker to stop, stop the market for temporarily because the falls were so steep. And then on the other side, you've seen commodity costs, particularly oil and gas, go through the roof. You've seen really sharp increases, particularly in gas because this region is such a big exporter of oil and gas and those ships are stopped from traversing through the Strait of Hormuz. And then one other effect is that has been really sharp in recent days or is starting to bite is the effect on governments and their borrowing ability. Around the world, government borrowing costs are starting to go up. They had been coming down. Governments around the world thought that they had slayed the inflation dragon. After the pandemic, after the war in Ukraine, it's been a long, steady slog to try and bring down those borrowing costs, try and ease the pressure on households and businesses. Now those things are starting to tick up because the fear is big spike in oil and gas becomes a prolonged spike and then that feeds through to higher prices for everybody and inflation.
B (2:28)
So there is all this focus on the Strait of Hormuz, which is this sea of water which links the Gulf to the Arabian Sea and beyond. Why is it so vital to the global economy.
A (2:39)
If you think about the Gulf, it is this vast repository of oil and gas reserves. Though the country's on the Gulf, the Irans, the Iraqs, The Kuwait's, the UAE's, the Saudis, they are some of the world's biggest producers of hydrocarbons and they export them around the world. So the gas particularly, that goes from Qatar, one of the biggest exporters of liquefied natural gas. It goes to Asia, it goes to China, goes to India, to Pakistan. Those countries need that, that fuel. And the only way they can get gas is in this form of freezing it, putting it onto large super cool tankers and shipping it through this very narrow strait. It's effectively like the world's gas station and there's a huge queue outside it. Nobody can get in, nobody can get out.