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- [00:01]
A
Today's Markets move fast. Get the insights you need in 10 minutes with the Barclays Brief, a new podcast from Barclays Investment Bank. Through Sharp dialogue and scenario based analysis, our leading experts analyze key market themes each week. So whether you're managing a portfolio or leading a business, the Barclays Brief podcast can help you make smarter decisions today. Stay sharp. Stay briefed. Find Barclays Brief wherever you get your podcasts
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B
Unhedged Listeners the inaugural FT Weekend Festival in New York City is quickly approaching. Join John Lithgow, Orna Goralnick, Jancis Robinson and most importantly, myself, Rob Armstrong and my partner Katie Martin, presenting a live version of this podcast, including taking your questions. All this and more on Saturday, June 20th at Spring Studios or online as the FT Weekend comes to life for one unforgettable day. Register now and as a podcast listener, save 10% using our code FTPodcast. Don't miss out.
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C
Pushkin the thing about that Donald Trump is the guy sure loves doing a deal. He certainly loves talking about doing a deal. Since his war against Iran started, he has stated that a deal to end it is just around the corner about 40 times 4 0. And do we have a deal? We do not. We supposedly have had a ceasefire for weeks and for what it's worth, markets have kind of moved on, but the latest is that the two sides are still tearing strips out of each other, to say nothing of the role of Israel today on the show. Seriously now, what is actually going on? This is Unhedged, the Markets and Finance podcast from the Financial Times and Pushkin. I'm Katie Martin, a markets columnist at FT Towers back in London, where summer has officially been cancelled and I'm joined by professional triathletes, the sporting specimen that is Mr. Robert Armstrong in New York. Rob, say hello.
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B
Hello. I think you exaggerate slightly. I have not recovered and I finished exactly in the middle of my age
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C
group in the triathlon. Were there any walruses? Because I think I may have mentioned before that a walrus can run faster than a man and swim faster than a man. So you've really got to nail the cycling section.
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B
If there had, if there had been a walrus, it would have been way in front of me, so I never would have seen it.
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C
Apart from the cycling bit, we digress. But also we have been trying to get him on the show for ages and he keeps saying no and claiming to be busy. But with me in the studio today in London, we have Andrew England, the FT's Middle east editor and generally a good egg. Andrew Englund you have been a busy man, have you not?
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D
It's been a little bit busy, yes.
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C
He's got a thousand yard stare going on.
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B
Yes.
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C
Mr. Andrew England, I put it to you that in March you wrote that Trump says there was a deal. On April 12, you wrote the two sides had failed to reach a deal. On May 8, you wrote that Trump had said the ceasefire was holding. On May 24, you said a deal to reopen Hormuz was largely negotiated. You get the idea. It just goes on and on and round and round. I feel like I'm going nuts. You must be, like losing your mind here.
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D
It's been a bit crazy, but I never said it was a straight road. There are mediation efforts going on and there have been consistently going on, led by Pakistan. Qatar's taking a bigger role now, and about two weeks ago, they actually did feel that they were on the brink. They had fought because basically you're talking about one page, a one page document, and this is not a final deal. And that's one thing to remember. This is essentially an extension of the ceasefire which has been in place since April 8. For Trump, the key thing is it would reopen the Strait of Hormuz, which has obviously pushed energy prices up, pushed prices at the US petrol pump up ahead of the midterms. So that's a key thing for him. And he's wanted that essentially reopened as part of the original cease fire on April 8th. So he's increasingly frustrated. So it would do that and it would also lay the framework for nuclear negotiations. There wouldn't be any significant commitment by Iran on the nuclear file. So essentially it's a temporary deal to move to another phase, get a more durable ceasefire, give Trump a win in terms of reopening the strait, ease the global energy crisis, and depending on what, how the next stage of negotiations go, there will be some economic dividend for Iran. So they have been moving closer to it. But then you're dealing with these two parties that have decades of hostility and distrust to overcome. That's been exacerbated by the US and Israel striking Iran twice in the last year whilst it was holding nuclear talks with the Trump administration.
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C
So there's just no trust.
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D
And don't forget, at the beginning of this war, they killed the Supreme Leader and many of his top officials, and the dead Supreme Leader was the father of the current Supreme Leader. So you can see that you've got two unpredictable, hostile leaderships and you're trying to bring them together and get them to agree on a deal. And then there's just the kind of the political courage for either side to sign off on something because they're both going to want to claim victory. They both believe they have the upper hand. So even just getting this preliminary agreement over the line is a huge, huge task.
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C
It's been such a marathon. And so the oil price has fallen back down. Right. The Brent oil price benchmark is about $87 a barrel. Like, couple of weeks ago, we were talking about 120 or something. So it's come right down. Even while, like, just before I came down here to record this, Trump was posting on Truth Social that he's going to, in capital letters, hit Iran very hard tonight and is talking about taking over Hog island and oil infrastructure. And, and, and, and, and what sort of, this is a funny sort of negotiation where you're trying to forge a peace deal but simultaneously threatening a land invasion.
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D
It is. And this is President Trump of the United States. He's not your normal president. I think we've all come to terms with that now. And he's a man who likes to deliver his own type of bluster and rhetoric. And, you know, at the beginning of the week, you said 40 times, he said, we're two to three days away from signing this agreement. And then on Tuesday, he announced that the US Military had informed him that Iran had shot down an Apache helicopter.
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C
Right.
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D
So clearly he wasn't happy about that. And again, he's got to speak to his base and the Hawks. As soon as the helicopter shot down, he says, I have to respond. So he responds that the U.S. military FARs, strikes Iran. Iran then has to respond because it doesn't want to be seen to be caving to US Pressure. So it attacks US Bases in the region, in Jordan, in Kuwait, in Bahrain, because the Iranians respond, then the Americans respond again, and so then the Iranians respond again. So the pattern was repeated overnight on Wednesday, Thursday. And so you're in this escalatory cycle all the time. There are still negotiations going on. So Wednesday, a Qatari team was in Tehran to try and finalize this deal that Trump said was close to being finalized. They would only have gone if they had American assurances that, one, Tehran wasn't about to get bombed, and two, the US Was still serious about a deal. And so they were there. Now, I'm, I was told this morning that they came out. So this morning being Thursday, I was told that they came out and they made good progress, they had breakthroughs. And then Trump issues his true social post, saying, we're going to bomb them again and we're going to take over Khag island, which is where 90% of Iran's oil is uploaded in the near future. So now I'm wondering, okay, so is there progress? Was there progress? I trust my contacts. And so there was progress. But once Trump makes these threats, how does Iran respond? Because, again, neither wants to be seen to be caving to the other.
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C
Exactly.
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D
And the lasting Iran will want to do is being seen to capitulate. And this is the thing that Trump hasn't understood from the very beginning. If you remember, before the war started, there were nuclear negotiations. And Steve Witkoff, his envoy, said the President's surprised that Iran hasn't capitulated to all this military pressure. And that just shows a fundamental lack of understanding of the enemy of the party they're dealing with.
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C
They may as well be speaking like Martian.
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D
Exactly. I mean, this is, you know, since the Islamic Revolution in 79, this ideological foundation is hostility to the US and the West. And after they've been bombed, they were bombed by the Americans and the Israelis in June last year, the last thing they're going to want to do is be seen to be capitulating to military pressure to the regime in Tehran. That's a graver threat to them than war.
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C
So let's turn to the token American on the podcast, Mr. Robert Armstrong, triathlete, from where you're sitting at in New York. Is there a similar thing for Trump, do you think, in terms of not wanting to lose face? Like what? What is he actually trying to get out of this?
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B
I haven't the slightest idea at this point. And I want to kick that.
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C
Thanks for joining me.
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B
I want to kick that question to Andrew, and I would frame it like this. You know, you've made very vivid, Andrew, the challenges of getting even a short term agreement, extending the ceasefire, opening the strait, and kicking off nuclear negotiations. What I'm interested in is supposing we cross that hurdle. Where are we? What is a long term stable status quo that the two sides can agree on? I ask this because it looks to me like, for example, the nuclear issue is a red line for both sides, and those two red lines are in different places. So if we get the short term agreement, have we actually achieved anything, Andrew?
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D
No. I mean, what makes this administration so different? I mean, you speak to people and you say it doesn't matter who you speak to around the President, it's only what the President's thinking that matters. Know, you don't have that institutional kind of system. So that makes everything much tricker. I, I mean, I think everybody thinks he wants a deal, he wants to get out. So he got into this war. He said it would take four to five weeks. You know, on the back of the Maduru kidnapping in Venezuela, which was a clean success, Benjamin Netanyahu, the Israeli Prime Minister, presented him, you know, a war scenario where there were going to be great outcomes, regime change, you know, destroy the missile capacity, et cetera, et cetera, et cetera. So he got sucked into this war hawks. Netanyahu thought it would be easy and then quickly understood, actually, they're not about to collapse. They've closed the Strait of Hormuz. Oh dear, we didn't expect that. They're hitting energy facilities in the Gulf. Oh dear, we didn't expect that. They've triggered a global energy crisis. Our allies in the, in the Arab world are getting battered and they're not stopping. So that's where we got to the eighth ceasefire. Now the question is, how does he get out with still claiming a win, still claiming a victory. And knowing Trump, he would paint anything as a victory. Right. The short term deal in theory could allow him to do that in the way he spins it. So there will be a commitment by Iran to say we're never going to develop nuclear weapons. And kind of the one constant in Trump's war goals, and they were totally incoherent, was I'm stopping Iran developing a nuclear weapon. Now, Iran has always said that it's not developing a nuclear weapon. There was a fatwa by the Supreme
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B
Leader, but if they're actually doing that, they're fools. Right. If I was the Iranian leadership, acquiring a nuclear weapon would be without question the most important long term goal I could possibly have. Right.
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D
Certainly there are those in Iran who would say that after the June war last year, I think, because you got to remember that Iran wants to get something out of this as well.
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C
Right.
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D
So Iran has taken significant blows. Its economy is in deep crisis. You know, inflation is, I don't know what it is. That is up around 60, 70, 80%. They're going to have to do a lot of reconstruction. Steel plants have been hit, petrochemical, chemical plants have been hit. Their oil exports have been stymied. They can't trade through the UAE as they would. So, you know, they do need an economic dividend and their challenges will come when the war stops in terms of dealing with domestic pressure. So there is, there's a reason for Iran to want this to stop as well. Just to go back to your original question, this is the great uncertainty. So if you get to this short term ceasefire, does Trump just claim a victory? The Iranians are notorious for dragging out negotiations, playing the long game. Trump always wants a quick deal. So will he claim a victory and then will his attention drift somewhere else? And then you kind of have these protracted nuclear talks that don't really deliver. And the region remains not at war, but it remains in a kind of a volatile, festering, simmering state, because in this short term deal, it doesn't even talk about the missiles which they've used to attack Israel and the Gulf states. You know, that's not even being addressed or the regional proxies that Iran supports. So there's a lot of things that are being left until the last minute. It's a bit like the Gaza deal. So that was, you know, launched with much fanfare in October last year, and it's never got out of phase one.
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C
Yeah. All the peace.
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B
Andrew, just sitting here in my comfortable chair in New York, it seems to me that an avenue that ought to be open is some kind of slightly nonsense deal that gets us through to the end of the Trump administration. In other words, a deal, something like this. Iran says we will forego all nuclear development. Both sides know they don't really mean that, but that's okay. They agree to open the Strait of Hormuz. There is some economic dividend to Iran that is not talked about very much. And the President gets to loudly claim victory. And we have now kicked the ball, at least until President Trump is wherever ex presidents go. Right.
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C
The next president can deal with it. Yeah.
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B
Is that, is it realistic that the kind of muddle through option I just described the context here being the oil market continues to be quite comfortable with this whole situation, as Katie mentioned before. And I don't think the oil market is made up of fools and Panglossian morons. I think they have some story about why we can muddle through. Do you think that's a realistic expectation I just laid out?
- [15:51]
D
Yeah, I think you've got a job going as a mediator. I mean, I think there's a couple of things just to start. One, you know, oil prices are still far higher than they were in the beginning of the war. And I think one of the scary things is that what we're seeing today is almost being normalized. So you've had, you know, for the last 48 hours, you've had strikes between Iran and America, the US and no one's jumping up and down about it. That that's kind of scary. And then before that, you had strikes between Israel and Iran, which again, hadn't happened direct strikes before 2024. So that's part of the issue. And it's. I don't think that's a positive thing.
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C
But even though still like energy people, I've got a note in front of me right here from Jeff Curry at Carlisle saying about the abundance illusion. Right. We're just chewing through all of these energy reserves that we've got all over the world. And those energy reserves are designed to be reserves. They're designed to provide a little bit of kind of security in emergencies. They're not designed to be drawn down for weeks and weeks and months and months at a time. So there remains this danger that we just get to the point where the reserves are too depleted and we still get that shoot higher in oil prices to 140, $150 a barrel.
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D
Absolutely. And there's also the question of just even if the war stops today, how long will it take to get everything back online? You know, if you've had wells in Iraq that have been moth bought, how much damage has been done? How long will it take to get back on?
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B
But you have just described, Andrew, the reasons why both sides would like a break of a couple of years. Iran to lick its economic wounds, maybe replenish its missile supplies, the US to take the political pressure off that is emanating from gasoline prices. There does seem to be some overlap in motivations here. And they can put whatever rhetorical flourishes on it they like, but they get to that overlap and we at least get the strait open and stop the kinetic part of the war and we go to a kind of cold.
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D
No, but what you're saying, I mean, I was being slightly facetious, but you're exactly right. And this is what the mediators are trying to do. Now, what they've done by doing the deal they're trying to negotiate is to get the straight open first, which is the crucial thing for global energy, for obvious reasons. You push the nuclear negotiations back to the second phase. And then whilst the strait is being reopened, you have the nuclear negotiations. But the key first step is reopen the Strait of Hormuz, get the oil and gas flowing, the helium, the urea, fertilizers, et cetera, and you lift the US blockade. Now, in the second phase, what you would see is then where you get to the nuclear nitty gritty, which is. That's kind of what they've been discussing, things that you've been Talking about a moratorium on uranium enrichment. Now, Trump wants their stockpile diluted. You know, the Iranians would probably agree to that. They agreed to it with Obama in 2015, the JCPOA. A key question is what happens to the stockpile of highly enriched uranium. That's a big stumbling block because the Americans want it offshore. Will the Iranians allow that to happen? Then there's a question about what happens to the enrichment of facilities, whether they're dismantled or not, as the Americans want. So these are the kind of, the technical details, if you like. They got to fresh out. Those negotiations are always going to take longer. And that's part of the reason you push them back. But you get the straight open. And Iran, everybody knows Iran will only do a nuclear deal if there is some kind of financial incentive. And like you say, it's how you dress it up. Is it sanctions relief? Is it a waiver on oil exports? Is unfreezing some of the frozen assets which they've got around the world. You know, some people have estimated up to 100 billion, which essentially their oil money, which they can't access in various central banks. So, yes, there are. And this is what the media is hoping for. Their medias are hoping that you get this initial extension done, you get the strait reopen, that cause tensions. It reduces the risk of hostilities in the Strait of Hormuz or around the Strait of Hormuzzi where you've got two competing blockades, the Iranian and the US One, and that provides a better environment for nuclear talks. Now, they've been having nuclear talks with the Trump administration since Trump came back in. So a lot of this stuff they've already been discussing anyway.
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C
But it sounds like really the best plan that we have to hope for at the moment is that there is no plan and that everyone can just pretend that there is a plan for long enough to get the strait open and that we just keep doing this dance and going round and round in circles.
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D
Yeah, but I mean, I think is
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C
that best case scenario?
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D
No, I think no, not the best case. And the best case scenario is they get this preliminary deal, the strait opens, and then they get some kind of nuclear agreement which reduces tensions. It doesn't mean necessarily that Iran's going to give up its entire nuclear capacity. They've got research and development know how, which you could never reverse. Right. But as they did in the 2015 deal, you know, they agreed to reduce the level of enrichment drastically to levels that are insignificant. They had caps on their stockpile. The rest was taken offshore. And in return, they got the sanctions relief. So they complied with that deal until Trump pulled out of it in 2018. And that pushed them way back from being able to have the capacity to develop a nuclear weapon. So you could see kind of a deal like that 2.0. Now the question is, how do you frame it when, what kind of economic dividend does Iran get? It's much harder to give Iran sanctions relief today than it was in 2015. After everything that's gone on both internally and externally.
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C
And how do we make it look like everybody's a winner? This, this is the big kind of conundrum, listeners. If you think you know, then unhedged.com let us know. You might, you might do Andrew a favor. We are going to have to leave it there.
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D
Can I just say one thing?
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C
Yeah, you can.
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D
The group of thing with Trump is he can spin anything. I mean yesterday he was asked about inflation. He said, I love inflation.
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C
Yeah.
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D
So I mean, you know, there's hope.
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C
There's hope, there's hope and there's spin. That's all we've got to go on at the moment. We are going to be back in just one second with Longshot.
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A
Today's markets move fast. Get the insights you need in 10 minutes with the Barclays Brief, a new podcast from Barclays Investment Bank. Through sharp dialogue and scenario based analysis, our leading experts analyze key market themes each week. So whether you're managing a portfolio or leading a business, the Barclays Brief podcast can help you make smarter decisions today. Stay sharp, stay briefed. Find Barclays Brief wherever you get your podcasts.
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C
Okey doke. It is time for Long Short. That part of the show where we go long a thing we love or short a thing we hate. Andrew England, Middle East Editor what are you saying?
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D
Well, now you've said go long a thing you love. I'm gonna have to go for the English Fortin.
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C
Ah, beautiful scenes. It's coming home. Is it coming home?
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D
Inshah
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B
I nobody but you two thinks it's coming home. I've read a little bit of the sports writers on this topic.
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C
I doubt it's coming home, but we live in hope. I am long our listeners. I've been away a little bit but on the show the other day, Rob and Dara discussed what to call this thing, which may or may not be real, where people are selling bitcoin to buy SpaceX. I am calling this the BS trade. Make it happen, people. But one listener got in touch to say we should call it. Are you ready for this the great brotation.
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B
That's pretty good. It's pretty good.
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D
Well done.
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B
Well done.
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C
We have a winner. You are hired.
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B
But we had a flood of other suggestions too. It was great.
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C
Some were rubbish, I'll be honest.
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B
Yeah, some of them were great, though. I thought I liked bait trade, bitcoin, AI trade is good. Anyway, what do I have? I am very short sand, which you might like, you might associate with the beach. About a third third of the run in this triathlon I did extremely slowly was on a beach. And let me tell you, I will never run on a beach again. I may never walk on a beach again. I may never go to the beach again. As a result of the experience of trying to go fast on sand at my age.
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C
So is that seen in one of the Rocky movies where they're running around in very short shorts on the sand?
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B
What I was doing did not look anything like that. Let me just tell you.
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It's a mental image I'm nonetheless going to take with me. May need therapy. Andrew England, thank you so much for sharing your wisdom about what on earth is going on in the Middle East. I'm still not sure I'm any the wiser, but you've tried your best.
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D
I love myself.
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C
Listeners, we are going to be back in your ears on Tuesday, so listen up then. Unhedged is produced by Jake Harper and edited by Bryant Urstadt. Our executive producer is Jacob Goldstein. We had additional help from Topher Forehead. Special thanks to Laura Clark, Greta Cohn and Natalie Sadler. FT Premium subscribers can get the Unhedged newsletter for free and a 30 day free trial is available to everyone else. Just go to ft.com unhedged offer I'm Katie Martin. Thanks for listening,
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D
Sam.