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Chapter 1: What is the main topic discussed in this episode?
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It appeared the market was betting on another Taco Tuesday from Donald Trump, and it could be said he's delivered. The US president announcing a two-week ceasefire with Iran, which involves an opening up of the crucial Strait of Hormuz, raising hopes of a more normal flow of energy around the world.
But no matter what the final outcome of this conflict, we've seen a dramatic shift in Australia's car market with electric vehicle sales soaring. Will it prove to be a permanent inflection point? Welcome to ABC Business Daily. I'm Carrington Clarke.
And I'm ABC Business Reporter Steph Chalmers.
We're speaking here around 11.30am Sydney time. I was in early this morning preparing for this latest deadline from Donald Trump, threatening the obliteration effectively of Iran as a civilisation. Extraordinarily inflammatory language heading into this deadline. And yet the market reaction in Wall Street seemed to be that people weren't taking it overly seriously.
There seemed to be some sort of movement once we heard that Pakistan was pushing for this two-week ceasefire agreement, at least something temporary to stop this obliteration, Trump raining hell down on Iran. What do you make of the way that this played out? And is it once again evidence that... In the end, on this big stuff, Donald Trump always chickens out.
I think so. I mean, it is somewhat, apart from the human cost of war, it is just a relief to be sitting here talking about, you know, another Taco Tuesday rather than what's, you know... what strikes are currently happening, although it sounds like things are still ongoing.
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Chapter 2: What recent announcement did Donald Trump make regarding Iran?
Was that the Australian market rallied yesterday even though at that point you had – The inflammatory language had already begun. It got even worse as we got closer to the deadline. But it did seem that investors here were totally betting that this wasn't a real possibility.
I mean, what Donald Trump was threatening, what many people were suggesting were potential war crimes, hitting civilian infrastructure, Obviously, it raised the question of whether or not we would see Iran strike its neighbors, civilian infrastructure, a major escalation. And yet Australia rallied ahead.
And then we saw the American trading session, the Wall Street effectively finished flat despite that deadline looming. Is it just that people have had this play over so many times now that they don't think Donald Trump will do anything that would cause that much chaos?
I think it's got to be that because, you know, these moves, even the rally today, as we're talking, the Australian market was up about two and a half percent. That's not kind of, you know, it's not an earth-shattering rally of like, oh, Armageddon's been avoided, which if you were to believe the rhetoric that was, you know, being thrown out there.
So I think it is a case of, you know, we're kind of a year on from that first tariff announcement and we spent a year really getting played by Donald Trump, moving at the mercy of his announcements, his delays. You know, it's really hard to even keep up with where we are at these times. extended schedule. So I do think there is just a sense that people do expect this now.
Yeah. And there are still major questions to be answered about actually what does this look like? Donald Trump said in the original announcement, announcing this two-week ceasefire, that it was on the condition of an opening up of the Strait of Hormuz.
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Chapter 3: What is the current state of electric vehicle sales in Australia?
Iran has backed that to an extent and said that they will be looking to open up the Strait of Hormuz. But ships will be passing through with their permission effectively.
And there still remains a real question in the aftermath of this war, if we are getting to the point where there is a more permanent agreement about whether or not Iran will try to implement some sort of tariff regime where they're taking tolls from ships that pass through. Donald Trump has also suggested that America could somehow be involved in the tolling of ships. I think
people need to be careful about thinking this is the end. This is the permanent finish of this conflict and that things will go back to what they were before. Because even for individual shipping companies right now, it's a major risk assessment to decide, are you going to be sending your crew, your assets through that straight when at any point this could flare up?
if either side decides that the other isn't upholding their side of the ceasefire or whatever it might be. And so do you really think we're going to see a full normalisation, flow of energy, flow of fertiliser like we saw before this conflict began?
I don't think so. And if you even just look at the text of what Donald Trump's put out on social media and then what's being reported in Iran's state media, they seem to be two very different takes on what's been agreed to. So it doesn't really set it up.
And once again, there have been major disputes throughout this conflict when Donald Trump says, we're talking, they're open to a deal. And Iran has often contradicted that directly. Now, there does seem to be some sort of agreement in place right now, but there seem to be pretty strong differences of opinion about exactly what's being agreed to and what the starting basis is for the negotiations.
Exactly. And it's only this two-week pause. So you're heading into a very short period of time with seemingly starting from very different bases. So I don't think, as you say, you're going to have companies confident to proceed in reentering this trade.
But then you've also got the fact that oil producing countries, their storage was filling up because they couldn't get their shipments flowing as normal.
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Chapter 4: How did the market react to Trump's ceasefire announcement?
So then they've stopped producing. So even if we do get ships moving through, that's not going to be a normalisation in oil production coming. We've got a backup of oil in storage, then you've got to get production online. And then I was just having a look at the damage to oil facilities in Iran and elsewhere in the Middle East.
And the other Gulf states and whether or not we actually have full appreciation or full transparency about exactly how bad the damage was because obviously
Countries also have an incentive to try to keep that stuff private because they don't want to illustrate that the attacks have been effective, but also they're doing their own assessments about how quickly can we actually get this repaired and up to normal production.
Exactly. So we haven't seen that flow through because pretty much what we've been dealing with is just, you know, no flow through the strait. So now we say it does actually reopen. There's this backlog. Then we're going to have to assess the damage to facilities. So what oil analysts have been saying this morning is that it's not really going to normalise for
potentially months and then we could be looking at a world where you know instead of going back to around 60 US dollars a barrel or some sort of normal level it's more like 80 US dollars a barrel because Iran hasn't closed the Strait of Homs before so we now see that that is a possibility and they've kind of successfully used it as you know a trigger for Donald Trump to come to the negotiating table so
Yeah, I don't think it's going to be something that's going to normalise. I think it will take months and then, you know, we're in a new world essentially.
Yeah, and individual countries have recognised their own vulnerability regarding the flow of energy around the world. We can see it playing out domestically as well. Here in Australia, there's a debate around how much we have in reserve, the contracts that we sign. Should Australia have more refining capability here?
And those same debates are happening around the world and about how can they make sure that if something like this were to happen in the future, that they aren't as vulnerable. One of the promises of open trade was that you keep prices low. It allows things you are able to buy from the lowest cost producer of these commodities.
But there now has to be a premium, doesn't there, for doing it at home or doing it with other countries that are less vulnerable. And so that's probably going to mean that the base price is just higher than it would otherwise be.
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