Chapter 1: What is the main topic discussed in this episode?
Good morning from the Financial Times. Today is Monday, May 4th, and this is your FT News briefing. We're counting the cost of the war in Iran as industries face shortages and disruption. Plus, Britain's governing party is bracing for local elections this week.
We're expecting a devastating set of results for Labour. It could be their worst ever showing at a local election in England.
I'm Victoria Craig, and here's the news you need to start your day. The U.S.-Israeli war on Iran is now in its third month. The critical Strait of Hormuz, where a fifth of the world's oil traveled before the war, is still closed. And that is causing a commodity shock that's hitting a lot of industries.
Chapter 2: What are the global impacts of the Iran war on industries?
Firstly, airlines. They're slashing thousands of flights globally because they're worried about running out of fuel in the coming weeks. Since the start of the war in late February, the cost of jet fuel has doubled. But driving instead of flying might not be any cheaper. Not only are petrol prices soaring, but the cost to buy a car might also soar too. U.S.
automakers estimate they're going to take a $5 billion hit from the war this year. That's because the domino effect from stalled oil shipments in the Gulf is making everything from aluminum to plastics and paint harder to get. If those weren't enough shortages to worry about, agriculture is on edge, too.
Prices of the world's most widely used fertilizer have also doubled since the start of the war. Now, one of the world's leading fertilizer companies, Emirati Fertiglobe, will start trucking its cargo out of the Gulf rather than shipping it through the Strait of Hormuz.
The OPEC Plus group of oil producers said Sunday they will increase June production by 188,000 barrels a day, and slightly less than May's increase. It was the first decision without the United Arab Emirates. That country's shock departure announced last week became official on May 1st. But despite the boosted production, there is still no plan to reopen the Strait of Hormuz.
And that has the world wondering where it can turn for more supplies longer term if needed. The answer, at least for now, seems like it's not to U.S. oil majors. Stephanie Findley is our correspondent in Houston, Texas. She's been talking to a couple of the biggest American oil producers and joins me now. Hi, Stephanie. Hi there.
So ExxonMobil and Chevron told you they do not have plans to increase production. Why?
The US oil majors have decided not to deviate from their pre-war plans because they are focused on capital discipline. So this is a recurring theme in the sector after boom and bust cycles and, more recently, a wave of consolidation. So we're seeing companies are focused on being efficient and having healthy balance sheets over chasing higher prices that may fall just as fast as they rose.
Additionally, and I think we've talked about this before, it's not easy to ramp up production. Fracking requires a large amount of investment per well and complex coordination to bring in all the necessary equipment and crews to get it done. So it's not something you can just turn on and off like a light switch.
In a reflection of this caution and discipline, Chevron chief executive Mike Worth said on the earnings call that with so much uncertainty out there for now, it's really steady as she goes. And that was his words.
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Chapter 3: How are airlines responding to fuel shortages caused by the conflict?
suffering the sharpest fuel price shock in the G7. It's a real pain point for Americans as the conflict drags on.
Yeah, that's a great story. And we will pop a link to that in our show notes today. Stephanie, I do want to ask you one more question before we go. One of the world's biggest oil traders told the FT that there's going to be, quote, huge pain if countries stop using fuel and that something will have to give by what he sees as a June tipping point when it comes to those energy supplies.
Could the U.S. fill some of this global need that's caused by the Strait of Hormuz closure longer term?
I was talking with Clearview Energy's Kevin Book, who was emphasizing exactly as you're saying, it's now going to get really interesting. There was a whole bunch of oil and gas inventory out on the water when the conflict broke out. We saw countries, including the U.S., release strategic reserves. Both of those acted as a kind of cushion for this supply shock.
But soon those are going to run out, which means the pockets of shortages, which we're seeing now, may become more severe, or we start to see people using less oil, bringing down demand.
On the ConocoPhillips earnings call, Chief Financial Officer Andy O'Brien said the company had actually downgraded global oil demand to be flat this year as a result of the conflict, and also warned import-dependent countries will potentially start to face critical shortages as we head into the summer.
So again, coming back to the point, I think a rise in shale production would help, but it can in no way compensate for the severe amount of barrels which are offline now because of the war.
Lots of problems still ahead. Stephanie Finley, our correspondent in Houston. Thanks so much for your time. Thank you. Local elections in the UK this week could spark a seismic shift in British politics. Polls are predicting heavy losses for the ruling Labour Party in what some have dubbed Starmageddon.
Prime Minister Keir Starmer came to power less than two years ago in a landslide general election. But he's facing turmoil in the wake of his appointment of Peter Mandelson as Britain's U.S. ambassador and the fallout of Mandelson's association with convicted sex offender Jeffrey Epstein. Lucy Fisher is the FT's Whitehall editor and hosts our Political Fix podcast.
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Chapter 4: What challenges is the agriculture sector facing due to the war?
In Wales, it looks like they will lose control of the Senedd, the devolved Assembly, for the first time in 100 years. And in Scotland, while Labour was sort of on track at the time of Keir Starmer winning the election in 2024... It looked like they could regain Holyrood, the Scottish devolved parliament.
It now looks like the Scottish nationalists are going to hang on in there and Labour could even be shunted down to third place in Scotland. So it's going to be a very, very difficult night for Keir Starmer.
And you and your team have been out talking to voters across the UK ahead of these elections. Where is the outrage directed at Starmer coming from? And could it force his resignation after all these results are tallied on Friday?
Well, Well, in truth, the anger at Starmer is everywhere. I think everyone is bracing to see what happens on May the 8th, the day when the results come in, and over that weekend, whether any member of the cabinet or wider party goes over the parapet and leads a challenge against Keir Starmer.
The Mandelson debacle has certainly been the focus in Westminster in recent weeks, and it has shone a spotlight on Keir Starmer's judgment. However, polling suggests It's the traditional issues of the economy and the cost of living, health care and the state of the NHS, and migration that are the real flashpoint issues.
Obviously, the Iran inflation shock and what that's done to push up the price of fuel, food, energy bills, that has been a really difficult pinch point.
One of the most interesting parts of this election is that we could see sizable gains for these third parties. Why is that?
Well, it's a really good question why and how the UK's traditional two-party system is being broken apart. And we're seeing this multi-party system. I think on the right, reform have really seized the issue of migration.
And while Labour has managed to bring down overall net migration when it comes to legal migration, I think there's a sense from some voters that the established options have been tried and failed. And then on the left, many more progressive voters in the UK, feel very unhappy at Labour's approach on Gaza and to Israel.
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