Oil surges on Biden’s unanswered question
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Why did oil prices jump over 5% this morning?
Middle East tensions mount and a not particularly persuasive response from Joe Biden about the prospect of an Israeli attack on Iranian oil facilities, plus strong US services data, a suddenly more dovish Bank of England governor, what does it all mean? And the jobs data from the United States tonight, obviously very important. And what will it take for markets to back away from the expectation that there will be another big cut from the Fed before the year is out? Fridays the fourth of October twenty twenty four. It's the morning call from Nab. Good morning. Well, oil is up a lot today, five and a half percent higher for both WTI and Brent. Brent well over seventy seven eighty a barrel now. The oil volatility index, the O V X, is the highest it's been since October two years ago.
It's up over fifty two now. It was well below twenty four back in July. So more volatility is clearly expected, and gold is up a third of one percent today as well. And shares in the red, the Dow is down naught point four percent at close, down The Russell two thousand down naught point seven percent. The same story in Europe, the Eurostok's fifty down naught point nine per cent, the Cat Cowarant is down one point three percent, the DAX down naught point eight per cent, just naught point one percent lower though for the FTSE one hundred. Ten year yields uh are up almost six basis points, two years are up over six basis points, German ten year bund yields are up five basis points, but Down one basis point in the UK, going the opposite to everywhere else.
Australian ten year yields were up six basis points yesterday to four point oh one percent now, and futures up to four point oh five percent, so continuing to creep up. And Taylor Newton is with me this morning from NAB in Melbourne. So no surprise the oil is higher. This is because of what Joe Biden uh sort of said. Uh he's been discussing the US support for Israel. Israel attacking Iran's oil facilities. I mean, you know, we've been saying or I was saying earlier in the week it was an obvious target for them. Uh but we so we've seen a response in oil. I mean it wasn't a definitive statement coming from the US President, was it?
No, no, far from definitive, and I think that's you know, that's part of what what got attention. He was asked, um, pretty directly if if he would support Israel attacking Iran's oil facilities and he replied that We're discussing that. Um, and then he kind of added that he thinks he thinks that would be a little and then kind of trailed off and then didn't really give much more detail. So I think, you know, the the reaction is that he didn't kind of shut it down as something that the US would be, you know, uh specifically opposed to. He kind of demured on the on that point. Um and so, you know, you can see there that reaction in in oil has been.
How did President Biden’s vague answer affect market expectations for an Israeli strike on Iranian oil?
Um, you know, pretty material, up close to five percent as as you said. Um and I think You know, it's worth just putting in some some context here as well. So the reaction on the day, obviously fairly meaningful in oil volatility, has been elevated recently, as you said, as kind of markets are kind of monitoring uh whether that kind of those tensions in the in the Middle East do spill out into broader conflict, whether kind of Iran's oil producing um capacities are are hit or whether there's the prospect of those kind of more material shipping disruption. uh in the region as well. Um but you know, even after this five percent um increase over overnight, um, you know, Brent oil is at around seventy seven eighty.
That's where it was at the start of September. So we've seen a, you know, a pretty big um move higher recently, but it's it's off some pretty low levels that oil got to through through the month of September.
Yeah, I mean that and you know, the volatility is actually not just all of this, it's also, you know, is there gonna be increased demand, is there gonna be less demand, is there gonna be increased demand? And you know, we've gone b to and thro in terms of what the expected uh consumption is gonna be as well.
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Chapters
4 chapters
1
Why did oil prices jump over 5% this morning?
0:02–2:39
2
How did President Biden’s vague answer affect market expectations for an Israeli strike on Iranian oil?
2:39–8:55
3
What does the recent surge in oil volatility mean for global supply risk?
8:55–15:01
4
Why did the US services ISM rise to 54.9 and what does it signal for the economy?
15:01–15:26