Chapter 1: What is the main topic discussed in this episode?
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War that was meant to prevent from reaching a bomb eventually might push them beyond the Rubicon and to have that bomb. I'm John Feiner. And I'm Jake Sullivan, and we're the hosts of The Long Game, a weekly national security podcast. This week, former Israeli Defense Intelligence Officer Danny Santronowitz joins us from Israel to discuss the war against Iran. The episode's out now.
Search for and follow The Long Game wherever you get your podcasts. Today's number. That's how many Olympic medals Eileen Gu has won, making her the most decorated free skier of all time. The 22-year-old achieved this while also balancing full-time studies at Stanford, as well as a successful modeling career. Today's other number is 99.
That is the percentage of parents who wish their kid was Eileen Gu. Welcome to Property Markets. I'm Ed Elson. It is March 3rd. Let's check in on yesterday's market vitals. The major indices rode out a volatile session after the U.S.-Israel strikes on Iran. More on that in a moment. Still, the indices ended the day in the green.
Meanwhile, the yield on 10-year treasuries surged the most since April. Oil spiked, the dollar rose, and gold climbed above $5,300. Okay, what else is happening? The United States is at war with Iran. The U.S. and Israel struck the country on Saturday, killing Supreme Leader Ayatollah Khomeini. Iran responded with retaliatory strikes across the region, including attacks on U.S. military bases.
The president said the military operation will last around four to five weeks, but could continue for, quote, "'as long as it takes.'" Markets opened in the red on Monday, but by midday, the major indices had recovered. Meanwhile, Brent crude, the global price gauge for oil, jumped 7% to just over $77 per barrel. Oil prices were already up 17% this year in anticipation of a possible attack.
Joining us to discuss what this war means for us, what it means for markets, we're speaking with Matt Smith, oil analyst at energy consulting firm Kepler. Matt, welcome to the show. Let's get right into it. quite rattling news for all of us for many reasons. When you look at what's happened in the markets here, what is jumping out to you?
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Chapter 2: How is the war with Iran affecting oil prices?
And I know that I'm now asking you to basically play military analyst, but it's interesting, as an energy analyst, you kind of have to. Why does hitting Iran hard necessarily mean for the analysts that oil will be good and that oil will make its way out of the region? Yeah, sure.
And so whether it's that the US is going after a regime change, which there's some doubt whether that's the case, or whether it's just simply they're trying to obliterate any nuclear ambitions in Iran there, or whether it's just attacking the military side of things, wiping them out there.
Once you get past that, then there is the situation where the uncertainty is lifted and the likes of Iranian barrels could even flow stronger. So it's really important to bear in mind what happened last year in terms of that 12-day war.
As soon as those nuclear sites were hit, you had President Trump come out on the presser and he was like, OK, now that this has happened, we've got what we wanted. Now, China, start buying that Iranian oil again. Right. And so he went straight to getting those oil prices down.
And so it's like, once these ambitions and goals are achieved, then the potential for lower prices afterwards is perhaps a much more likely proposition. Maybe it's that or maybe it's just the fact that we just didn't get a bunch of tankers on fire around the Strait of Hormuz today.
Is there an outcome that energy investors and energy analysts, those who work with oil and gas, is there an outcome that most want? I mean, when an oil firm... a consulting firm or even an oil investment firm, sees what's happening in Iran. I mean, obviously, this is a political issue. Some people support what's happening, some people don't support what's happening.
But say you're an investor in this stuff. What do you think when America strikes Iran? Yeah, and I think it's a stability thing, right? So OPEC as a whole, this group of oil producers, they want stability of price. I think oil investors want stability in terms of the geopolitical backdrop, right? And so I think if Iran is addressed here in the same way as we've had Venezuela addressed,
it's one more hot potato that the market doesn't have to think about or deal with. And so that taken out of it gives way less uncertainty. And so that's a positive thing for investment. So I think that's perhaps the best way to look at it. Yeah, certainty, understanding what the path forward is.
And it sounds like what the analysts seem to say, what maybe the price is telling us is that people believe that Trump is going to conclude this. Yes. Or at least that this will be far less uncertain now than it was, I suppose, a year ago? Yeah, no, no, absolutely, absolutely. And that's the thing here as well, right?
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Chapter 3: What are the market implications of the U.S.-Iran conflict?
So in the same way that people in San Francisco talk about escaping the permanent underclass, maybe that's how investors are thinking about getting into OpenAI right now and getting while you can, right? Yeah. That's how I feel. Let's talk about Anthropic and the Pentagon. Trump has called Anthropic a, quote, radical left AI company. Anthropic has been blacklisted as a supply chain risk.
Federal contracts have been cut. He's saying that the government won't do any business with anyone who does any business with Anthropic, which that part seems really crazy, right? We talked about this a few weeks ago. It's amazing how it has developed. What does this say about the AI race right now? I think it shows how powerful these companies are. It was surprising to me, actually.
I mean, I knew about Anthropix government work, but that they were the most fully integrated model in the government behind classified walls up until this point, I wasn't quite fully aware of until this whole blow-up happened. And it's interesting that that has been the case given that Anthropic has historically been the, I guess you could say, more doomer of the other AI labs, right?
The one that is always talking about the potential pitfalls and safety risks happened to be the AI lab that was the most closely integrated with the U.S. government before this. It's interesting. It's interesting that OpenAI swooped in and got a deal that is effectively what Anthropic said that it wanted.
And to me, that suggests, you know, based on what we know about this administration, egos can run hot and heavy. especially looking at some of the players involved specifically in this. You've got Emile Michael, the very strong-armed head of growth and business for Uber back in the day, for Travis Kalanick.
One could argue the Sam Altman before Sam Altman in terms of the amount of capital he raised for Uber at the time, which then was record-setting. who understands tech and goes back with all these players is an Elon loyalist. And then Pete Hedgesmith and all the other players involved. I mean, it really, I think it just speaks to the ego. You know, I don't really know if there's much more.
I don't know if like, you know, you see some of the reports about, you know, they were arguing about like theoretical missile strikes and And Dario saying, Amadei, the CEO of Anthropic, saying, oh, you'd have to call us first if you wanted to use Claude to defend against a missile strike.
And that just suggests a level of bravado and chest pumping in these negotiations that I imagine, given all the personalities involved, did not work out well. And this could end up to be catastrophic for Anthropic. My gut says it won't be. There's too much money at stake. There's too many investors in Anthropic who have ties to the White House.
I'm sure that, yeah, Anthropic loses this $200 million contract that's not really a factor for them financially, but certainly shows that OpenAI can be shrewd, as Sam Altman has been known to be, and swoop in here and get closer as Anthropic pulls apart from the government. Yeah, it's striking how relevant the politics are becoming in these tech stories and these AI stories.
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Chapter 4: What are the ripple effects on other energy commodities?
Now, there are plenty of implications that we could spend hours, even days, discussing. And the idea of asking how this will affect markets seems a little bit of a ridiculous question because there are some things like war that are just bigger than markets. Having said that,
We will end here with a few thoughts, not just on what this will do to markets, but also what this will do to your life, what being at war with Iran actually means for our daily experience as Americans. Now, there is the fact that we will be reading about this pretty much every day, and that is significant, but there will also be some more material implications with this war as well.
For example, gas prices. As we discussed, oil prices are currently rising, and it's possible they will rise even more. And that will affect prices at the pump for you. To be more specific, a $5 increase in the price of a barrel of oil translates to a roughly $0.10 increase in the cost per gallon of gas at the pump. So a $10 or $15 increase in the price of oil isn't that bad.
That's kind of what we're seeing. But the question will be if it goes even higher than that. If oil hits, say, $100 a barrel,
Chapter 5: Why didn't oil prices spike as expected during the conflict?
then that will have a real impact on the pump. It will have a real impact on the cost of living at home. Something else that will be impacted is the price of liquid natural gas, or LNG. This is the fuel we use for heating and electrical power and energy storage, etc. And also, a fifth of the world's liquid natural gas flows through the Strait of Hormuz.
So that means that global LNG supply is now going to be significantly constrained. And while America does have its own liquid natural gas supply, we will likely be exporting more of that over to Europe, who will be in desperate need for LNG, thus reducing the supply and raising prices here at home.
This is exactly what happened during the Russia-Ukraine invasion, and it's why your heating and electric bills started to go up back then. A similar scenario could easily play out today. And finally, for the investors who listen to the podcast, I think you can safely assume that because of this war, your stock portfolio is about to become even more volatile than it already was.
There are currently around 60 military conflicts ongoing around the world right now. That is the highest level of global violence that we've seen since World War II. Geopolitical uncertainty is rising. AI uncertainty is also rising, as we've discussed, which means that investors now have more reasons to panic today than at any time in recent memory.
And that means they are going to be making some very rash decisions. They might start panic selling. They also might start panic buying. Either way, it will translate to a highly erratic market, which will make all of us even more anxious than we already were. In other words, the days of metaverse projects and NFTs and speculative investments such as those are firmly over.
Investors are now looking for one thing and one thing alone, and that is safety. Physical safety, technological safety, personal safety, financial safety, all kinds of safety as the world becomes more and more dangerous. the demand for safety is only going to go up. And if we were safe last year or even the year before that, well, now the consensus on Wall Street is pretty clear.
We're not so safe anymore. Okay, that's it for today. This episode was produced by Claire Miller and Alison Weiss, edited by Joel Patterson and engineered by Benjamin Spencer. Our video editor is Brad Williams. Our research team is Dan Gillan, Isabella Kintzel, Kristen O'Donoghue, and Mia Silverio. And our social producer is Jake McPherson.
Thank you for listening to Property Markets from Property Media. If you liked what you heard, give us a follow. I'm Ed Elson. I will see you tomorrow.
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