Chapter 1: What is the main topic discussed in this episode?
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Pushkin. So it's actually not that weird that markets are doing fine, even though we're now entering month three of the US-Israeli war on Iran. The problem, though, is it's becoming increasingly clear that energy prices are going to be much higher for much longer. Is this really OK, like indefinitely?
This week, we got a bunch of central banks and really big company earnings reports to help us understand what it all means. So today on the show, bear with me here. Is Donald Trump actually a master of getting markets exactly where he wants them? This is Unhedged, your friendly markets and finance podcast in the Financial Times. I'm Pushkin.
I'm Katie Martin, a markets columnist at the FT in London, where it's warm, it's cold, it's warm again. No one knows what to wear. It's chaos. And I'm joined through the miracle of technology by the larger than life, Mr. Robert Armstrong, all the way over there in New York City. Rob, how is the Big Apple?
Katie, it is a beautiful, sunny, cool day here in New York, a perfect spring day. And I know markets don't care about our listeners' feelings, but I do. We here at the Unhedged podcast, we really care.
We're here for you, listeners. So, look, it's maybe like a riddle and it's maybe not, but it's definitely a thing that, like, the cuffs and collars in markets just don't match at the moment. You were out in Switzerland talking to energy people the other week. Yes. I was writing about this yesterday. All the sort of energy analysts are saying, I don't like this much.
I think the Strait of Hormuz is going to be basically impassable for much longer than I previously thought. I think oil prices are going to be much higher than we previously thought. I think this is going to go on for longer. I think it's going to be economically more painful than we perhaps thought at the start of this crisis. And yet, like, markets are still like, dee, dee, dee, dee, dee.
I think we can make sense of this, not perfect sense, but maybe as good sense as we can ever make of the wild squiggling that characterizes all markets everywhere always. I mean, you know, I thought your column on this was excellent, Katie, but the numbers they are talking about.
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Chapter 2: Why are markets thriving despite negative news?
Yes. You know what I mean? Yeah. But, you know, I think the central hypothesis remains sometime in the next couple of months. They managed to get the straight open. Oil never touches 150. Yeah. And we all breathe a big sigh of relief. There is a right tail that is awful. And we should talk about that.
Chapter 3: What impact will rising energy prices have on the economy?
But the central hypothesis, the most likely outcome, I think it's markets friendly, given everything else we know about the economy and what the market is doing now and so forth.
Well, let me throw you a curveball, Rob Armstrong, because just before we came to record this show, a headline broke. Saying that, the United Arab Emirates said on Tuesday it was leaving OPEC, the organization that effectively controls oil prices. A bunch of big oil producing countries.
They get together and talk about how much oil they're going to produce, how much they're not going to produce and roughly what they think that's going to do to oil prices. It's been around for like decades. It's a really important part of the fabric of global finance. And the UAE is saying, right, after 60 years, we're off. And everybody I've mentioned this to has gone, huh? What?
Like, what does that mean?
It is a very unpleasant sensation for a pundit. Thank you very much. All I can do is fall back on that old description of OPEC as the world's dumbest cartel. Like their ability to organize themselves, to effectively control prices, to execute a long-term strategy is notoriously a bit ragged.
So my first guess, and it's just a guess, is that this is just another wheel coming off a car that is famous for throwing off wheels.
The other car that this wheel is coming off is like multilateralism writ large, right? You know, the World Trade Organization, the United Nations, NATO, OPEC, all these things are just kind of unraveling for reasons that I'm largely going to blame on the US. I mean, whether that's fair or not, I don't know.
But like, you know, just a lot of these sort of things that tie the room together are falling apart. Yeah. And another interesting thing from the Reuters story about the UAE leaving OPEC says here, it's a big win for US President Donald Trump, who has accused the organization of, quotes, ripping off the rest of the world by inflating oil prices.
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Chapter 4: How is Donald Trump's influence perceived in market trends?
And it's like, dude, you inflated the oil price. Like what? Yeah. Did I miss did I miss something like I don't get this.
Yeah, I don't get it either. But clearly, you know, and this when you talk to regional experts, this is the larger context is this kind of. doom loop hypothesis that all the global structures are breaking down a little bit. And the local story is that it's not a simple situation, a simple two-sided war. Like all the parties to this war are pointed in slightly different directions.
The Gulf states, Israel, the United States, Europe, everybody... There is not. It's not. There's nothing simple about it. This is just more evidence of that, that what the Saudis like, the smaller Gulf states don't like, which is different from what the Iranians are hoping for, which is different from etc., etc., etc.
Yeah, there's this simmering tension between the UAE and Saudi over the years. Saudi is kind of the biggest beast in OPEC. So this almost certainly has something to do with that. But yeah, it just feels a bit like every man for himself, which doesn't feel like a great place to be.
So, you know, in moments where you have these big stories like this breaking, people look to podcasts like this to say, what does it all mean? And our answer is, we don't know.
Let me try a hypothesis on you, Katie. If you look at this mess and then you look at how U.S. markets in particular are doing well right now, bonds steady and stocks rising, maybe there's not a contradiction there after all. Maybe in a fracturing world, you want your money to be near the biggest thing that it can be near, and that is America. You want to cozy up.
Not to the nicest, but to the biggest. Now, this is kind of barstool psychology on a global scale by me. But I think that thesis kind of makes sense that, you know, you might there is a flight to safety trade in the U.S. right now, even when and we've talked about this a lot, even when the U.S. has its role to play in creating the instability, a flight to safety still points to the United States.
Yeah, maybe US stocks are the new safe haven. Pass it on. Like I have heard this idea expressed like completely sincerely that there has been like a reordering of where safety is in markets. And maybe it's here. And like an additional interesting thing that's going on here is I've read quite a bit of analysis from like a couple of different places recently that have both pointed out that
where you see US stocks rising, it's not rising because of the usual reasons why US stocks rise, which is just like hope and expectation and hype and effectively investors paying more and more money for the same things. Actually, what's rising here and what's doing the hard work in pulling markets up is earnings. Now, on paper, of course, it's healthy. that stocks respond properly to earnings.
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Chapter 5: What are the implications of the UAE leaving OPEC?
And there were errors on both sides. And just the whole like Iran beats Trump headline is just too good to resist. So I'm here for it. So listeners, like I say, we're all going to be much wiser about the world. We might know some things by Thursday. So listen up then. Unhedged is produced by Jake Harper and edited by Brian Erstadt. Our executive producer is Jacob Goldstein.
Cheryl Brumley is the FT's global head of audio. 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 slash unhedged offer. I'm Katie Martin. Thanks for listening.