Apollo Chief Economist Torsten Slok Talks Importance of Iran War Risk

**SPEAKER_1** (0:02)
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**SPEAKER_2** (0:07)
Our next guest out with some research, always a must read. It's always on the Bloomberg. Everybody talking about it on Wall Street. We talk about it a lot in the newsroom. Torsten Slok is with us, chief economist and partner to Apollo Global Management here in studio. Good to have you here with us. So many different places to start, and I do want to talk about the 60-40 portfolio. President Trump, we watched, and what he's doing with policies. We talk about AI a lot. We're going to get into that.
The Fed, do you just look at it all, or first thing in the morning, do you want to check what's going on in Asia? Is it everything that is a priority right now?

**Torsten Slok** (0:43)
Yeah, no, absolutely. I mean, the agenda is certainly first, the Iran is very important. Are ships going to sail through the Strait of Homs or not? How much oil is going to get delivered? That continues to be a very important risk, because if we do run dry in tanks, especially in Europe, then we may run out of marine fuel, of jet fuel, fertilizer, of helium. And obviously, this creates a jump risk in prices, especially for energy.

**SPEAKER_2** (1:06)
That's still a risk, even though they're like back and forth.

**Torsten Slok** (1:09)
It's a very...

**SPEAKER_2** (1:09)
It looks like markets look through it.

**Torsten Slok** (1:10)
You're right, Carol, because this hasn't been an issue for a while because we've been so busy with the Fed and with AI.
But in the background, this continues, unfortunately, to still be very, very important, because it literally is the case that we could have some tanks get to critical levels. Yes, there's still, of course, fuel running in the pipes, and the systems have to function. But we don't know what that level of, critical level of inventory is. And the risk is, when we don't have 20% of oil that's supposed to be delivered every day coming through the Strait of Hormuz or Bab el Monte, the consequence is that we still have this in the background as, again, jump risk in oil prices in particular, and also for agricultural prices. So yes, this just adds to the other things about Walsh's press conference and AI and all the other things we can talk about.

**SPEAKER_4** (1:51)
But one more on oil and Iran before we get there. It does seem like the oil market, and we just heard from Jeff Mason, who said, we have no idea what the talks are happening between the US and Iran right now to end this conflict. Oil prices, though, are down 5%, whether we're talking about Brent or WTI. Is the oil market getting this right, or is it getting it wrong?

**Torsten Slok** (2:07)
Well, it is quite remarkable that oil prices have been through this rollercoaster of going up and down and seems to have a much stronger opinion about whether a deal is happening or not, whereas people in rates and in the economics and in the region, they have a much more nuanced view of, hey, if there is no sign of a deal and if we have a deal, then there is a bigger risk that we could eventually run dry. So that's why the clock is truly ticking on oil inventories. And the more that ticks, the higher is the risk. Remember, there's now two months ago that the head of the EIA said that we were six weeks away from Europe running out of jet fuel. Now we thankfully have not reached that point quite yet, but it's very clear that we literally have zero ships. If I look at my Bloomberg screen, I can see homos, zero ships coming through the Strait of Hormuz and Bab el-Mandeb at the moment. That is still a very significant risk in the background. It's difficult to quantify. Who knows if this is tomorrow, next week or next month. But if the Iranians continue with this until the midterm election, I feel very confident that then we will have the risk that we could see inventory. Remember, Nice Airport ran out of jet fuel three weeks ago. So this is also not just some academic exercise. This is something that's really truly happening, not only for jet fuel, also for marine fuel, other types of fuel, and of course also agricultural products such as fertilizer and helium.

**SPEAKER_2** (3:17)
Maybe this is why Fed Chair Kevin Warsh was so general, broad, macro. And I want to play something for you because Double Line Capital's Jeff Gunlock called out Michael McKee on X, noting that Mike's question at last week's FOMC press conference, he wrote, the greatest financial media moment, year to date, was Michael McKee teeing up and then delivering, what are you waiting for to Fed Chair Warsh? Listen up, everybody, here's what Mike had to say at the FOMC press conference last week.