Iran Is Trying to Choke Off Traffic in the Strait of Hormuz

SPEAKER_1 (0:01)

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Alex Ossola (0:33)

Inflation held steady in February, but the bigger question is what comes next? Plus, why the US military isn't helping oil tankers get through the Strait of Hormuz?

Jared Maslin (0:44)

What American defense officials are looking at is saying, if we send our people in there, they're going to be in the line of fire themselves. It's not safe for them either. So that's why they're not currently offering that to the oil or shipping industries.

Alex Ossola (0:57)

And Democrats are pitching tax cuts for millions of Americans to try to win over voters. It's Wednesday, March 11th. I'm Alex Ossola for The Wall Street Journal. This is the PM Edition of What's News, the top headlines and business stories that move the world today. A new report out today from the Labor Department showed that consumer prices rose 2.4% in February from a year earlier. That's the same pace as in January and pretty much what economists expected. But these numbers are from before the US and Israel attacked Iran, and the war threatens to raise a lot of prices. WSJ investing columnist Spencer Jakab joins us now to discuss the question on everyone's mind, just what can February's numbers tell us? Spencer, under normal circumstances, these numbers would have been a key reading on what prices are doing. How does the Middle East war change that?

Spencer Jakab (1:53)

Well, yes, it changes it a lot. It's a bit like saying, you know, other than that, how did you like to play Mrs. Lincoln? I mean, there's a big, big thing that's happened since these numbers were compiled for February. This war, if it lasts a long time, will have an impact not just on energy prices, but on food prices, because it affects a lot of the world's fertilizer supply, a lot of just transport generally in the world. What does the Fed do when you have a big energy price shock? Well, they're kind of scarred by the memories of the 1970s, when they tried to initially cut the economy back into health, which turned out to be a mistake. And really, the answer central bankers have for this is to do nothing. Unless there's a very severe recession or the war creates other recessionary effects, they tend not to try to use monetary policy to deal with a commodity price shock.

Alex Ossola (2:46)

So as the conflict continues, what are some of the numbers that you're going to be keeping an eye on, just to gauge a bit of the economic impact?

Spencer Jakab (2:55)

One thing to look at is what's happening in the real world to prices. For example, gasoline prices, those are already up substantially. And those have a big effect, especially on middle and working class households, you know, spend a lot of money on gasoline in the United States. But also psychologically, it's a price that everyone knows, it's a price everyone sees. You know, if the price of milk and bread and things like that start to go up as well, which they could, those are the ones that people get angry about and are aware of, and it affects their behavior in other ways, it affects their propensity to spend, for example.

Alex Ossola (3:27)

That was WSJ investing columnist, Spencer Jakab. Thanks Spencer.

Spencer Jakab (3:30)

Thank you.

Alex Ossola (3:35)

This morning, we told you the International Energy Agency was proposing a record release of oil reserves to try to bring down crude prices. The IEA has now agreed to do so, and its member countries will release 400 million barrels of oil from emergency stockpiles.

SPEAKER_6 (3:50)

This is a major action aiming to alleviate the immediate impacts of the disruption in markets. But to be clear, the most important thing for a return to stable flows of oil and gas is the resumption of transit through the state of Hormuz.

Alex Ossola (4:13)

That was the IEA's Executive Director Fati Birul speaking this morning. Meanwhile, the Strait of Hormuz, that critical shipping lane for the world's oil supply, is still effectively closed. Today, three commercial ships were hit around the strait. The spokesman for Iran's Armed Forces said the country wouldn't let a single liter of oil pass through the strait for the benefit of the US and its allies. President Trump said today that oil companies should use the strait. However, they're not likely to do so until it's safe. I'm joined now by WSJ Middle East correspondent Jared Malsin. Jared, the president suggested that there will be military escorts to help ships cross the strait, but the journal's reporting that the US military has turned down requests to escort ships through the strait. Why is that?