Oil, yen and egonomics

Katie Martin (0:00)

There's some big egos pushing global markets around at the moment, and on some level, we're all feeling the impact. The first involves Japan's currency, the yen. As regular listeners will know, Scott Bessent, the US Treasury Secretary, has taken it upon himself to push the world's third biggest currency up from its long-running slump. It's safe to say this plan has had its doubters, but this week he declared, I am the house now. You can bet against me if you want. Good stuff. The second is oil. Neither the US nor Iran is willing to back down on the conflict that started in February. It's all escalating again, and suddenly the price of oil is back at $105 a barrel. Yikes.

So today on the show, Egonomics and what happens when powerful people are spoiling for a fight.

This is Unhedged, the markets and finance podcast from the Financial Times. I'm Katie Martin, a markets columnist down in the dungeon of FT Towers in a rather lovely sunny London. Joining me down the line from New York City, our very own resident big ego, Mr. Robert Armstrong.

I couldn't resist.

Rob Armstrong (1:15)

Yes. I have a big ego, but not the power to push anyone around.

It's been a painful combination my whole life.

Katie Martin (1:24)

It was nice to see you in London the other day.

Rob Armstrong (1:26)

It was. It was great. The audience was terrific and it was just a lovely event overall. Yeah. It was lovely to see your mother again. That's the most important thing.

Katie Martin (1:35)

I still don't think she really understands what a podcast is, but she likes hanging out. Our listeners are very nice. Hello listeners. If you were there, it was nice to see you.

Okay. So let's start with oil and then turn to the talented Mr. Bessent. This war in Iran, six months, Rob, it just goes on and on. And the oil price rushed higher when it started, obviously, came back down again and we all had a good laugh at all the oil analysts who got it wrong and said the oil was going to a hundred bazillion dollars a barrel. Anyway, now-

Rob Armstrong (2:08)

Who's laughing now, Katie?

Katie Martin (2:09)

Who's laughing now, oil analysts? Anyway, they are because oil is back up at a hundred and odd dollars again.

Rob Armstrong (2:17)

Brent Crude this morning, 105, which is getting close to the peaks of the early days of the war, which were kind of at that 110 level and rising fast.

Katie Martin (2:29)

Yeah, 105 is squeaky bum time. That's high oil prices.

Rob Armstrong (2:34)

Yeah. And I think it's a moment where we kind of don't know how much oil is flowing through the strait and how much oil will be flowing through it. Both, at least the Iranians seem to be cultivating a kind of ambiguity about their strategy. They seem to like the slow burn.

And so that is finally coming through in prices. I think the people who thought the Americans and the Iranians would figure out something before the American midterm elections are now rethinking that prediction.

Katie Martin (3:11)

Yeah, because this is a good bit of leverage that Iran has before the midterms in November. And look, you and I, we know what we don't know. We are not geopolitical experts, but I was reading up on this earlier. So the gist is that people have been hoping that the two sides could get back to the memorandum of understanding that was signed in June.

That has failed, and now the US wants what it's calling a comprehensive agreement, which includes the Strait of Hormuz, which you will be aware was open before this all started, and nuclear, which again, had been sorted by Obama. So we're trying to get back to something like square one, and the Iranians are digging their heels in, and ships are getting hit by rockets, and it's all terrible. And so yeah, I mean, where does oil end up? I mean, you don't know, I don't know.

Rob Armstrong (4:01)

I don't know. I mean, when we talked about this during the first spike in oil prices, we were all surprised, I think, as a kind of the pundit industry broadly, or the finance world broadly, was a bit surprised at how resilient the American economy was in the face of oil that passed 100 There wasn't a big slowdown. I think the consensus has come that if you can kind of keep things below 150, it's not an energy crisis. It may be a political crisis. I'm looking at national average gas prices here. At $4.27, a gallon of unladed gas is more than a dollar more expensive than it was a year ago, and a quarter more expensive than it was a month ago.