The Iran War’s Lasting Scars Across Asia

**SPEAKER_1** (0:02)
Bloomberg Audio Studios.

**Joe Weisenthal** (0:04)
Podcasts, radio, news.

**SPEAKER_3** (0:08)
We begin the week with the US and Iran having reached an interim deal to end hostilities and reopen the Strait of Hormuz.

**SPEAKER_4** (0:14)
You sent oil prices lower and sparked a relief rally across Asian markets. Officials from both countries set to meet now in Switzerland on June the 19th where the agreement will be formally.

**Tracy Alloway** (0:24)
Everyone has discovered from the past six years that these big one-off, supposedly one-off disruptions can happen with frequency.

**Oanh Ha** (0:35)
That's Bloomberg's Tracy Alloway. Tracy co-hosts the Odd Lots podcast, and she spends a lot of time looking at the long-term impacts of geopolitics on the global economy.

**Tracy Alloway** (0:47)
The lesson that everyone's been internalizing is that you need to build up stockpiles, you need to have independence in terms of your crucial supplies, you need to have additional capacity.

**Oanh Ha** (0:58)
And few places have shown the need for independence and extra capacity more clearly than in Asia over the past few months. After the US and Israel went to war with Iran, the Strait of Hormuz grounded to a halt, choking off supplies of virtually every major commodity, including one-fifth of the world's oil.

**SPEAKER_7** (1:18)
But I think a lot of great things are going to happen to the Middle East right now, and very importantly, the oil is plummeting down.

**Oanh Ha** (1:26)
At the G7 summit in France, President Trump touted a deal the US reached with Iran's regime over the weekend, which he says will reopen the Strait of Hormuz.

**SPEAKER_7** (1:35)
Essentially, ships are starting to go out now. On Friday, it'll be completely opened.

**Oanh Ha** (1:42)
Across Asia, countries are welcoming the U.S.-Iran peace deal that would help stabilize global energy prices and reopen a vital shipping route.
But many are skeptical that will happen.
And even if it does, for Asia, that shift might be too little, too late.

**Joe Weisenthal** (2:03)
There is this brewing but not yet impacting food issue that will arise in Southeast Asia specifically.

**Oanh Ha** (2:11)
That's Bloomberg's Joe Weisenthal. He co-hosts Odd Lots with Tracy.

**Joe Weisenthal** (2:16)
The closure of the Strait of Hormuz is going to create a food stress in much of the world during the next planting season.
And if there's food stress, people will be buying food and not random manufactured goods in China come that time. And so there may be an element where China is choosing to reduce its imports so that its customers of manufacturers have more capacity come next year.

**Oanh Ha** (2:53)
Welcome to the Big Tech Asia from Bloomberg News. I'm Oanh Ha. Today, I'm sitting down with my colleagues, Tracy Alloway and Joe Weisenthal, co-hosts of Bloomberg's Odd Lots podcast. We recorded this conversation just before news broke that Iran and the US may have struck a deal to reopen the Strait of Hormuz. And as you'll hear, this discussion is arguably just as relevant now as when we taped it. While the reopening of the Strait would be a welcome relief, the structural shifts caused by the conflict have fundamentally changed businesses across Asia. And the resulting pressure on food and energy supplies and prices isn't going away anytime soon.
On today's show, we dive into why Asia is feeling more economic pain from this conflict than Western nations, and what the new normal looks like for the region and the rest of the world.
While the details of the proposed new deal between the US and Iran remain unclear, one thing is certain. War in Iran and the virtual closure of the Strait of Hormuz have effectively slapped a war tax on vital products, and it's impacted every corner of the global economy. You've probably felt the pinch in one way or another, but its effects haven't been distributed evenly. Wealthy countries like the US and Japan have opted to drain their stockpiles of crude oil In other corners of the world, governments are turning to demand destruction by encouraging industries and consumers to use less. But that risks slowing economic growth and triggering recession. It's a glaring disparity, and Bloomberg's Tracy Alloway says it highlights a structural vulnerability.

**Tracy Alloway** (4:44)
They're often poorer countries. They don't have as big stockpiles of oil inventory, and the one thing we've seen developed countries do across the world is really start to dig into those stockpiles and release barrels in order to, I guess, cushion the higher prices.
And so for a poorer country, I think that's one of the reasons in Asia you're seeing the governments really focused on demand destruction rather than propping up prices. So you've had, I think India was encouraging people not to go on flights. People are being urged not to drive to work, things like that. China is doing pretty much all the heavy lifting in terms of demand destruction or like the bulk of it. So I saw a JP Morgan estimate, I think, saying that demand for oil from China had fallen like 9 percent. I think that's 1.5 million barrels a day.