The Iran War’s Oil Shock — How Bad Could It Get?

**Chef May Lin** (0:06)
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**Ed Elson** (1:42)
Today's number, 14 That's how many months Christy Gnome served as the secretary of the Department of Homeland Security. That makes her tenure the second shortest in American history. However, the good news is she lasted longer than her dog.

**Mohammed Sergie** (2:02)
If money is evil, then that building is hell.

**Ed Elson** (2:11)
Welcome to Prof G Markets. I'm Ed Elson. It is March 10th. Let's check in on yesterday's market vitals. The major indices rode out a volatile session with the S&P 500 falling as much as one and a half percent. By close, however, the major indices were back in positive territory after Trump said the Iran war was, quote, very complete pretty much. Oil prices moderated after surging over the weekend. We'll talk about that shortly. Meanwhile the dollar climbed and Bitcoin topped $69,000.
Okay, what else is happening? The global energy market is facing its most severe shock since the 1970s. The Strait of Hormuz closed for the first time in recorded history, pushing the price of oil above $100 a barrel on Sunday. It spiked as high as $119 before crashing back down to $85 a barrel on Monday. As the G7 signaled, it is ready to release strategic reserves. Meanwhile, Qatar halted 20% of the global liquid natural gas supply after Iran fired drones at a Qatari facility. Okay, here to help us break down what is happening in the Gulf and what it means for energy and for oil. We are speaking with Mohammed Sergie, editor at Semafor Gulf. Mohammed, thank you for joining us. So much has happened. In just a couple of days, this story is changing literally by the hour, I mean, oil skyrocketing and then coming way back down. What do you make of what has happened over the past couple of days? And what do you make of prices in reaction to what's happened?

**Mohammed Sergie** (3:54)
Yeah, thank you for having me.
This has been just an incredible turn of events, I would say, for the Gulf. And all the eyes went towards Hormuz. And that's the choke point for the natural gas that comes out of Qatar, obviously, and that had a huge price spike in gas prices in Asia and in Europe. But even more importantly, it's the choke point for about 30%, if not a bit more, than the treated oil in the world. And, you know, it's what comes out from there. It's all of the oil from Iraq, all of the oil from Kuwait, and a significant portion from Saudi Arabia and the UAE. The idea here is that we couldn't see any more ships going through over the weekend. And this one was the unthinkable, the closing of Hormuz. And I think that's why we saw this huge swing up and down. But then when people started looking at, okay, so what is actually happening to supply? Is the market well supplied? And how much can go through the pipelines that bypass Hormuz? There's a pipeline that goes from the east to west in Saudi Arabia, usually has capacity, I would say between 5 million, could go up to 7 million barrels a day. So they could potentially move most of the oil that they need to the Red Sea. And there's another pipeline that goes through the UAE down to the Gulf of Oman. And I think once you start factoring that in, the supply scenario would change a little bit, and that's potentially one of the reasons why the prices came back down so quickly.