4/13/26: Trump Blockades Hormuz Strait, Negotiations Break Down, Gas Prices Spike

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23:06Rory Johnston:Because when the mess is already handled, you can focus on what matters, the food, the people, and the moment. It may look effortless, but now you know it's Reynolds Kitchen's countertop prep paper. Take a tip from me, wet it, set it, prep it, done. Make it easy. Make it with Reynolds Kitchen's countertop prep paper. Available now in the Reynolds Wrap Aisle in Walmart. George? Here was the vice president in Islamabad shortly after some 21 hours of talks basically announced they totally failed. Let's take a listen. We have been at it now for 21 hours, and we've had a number of substantive discussions with the Iranians.

23:49That's the good news. The bad news is that we have not reached an agreement, and I think that's bad news for Iran much more than it's bad news for the United States of America. So we go back to the United States, having not come to an agreement, we've made very clear what our red lines are, what things we're willing to accommodate them on, and what things we're not willing to accommodate them on. And we've made that as clear as we possibly could. And they have chosen not to accept our terms.

24:15Rory Johnston:They have chosen not to accept our terms. It's not even our terms. It's Trump's terms. Let's go to the next one. This is from Golubov, the chief negotiator on the Iranian side. He says, before the negotiations, I emphasize we have the necessary good faith and will, but due to the experiences of the two previous wars. We have no trust in the opposing side. My colleagues on the Iranian delegation, the Minab 168, raised forward-looking initiatives, but the opposing side ultimately failed to gain the trust of the Iranian delegation in this round of negotiations. Some people are taking note of that in this round of negotiations, keeping the door open to the future.

24:50Rory Johnston:He says, America has understood our logic and principles. Now it's time for it to decide whether it can earn our trust or not. We consider every mirror to be another method of authority diplomacy alongside military struggle for upholding the rights of the Iranian nation. And we will not for a moment cease our efforts to consolidate the achievements of the 40 days of Iran's national defense. He continues that he is grateful for the efforts of our friendly and brotherly country, Pakistan, which continues to try to push some sort of negotiations in the future. The foreign minister of Iran, Arachi, also spoke out.

25:27Rory Johnston:Let's put his tweet up there on the screen. He says, in intensive talks at the highest level in 47 years, Iran engaged with the U.S. in good faith to end the war. But when just inches away from an Islamabad memorandum of understanding, we encountered maximalism, shifting goalposts, and blockade. Zero lessons learned. Goodwill begets goodwill. Enmity begets enmity. And I do think that this confirms that Trump, You know, eventually they would try and work out something, which they thought was relatively reasonable. They called Trump. He's like, no, absolutely not. He decides to do some sort of a naval blockade.

26:01Rory Johnston:So that's where we are as of right now. Things could change. The oil markets are not responding in a way which is, I think, going to force his hand entirely. Let me take a look at the stock futures. Stock futures are down 0.67 percent. Not terrible, right? Not great, but not catastrophic. Yeah, it's not phenomenal, but nothing catastrophic by any means. everybody still seems to think some sort of inevitable taco is going to happen. But from all the oil analysts and others that we've spoken to and all of the other – the amount of – like the storage has dried up in the Gulf. They already had to cut production.

26:34Rory Johnston:Damage has been done to multiple different oil and gas facilities. The holdup on fertilizer and natural gas and on – what else? Helium is already going to show up in the global supply chain. We will live with this for months. And even with the naval blockade, CENTCOM announcing this morning, I was just taking a look, that every ship in and out will be subject to U.S. inspection. So that's – I mean this could be like Iraq in the 90s. We had a no-fly zone over Iraq in the 90s. This was a precursor to the war with Iraq because they would always say, oh, Saddam violated the no-fly zone, whatever. But my point is just like that took billions of dollars.

27:17Rory Johnston:It actually cost lives. It ended up being just some sort of permanent empire mission over Iraq for nothing, really, you know, after the original Gulf War. And this very much could be where Trump doesn't want to restart the war, but we just have this multibillion-dollar boondoggle, Straits of Hormuz situation. Iran can continue to suffer. It just seems like a nightmare all the way around for us, for them, for the Persian Gulf countries as well. So that's where we are. I mean, I think he really doesn't want to restart the war because it was such a disaster. He doesn't really want to surrender either.

27:52Rory Johnston:Something's got to break. Maybe Iran will just start firing again and then we'll go back to a hot war. It's very possible. But if that happens, then it's nuke or ground troops. I don't see another way out. Yeah. There's a Wall Street Journal report that Trump's considering limited military strikes. There's no such thing. I mean, what is that? Yeah, exactly. And it's not like he's still under the illusion that he gets to completely control the escalation. That's not the way that works. I mean, Iran has already demonstrated like, OK, you go after our oil and gas infrastructure. We're going to hit the Gulf states.

28:21They have that capacity. Or, you know, you go after our businesses. We're going to hit your data centers in the region. They've already demonstrated that they're able to do that. There was another report this morning. So Trump had said in that Maria Bartiromo interview that he thought other countries were going to come and help with our blockade of the blockade. And so far, everyone's like, yeah, you're on your own on this one. Britain has said no. Australia has said no. obviously Spain said, no, there's no other country that's been like us. We're on our way. We're going to come and help you out.

28:52So, I mean, that's the other piece here in terms of the pressure is we really don't have outside of Israel. We really don't have any allies that are rushing to our defense. I guess you could put UAE in that camp as well now, because the situation is so catastrophic that they're like barely a country anyway. And then I think the original idea probably of this blockade of the blockade is to put pressure on China so that China puts pressure on Iran. But if you're now saying, well, we're just going to block Iranian ships, well, that's not really going to put any pressure on China whatsoever.

29:23Rory Johnston:This is where the confusion is. So let me read you verbatim. This just came out like six minutes ago. U.S. Central Command issues notice to seafarers about the blockade, warning any vessel going to or from Iran is subject to interception, diversion and capture. The blockade encompasses the entirety of the Iranian coastline to include, but not limited, to ports and oil terminals. So that isn't just Iranian ships. Right. That is Chinese ships. Yeah. I mean, now we're in a different world, right? So think about how this goes. I mean, then if a Chinese ship shows up, are you actually going to fire on them?

29:56Like, what are you going to do?

29:57Rory Johnston:Are we going to board a Chinese vessel? Right. I mean, these are serious diplomatic incidents. I don't even, I don't know. I just think about it and I think, can we – would the United States of America, would a U.S. merchant, marine, and or flagged vessel accept boarding and inspection through the Taiwan Strait? No. Like that, it's time to go at that point because then – what does that mean? You control the strategic – or the Straits of Malacca. If the Chinese Navy just declares all of a sudden we are putting a cordon over Taiwan, all of us understand that is an act of war. I'm not saying we should go, but at that point, like, OK, we are in crisis mode.

30:35Rory Johnston:You have declared literal, like basically annexation and total control of these waterways. And look, that is the purpose of the U.S. Navy. Do we all have confidence that we can actually do it at this point? Like, are we going to escalate from that all the way up? This is a serious, serious shot across the bow at them. And yeah, with the Chinese, I mean, they've called our bluff every single time. They did. Let's give them credit. They actually worked pretty hard to try and get a ceasefire. They pushed Iran to the table. The question is, is will they buckle? But the other problem is if we have some sort of diplomatic incident, remember, the Trump-She summit is sometime next month.

31:13Rory Johnston:We don't have a date. We're really going to blow it all up over Iran of all places, right? Like we don't even get much oil out of this place. Like that is why it is the whole thing is so crazy. If we just like think about how much better off we would be on the February 27th status quo. How much? It was so much better. It was a paradox back then comparatively. Two dollar ninety cents. Two dollar ninety cents gasoline. Iran just didn't have a nuclear weapon. They actually had a leader who really didn't want a nuclear weapon, whereas now they really might have a leader who wants a nuclear weapon.

31:46They were very conciliatory in those negotiations. The Omani prime minister said, like, there was a deal. I mean, they had gone way further than they even went during the JCPOA. And Trump could have done that. It could have claimed mission accomplished. Look, I was able to get a deal. Obama never did. Our maximum pressure campaign is a success. Then they were too weak and lame to be able to do what I can do, art of the deal, on to Cuba or whatever next nightmare he has in store for us. But instead, he decided that he needed this grand, glorious military victory. And instead, it has turned into an absolute total disaster.

32:18And just zooming out, look, we're already in a proxy war with Russia via Ukraine now. And I wouldn't yet call this a proxy war with China, but we are very close to, you know, effectively being in that situation. It only takes a few of these incidents before you're also now in a proxy war with China. And China's been assisting the Iranians more than had previously been reported. That's part of why they were in the position they were to pressure Iran to come to the negotiating table at a time when a lot of the IRGC was very opposed to even starting negotiations at this point and thought that there needed to be a lot more pain.

32:53So, you know, China, again, like at a time when obviously our military supplies are very low and we need to resupply, they control a lot of the critical supply lines we would need to be able to accomplish that. And so they really have us in a bit of a chokehold here, which is what the Trump administration has already discovered. So I don't know where this thing goes, but it's hard to see any sort of resolution that is going to be positive whatsoever. The best we can hope for at this point, is that the first round of negotiations was basically for show and to bluster and demonstrate how tough we are and that we'll walk away from the table, blah, blah, blah, but that they are willing to come back and get serious about making a deal with Iran that reflects the reality that the Iranians demonstrated a lot more capability than what we expected them to.

33:41Rory Johnston:Yep, that's exactly right. Last thing, let's put out this warning from the IRGC A8. Let's put it on the screen. Iran's Revolutionary Guard has warned any miscalculated move will trap the enemy in the deadly whirlpool of the Straits of Hormuz after Trump ordered a U.S. naval blockade of the strategic waterway. So you can see they continue to have that capacity. Remember, they have the small boats. Also, remember this. Trump said that there were no mines in the Straits of Hormuz, and now they're like, oh, well, we have to do mine clearing. So there are mines in the Straits of Hormuz, just so we all understand.

34:10There were a lot of PSYOPs over the weekend, too. But there's so many fascinating things here.

34:13Rory Johnston:It's like, oh, so there actually are mines in the straight. So they did have that capacity. All of these, you know, oh, CIA estimate comes out, half of the Iranian missiles are still operable. They're digging them out. Iran's national media reporting this morning that they're redoing all of their railway, right? It's like, oh, it's not so easy, is it? Turns out as we, I mean, we've learned these lessons a hundred years ago. Yeah, you can bomb a railway unless you've got a General Sherman. This was 200 years almost at this point, sitting there and, you know, forming the metal, the Sherman necktie.

34:45Rory Johnston:Yes, actually, it's very easily to replace if it's only under aerial bombardment, as we saw in World War II. So this is the problem that we have strategically. It's either ground invasion, or it's nuclear weapon, or it is actually diplomacy at this point, which is basically surrender. I'm just not sure that anybody is there yet. And that's the unfortunate lesson of history. So we've got Treat to Parsi standing by. Let's get to it. Discover a spectacular island destination with crystal blue seas, endless sunshine, and the cool Bahamian breeze. Bahamar, located in Nassau, Bahamas, offers your choice of three luxury hotels.

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36:38Rory Johnston:This is Martha Stewart from the Martha Stewart Podcast. Ever wonder how to make hosting look effortless? Here's a secret. When prepping for cooking and baking, get ahead of the mess with new Reynolds Kitchen's countertop prep paper. Just lightly wet the counter so the paper grips. Lay it down, and drips and spills stay on the paper, not on your counter. Cleanup is as simple as lifting it away to reveal clean counters. Effortless it is, thanks to Reynolds Kitchen's countertop prep paper. Wet it, set it, prep it, done. Available in the Reynolds Wrap Aisle at Walmart. For more on the so far failed negotiations, we are joined by Trita Parsi of the Quincy Institute.

37:26Great to see you, sir. Good to see you. Good to be with you guys. Yeah, of course. So let's go ahead and put this first element up on the screen from Barack Ravid, which claims to be the U.S. red lines from the negotiations. According to him, from a U.S. official, they said, ending all uranium enrichment, dismantling all major nuclear enrichment facilities, retrieve highly enriched uranium, accept a broader peace, security and de-escalation framework that includes regional allies and funding for terrorist proxies. Hamas has blown the Houthis fully open the Strait of Hormuz, charging no tolls for passage.

37:59One gap in the talks was the amount of Iranian frozen funds that will be released per source with knowledge. Your reaction to these purported U.S. red lines and also where we are right now in terms of any sort of resolution to the war? If these are the American red lines and if these were the actual negotiation positions of the delegation in Islamabad, then I don't think there was any need for any negotiations at all. Those are dead on arrival. The U.S. side knows it. I don't think this is accurately reflected in the talks. I think also there's a problem in which certain, there's a diversity of views within the administration and various people are trying to influence the final position by leaking these type of things and making them the reality.

38:44I do think also that in the talks, there were a lot of progress made, including on the nuclear issue. But at last moment, there was a shift on the American side, Whether that was part of a negotiation tactic or whether that is yet another example of shifting goalposts, which unfortunately has become the hallmark of this administration's negotiations with Iran, remains to be seen. Yeah.

39:08Rory Johnston:Dr. Parsi, let's talk about that because the foreign minister, Arachi, he came out and said, we had a memorandum of understanding basically ready to go. Then the shifting goalposts started. Now, I seem to think that's an allusion to the nuclear enrichment as in a red line of zero enrichment. Let's be clear about where that came from. It appears to be in Israeli demand. Now, what's your view there of how that demand enters in the last minute? Is it Israel calling Trump, saying this is unacceptable? How exactly did this go? How do the Iranians view their negotiations? So we know that in the previous negotiations, this is a shift that occurred as a result of the Israelis pushing very, very hard for it and using their echo chamber in Washington, et cetera, to kind of push Trump in that direction.

39:59And that's part of the reason, a critical reason as to why the talks failed. Because, you know, the only reason why the talks even began in the first place was because Trump kept on saying, my only red line is nuclear weapons, not nuclear enrichment or nuclear capability. Had he said from the outset that his red line is nuclear capability and enrichment, I don't think the Iranians would have come to the table in the first place. But once at the table, this shifted as a result of pressure from Israel. Whether that is the case here or not, again, remains to be seen. I can see a scenario in which because of progress having been made, the US side kind of pulls back, knowing very well that there's still another week or so left of the ceasefire sees what else it can get by adding some pressure and then if it gets something else and even if it doesn't it will have formed a narrative of said that the Iranians caved because the U.S.

40:55you know threatened to close the strait of or the Persian Gulf as a whole with a naval blockade etc so a lot of these things I think should be read as tactics within a negotiation rather than necessarily an end to the negotiations, because it's very important to keep two things in mind. Neither side has said that the talks are over, none of them, and neither side has gone back to firing at each other. So the ceasefire is holding, and if the ceasefire is holding, that means that the negotiations, at least nominally, may still be alive, particularly mindful of the fact that neither one of them have said, this is over with, we're not going to meet again.

41:35And even J.D. Vance speech or presser, he said, we have made our terms clear. The Iranians need to accept that or something like that. He didn't say it's over. Yeah, that is a very important point. We talked some about the U.S.'s purported red lines, at least. What is your sense of what the Iranian red lines may be? I think on the Iranian side, it's actually quite clear that may be part of the challenge they have in their negotiations. They're not going to give up the control of Shredo Hormuz, but they can consider various arrangements. The US side did make some proposal on that. The Iranians rejected those.

42:11I do hope that the Iranians see a value in doing something with the US on this, because I think it will be very important for Trump as part of his narrative, but also because it may actually stabilize the situation if the US is in on it in some fashion. So you're talking about actual sort of sharing the toll with the US, that sort of proposal. It could be different. The US proposal was sharing a toll. I think it could be other things. The sharing the toll seems to be something that at least the Iranians initially rejected. It could be other things, you know, what the currency would be in which the tolls would take place in.

42:45It could be that the Iranians would use a percentage of the toll revenues not to give it to the US, but to buy things from the US. So I think there's various ideas, etc., that can be further explored on that. And I think if it ends up becoming some arrangement in which both sides are involved in it one way or another, it can help stabilize the situation because the critical thing is to make sure that the strait opens. The Iranian objective is not to close the straits. The Iranian objective is to use the control of the straits in order to reestablish economic relations with countries that have left the Iranian market.

43:21The South Koreans have already come to Iran. The Japanese are about to do their own negotiation. These are countries in Asia that used to have extensive economic relations with Iran, but were chased out of the market because of the sanctions, because the U.S. pressure on them was very intense. Now the Iranians are pressuring them back in through the Strait of Hormuz. It's not to close it.

43:43Rory Johnston:Yeah, this is - But I think it's - There's one thing I think is very important to understand, in which the Iranians may actually have ended up in a relatively weaker position than they were in before. See, the United States, or Trump, could not end the war without some sort of arrangement with Iran because the Iranians had a say in it. And this kind of forced them into a situation in which they had to ask for negotiations. But now that the Iranians have accepted a ceasefire, I think the tables have turned a little bit. The United States can now actually walk away from these talks and end up in a scenario in which the Iranians are controlling the Straits, which is, you know, from the U.S.

44:21perspective, not good, but it's not devastating. It's much more problematic for other countries, particularly the GCC countries. The Iranians don't get any sanctions relief, but the U.S. doesn't go back to war. And it kind of washes its hands of this whole thing, but just walks away. Doesn't give anything further, doesn't get a deal, but is out of the war, which I think is Trump's critical objective. Oil prices would come down, etc. But then what does Israel do in that scenario? Let me get to that one second. But the thing is, the Iranians want more than that. They want a framework agreement on how to manage the relationship between the United States and Iran.

44:56They want to move beyond the 47 years of enmity. They think that they finally have leverage to be able to meet the US face to face and get that. And that would, of course, entail a dramatic amount of sanctions relief, but also concessions from their end on the nuclear issue. From the Iranian side, that would be a much more valuable outcome from this, to make sure that they actually end this situation with the United States and get some sort of agreement, reestablish some economic relations. That's something the Iranians want. The U.S. doesn't need this. The U.S. could walk away and would end up in a still not an ideal situation, but not a terrible situation.

45:34The Iranians could also walk away, but they would lose more if they walk away. And this, I think, has in some ways changed the dynamics because prior to the ceasefire, the situation was opposite. The United States could not walk away without an agreement from Iran.

45:49Rory Johnston:Right. So what does that mean then? You know, Crystal asked about Israel. So how would it so if they did walk away, it would seem logical then that Iran would actually have to resume firing because that would be the only thing that would draw the United States back to a situation where it had to reach this memorandum of understanding. Depends. If the Israelis go back to war with Iran without the United States, then the Iranians undoubtedly will strike at Israel. And it will not be like before. They were not going to go into a scenario in which the Israelis slowly but surely, constantly increase the type of, I mean, Gaza or Lebanese scenario, in which the Israelis gradually increase their attacks on Lebanon or on Gaza while the ceasefire is still in place.

46:33They will not accept that. So slightest thing from the Israelis, the Iranians are going to strike back very, very hard. Then the question is, if the war between Israel and Iran resumed, first of all, can the Israelis manage that without the United States being involved? I have my severe doubts about that, both from a military standpoint, from an intelligence standpoint, the amount of help the Israelis need, but also from a public opinion standpoint. Will the Israeli public go along with further war with Iran, in which they do take a lot of hits themselves, but without the U.S. being part of the war?

47:05And I think that can change dramatically. It could also create a scenario in which the Israelis will, of course, do their outmost to get the U.S. back into the war. And that will be a real test. If Trump has managed to pull out of this war, cuts his losses on the straits, but then goes back in because the Israelis want it, Again, I have a hard time seeing that happening. But then again, I was wrong about him going into this war in the first place because it was so utterly clear in my view that it would be a disaster, yet he did it. But you can also see a scenario in which the U.S. doesn't go back in and then the Iranians have managed to achieve something else, which is they have truly separated the U.S.

47:43from Israel. That would be a huge strategic win for the Iranians, which may be part of the reason why the Israelis actually won't go into the war again with the Iranians, knowing very world that that might be an outcome from that. That's interesting. Let's talk a little bit about China's role in this. We can put B3 up on the screen. This is some reporting from the New York Times showing that China was taking a more active role than previously known in Iran. American intelligence agencies have obtained information China in recent weeks may have sent a shipment of shoulder-fired missiles to Iran for its conflicts.

48:14They say it's not definitive that the shipment was sent. There's no evidence the Chinese missiles have yet been used. But even a A debate in Beijing over sending missiles to Iran suggests the degree that China sees itself as having a stake in the conflict. Intelligence agencies have assessed that China is secretly taking an active stance in the war, allowing some companies to ship chemicals, fuel and components that can be used in military production to Iran for the war. Obviously, we take with a grain of salt anything that, you know, any intelligence agency says. But there's no doubt China has vested interest in the resolution of this conflict.

48:46There's also reporting that China was involved in pushing Iran to the negotiating table. So how do you think that they're viewing where we are right now? So first of all, as you said, we have to take all of these different intelligence reports leaking to media without much scrutiny, with a pinch of salt. But I think also we have to take the definition of China helping Iran somewhat carefully. for the Chinese to continue to sell stuff to Iran, including chemical things, is not from the Chinese perspective in any way, shape or form them actually helping Iran in the war. Similar to the fact that the United States keeps on selling a lot of things, even short of weapons to Israel, even its selling of the weapons, it doesn't necessarily view as a provocative move.

49:31Imagine, you know, accusations that just because the United States were to sell other type of things to Israel during a war, that that would be active support for the war from the US side. So I think the definitional issue is quite important to understand here. Having said that, I do believe that the Chinese have provided the Iranians with intelligence and other measures. Without getting directly involved in this, it's still way below any threshold that would really justify the US doing anything in particular. The Chinese have an interest in getting this resolved ASAP. There is this view in Washington that as soon as the US shoots itself in the foot, that benefits China.

50:05There is truth to that, undoubtedly. But it is a simplistic black and white view of the Chinese. The Chinese, more than anything else, want to make sure that there is stability in the Persian Gulf. They are much more affected by high oil prices and by the flow of oil from the Persian Gulf than the U.S. is. And if this continues to become a real debacle on the energy markets, the Chinese are going to suffer tremendously from that. And there's no win in that for them, even if the U.S. itself is also hurting itself through that process. So I'm not surprised that the Chinese potentially have played a role in the background trying to get an agreement.

50:41I think they would want to keep their fingerprints off of it. They don't want any responsibility for what is going on. There's one thing to help. There's another thing to actually become a partner openly in this. And then suddenly you share the responsibility for the outcome instead of Trump, who started this war. So I think the Chinese are going to be very careful about that. But behind the scenes, I'm sure they're going to do things to try to make sure that it goes in a direction that benefits them, which is for this issue to be resolved.

51:05Rory Johnston:Right. And then my question here is on the blockade. So let's say that the scenario that you laid out happens. Trump walks, but he keeps a naval blockade. Is that a tolerable situation for Iran? How long could they really survive without doing something radical to try and change the status quo? You know, the Iranians have actually prepared themselves for this scenario, including having a lot of oil outside of the Perlin Gulf already. Moreover, I think it's important to recognize that in the scenario I'm talking about in which the US walks away, there would likely be more economic pressure on Iran.

51:36But I'm not so sure there would be that naval blockade. Not necessarily, at least in its full form, perhaps a nominal one. But just think about it. The Iranians are selling oil to India and to China. What is the US going to do? They're going to stop those shipments? They think that's a punishment of Iran? That's a punishment of China and India. That's a direct confrontation with the Chinese and the Indians and other countries in Asia that are buying this oil. So it is not as simple as to believe that this is just some sort of a pressure on Iran. It will be pressure on Iran. But more than anything else, it will be pressure on other countries that actually have strong relations with the U.S.

52:11and on the energy markets. Anything that right now takes energy off of markets will push up oil prices. That will lead to higher gas prices in the United States, which dramatically backfires on Trump and on the Republican Party in the midterms. On top of that, if the U.S. goes really hard on this issue, then there's a high likelihood that the Houthis will step in and they will close off the Gulf of Aden and there won't be any ships going through there either. That suddenly means that another 12%, in addition to the 20 % of the flow of oil that has been compromised because of Iran's current control of the straits, would also then go off the market.

52:54and that will dramatically push up oil prices. Moreover, in order for this to be workable for the US, even if the US is capable of absorbing those hits, it would require that this goes on for some time. This is not a quick thing. This is not something in which you do it and suddenly the Iranians came. And then that raises the question, who has most tolerance for this? The United States and not just the United States, but Donald Trump and his political situation or the Iranians? I think this is yet another one of these examples in which, yes, the U.S. can escalate, but the Iranian counter-escalation is far more painful to the U.S.

53:32than the U.S.'s own escalation against Iran initially is against Iran. My last question for you, Triton, you've set us up well for our next block, which is an oil analyst is going to join us to talk about what he's seeing in the markets right now. But what about the role of Saudi Arabia and UAE, who have signaled they want the war to continue? All the indications are that they're pushing in that direction. UAE has even potentially already, but certainly signaled their willingness to join the war as a combatant themselves. You know, what sort of messages do you think they'll be sending to President Trump?

54:04So there's a lot of conflicting reporting about Saudi Arabia, in which it is at times pushing for this. And then there's a reporting that says that it is not. I think the UAE is a little bit more clear. But I think it's stunningly clear. If the U.S. pulls itself out of the war, what is the UAE going to do? The UAE is in a very, very dire situation. It has made a huge mistake, in my view, making itself a frontline state against Iran within Israel's enmity with Iran because of its signing on to the Abrams Accord. Its own problems with Iran were far more resolvable than the problems between Israel and Iran.

54:41But now it is beholden to Israel's enmity with Iran. while it itself is only 50 or so kilometers away from Iran at its closest point to one of the Iranian islands, whereas Israel is 1 ,200 or whatever kilometers away from Iran. So I think this was a huge mistake. But it should also be said there's huge differences within the GCC. And some of the GCC countries are privately very happy to see that the UAE has been hit very hard in this war and that this really sets back the UAE's influence within the region and within the GCC itself. Very interesting. Well, everyone should take note of the fact at a time when the Abraham Accords were being praised as this landmark peace deal, you were sounding the alarm and saying this could actually increase tension and division, and it was far from the sort of utopia that it was being portrayed as.

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57:05Rory Johnston:This is Martha Stewart from the Martha Stewart Podcast. Ever wonder how to make hosting look effortless? Here's a secret. Getting ahead of the mess with new Reynolds Kitchen's countertop prep paper. Just lightly wet the counter beforehand so the paper grips and stays in place. Then lay down the Reynolds Kitchen's countertop prep paper so drips and spills stay on the paper, not all over your kitchen counter. You can roll out dough, prep a party spread, or cook alongside family. When you're done, cleanup is as simple as lifting the paper and revealing that clean counter underneath. Effortless. You can use it for cooking and baking prep, and even crafting, especially when you need extra working space.

57:53Rory Johnston:Because when the mess is already handled, you can focus on what matters. The food, the people, and the moment. It may look effortless, but now you know it's Reynolds Kitchen's countertop prep paper. Take a tip from me. Wet it. Set it. Prep it. Done. Make it easy. Make it with Reynolds Kitchen's countertop prep paper. Available now in the Reynolds Wrap Aisle in Walmart. Joining us now is great friend of the show, Rory Johnson. He's the founder of Commodity Context, a fantastic sub stack, which we'll have a link down in the description. Thanks for joining us again, Rory. We appreciate your time.

58:30Rory Johnston:Thanks for having me this morning. So you were reposted by the presidents of the United States, seemingly bragging about policy. Maybe we can turn the tables here a little bit. We'll see if he'll repost this segment. The president announcing a full naval blockade of Iran. Let's put this up here on the screen, effectively announcing that they will not allow any vessel to enter an Iranian port. So CENTCOM clarifying this morning that any vessel that is headed for Iran is subject to, and I want to get this language correct, interception, diversion, and capture, literally any vessel, not just an Iranian vessel.

59:06Rory Johnston:So Rory, you're our resident oil analyst. What does this mean for the global oil markets? Yeah, so just for context here, one of the things that I think is important to keep in mind, and one of the weird things about this crisis thus far is that if you had asked any oil analyst, myself included, three months ago, if Iran was going to close the Strait of Hormuz, would Iran still be exporting oil? And the answer would have been obviously no, right? That would have been something that obviously in such a situation, the United States or whatever kind of opposing party would have blockaded those shipments.

59:37And the strange thing is that throughout the crisis, Iran has continued to export its oil, not only export its oil, but at higher prices and thanks to U.S. Treasury sanctions repeal to more and more consumers at lower and lower discounts. So they've actually been making kind of great money out of this process thus far. And one of the things and now, you know, and now Trump is trying to remediate that and saying, OK, now we're going to cut off the flow of oil after six weeks. So I think the question here now is, you know, the first Iranian tanker or the first Iranian ship either direction to test this blockade is going to set up this next step for escalation, because thus far Iran has generally withheld or held back from attacking production assets across the Middle East or, you know, export and loading infrastructure.

1:00:25If they now can't export their oil, maybe that's the next thing up for grabs. Should, let's say, the United States fire on or seize an Iranian tanker? Let me go ahead and put, guys, C7 up on the screen. I wanted to get your reaction to this. And this was written up by DropSite from publicly available information. They say Iran has about 174 million barrels of oil in floating storage that a blockade would not touch. And you can see all of the details there. They say over 90 percent is bound for China, carried largely by ghost fleet tankers running dark. 129 tankers linked to Iranian crude currently sailing dark, according to Windward.

1:01:03U.S. naval blockade of Iranian ports won't intercept oil that is already at sea. And then it goes through a list of where these tankers are located. You know, how does this factor into your calculation? Because it seems that Iran has somewhat prepared for a scenario similar to this. That's exactly right. And I follow a group called Tanker Trackers. And what they've noted for a couple of days now is that if this should happen, Iran has basically positioned a large kind of flotilla of floating storage just outside the Gulf of Oman, specifically that would allow it to continue servicing these clients, at least for some time, should the actual strait be blockaded.

1:01:40Now, obviously the United States Navy is quite sophisticated, quite large and quite capable. We saw this during January of this past year or earlier this year, time flies. But when they were kind of blockading Venezuelan exports and chasing down Venezuelan tankers across the Atlantic, clearly it's a question of how intense they're planning on enforcing this. it they're able to again but this question of you know is this just the latest kind of jawboning or kind of you know threat from trump or are they actually going to follow through with us at this stage six weeks into war it's very very difficult to kind of handicap that because yeah it seems like yes but who knows you know we could be an hour away from trump you know posting that uh that peace has been found in the middle east and oil is going to drop another kind of 15 bucks a barrel and this is the challenge we face is no one's actually knows what's going to happen next All the while, 13 million barrels a day of production remains shut in the Gulf, and the world hemorrhages that volume of crude every day the strait remains closed.

1:02:37And thus far, the strait is not only closed, but now it's even more closed than it was at the beginning of the weekend.

1:02:42Rory Johnston:Yes, that's what I wanted to focus on with you is you were warning to us a couple weeks ago, if we're in this scenario, the amount of destruction just inevitably in terms will lead to demand destruction. Now, the strait, like you said, is not just closed. It's even more closed. If we take some Iranian oil offline and there's not any Persian Gulf oil that continues to move through, let's put the market just on our side because maybe they will catch up to supply. Supply-wise, what are we talking about? Are all the shortage conversations, jet fuel, et cetera, is that back on now? Is that still a reality?

1:03:16Rory Johnston:What's that going to start to look like? It's normally still on. It never changed, right? And I think that's the issue is that right now, so again, just for context, roughly of the 20 million barrels a day of previously kind of previous flow that was traveling through our Humus every day, roughly 7 million barrels of that has been offset by rerouting. The Saudi East-West pipeline, kind of Iran's flow continuing, et cetera, et cetera. But I mean, 13 million barrels can't exit the Gulf and has been forcibly shut in. That's the barrels that we're losing kind of every single day. And right now, you know, thus far in the crisis, we've lost roughly more than 400 million barrels, barrels that were going to produce this year that now just aren't.

1:03:55The longer this goes on, you know, you quickly approach a billion barrels, particularly with the necessary ramp back up. So, yeah, this is going to continue. You know, the longer this goes on, you're going to need to fill that hole because 13 million barrels a day. Now 15, actually, if you block Iranian flow, because that was one of the offsets previously. So 15 million barrels a day. There's no supply source in the world that can fill that. So if the strait remains closed, if this is, again, a month or two more of what we're talking about, you're going to need to see prices skyrocket in order to forcibly destroy demand.

1:04:28We're already beginning to see shortages across a bunch of different regions of the world. Asian airlines are canceling flights. You've seen talk of rationing jet fuel in southern Italy. the EU broadly, you know, European jet fuel suppliers have basically said that they can't commit to supply jet fuel into May, that probably through through April, this is going to be good, like, like, there's buffer here, this is what the inventories are for. But as we get into May, and again, into kind of peak travel season, June and July, that's when these suppliers can no longer guarantee shipments, which means that airlines that are trying to book flights, you know, or trying to plan flights, are not going to be able to have a bunch of friends that are trying to like plan European vacations.

1:05:08And they're like, Rory, will we have jet fuel? Will there be flights to get back? And I'm like, I don't know. And you never would have pictured a moment where I'm like, I don't know if Europe would have jet fuel. That's the kind of situation we're now in right now. Yeah, absolutely. Well, it's 9, 10 a.m. right now. I'm looking at the oil prices, you know, just above$100 a barrel. And what's your sense of whether that reflects reality or whether these markets are still somewhat delusional or, you know, pricing in, OK, hey, we expect Trump to somehow magically resolve this in the next short period.

1:05:39I would say definitely, I don't know if I would go so far as delusional, but certainly sanguine, overly optimistic relative to where I see the situation now. One thing that's kind of been a hallmark of this crisis throughout, given this kind of chronic expectation, this persistent expectation, that this will end any day now and that, you know, flow through the straightforward moves will resume tomorrow, is that most of the kind of pricing pain, the pricing pressure, is being felt at the very, very front of the curve. in what we call like extreme backwardation or term structure at the front of the curve, the shape of the futures curve.

1:06:10And that extends into the physical and spot market. So right now, even though Brent crude right now is trading at, you know, just over$100 a barrel for June delivery futures, WTI, which is trading in for May, is actually trading at a premium to that, which is weird at the front of the curve. And dated Brent, which is the spot benchmark, is trading, you know, north of 130. And then the physical delivery of these various actual crude cargos is something at$20,$25 at a premium to dated Brent. So many of these physical croods are trading at over$150 delivered. Wow. And that's the kind of thing that eventually futures need to recognize that.

1:06:46But thus far, you know, the White House has been very successful in kind of managing expectations that this conflict is going to end any moment. And who's to blame traders that, you know, can't get too long because then they're going to get blown out of their positions with a$15 a barrel, you know, tweet. It's a very strange market to trade.

1:07:01Rory Johnston:Rory, can you just transfer some of that into gas prices? What does that do? So let's say if we caught up, what did you say, 150 a barrel, what does that look like at the pump nationally for the US? Well, what's interesting actually is that physically, well, US consumers are basically going to be paying spot prices for gasoline. So they actually will be paying these prices rather than June delivery, right? We all consume in physical spot markets, even though the futures price is trying to continue to handicap this forward. So yeah, you're going to see national average prices at this pace easily outstrip$5 a gallon, en route to$6 a gallon should this continue by June easily.

1:07:41And I think that's just gasoline. Diesel at this stage is trading at a decent premium to that. So you're going to see all time, you've already seen kind of all-time highs reached in California. You're going to see that across the entire continent of the United States. Yeah, where this morning it looks like$4.13 is the national average per AAA. And I wanted to talk to you. I obviously focus on oil, but I'm sure you've thought quite a lot about the way this ripples around the economy. Let's put C5 up on the screen. This was some reporting from the Wall Street Journal about the warnings that the Trump White House is fielding about the Iran war's economic hit, some of these warnings coming from oil executives.

1:08:16And we can put C6 up on the screen as well. We had a relatively hot inflation report last Friday. U.S. inflation tripled last month based on record spike in gas prices. Obviously, you know, it's not just at the pump where we feel the increase of these prices. This flows throughout the entire economy. So talk to us a little bit about what you expect there. Yeah. So consumers are going to feel this primarily through gasoline pump prices. But the kind of stealthier way that this is going to, you know, continue to juice inflation is through diesel, is through jet fuel, is through these fuels that kind of, you know, these middle distillates, diesel and gasoline in particular, are effectively the fuels that drive the industrial economy.

1:09:00These are the prices that, unless you have like a diesel Hemi truck, you might not be paying for diesel at the pump, but you're going to start paying, you know, surcharges on Amazon deliveries. You started to see flights that started charging surcharges on, you know, long-haul flights. All of these things are going to begin to be incorporated because otherwise, you know, corporate margins are going to get obliterated. And I think the longer this goes on, the more this is going to go from special surcharges to just new high prices. And that's the thing we saw through 2022 is the longer this goes on, that's when those inflationary expectations begin to mount.

1:09:31And that's when you begin to see companies have more of this kind of space and kind of flexibility to raise prices, even if they would have hesitated historically. That also, I think, bears on central banks and the fact that many central banks would have been wanting to be cutting interest rates during this period to kind of support the economy, which looks like it could be flagging in a couple of different areas. That, I think, is also now going to be on hold, given the very recent experience in 2022 of, you know, runaway inflation and how unpopular that was for consumers. All of this, of course, is just deeply, deeply bizarre and ironic coming from an administration that was brought into the White House to end, you know, forever wars in the Middle East and increase and kind of better the cost of living for American consumers.

1:10:17And so far, we're going in the polar opposite direction.

1:10:20Rory Johnston:Last question for you, Rory. Our next segment is gonna be about Asia. There's been significant unrest in these Asian countries over their reliance here on Iranian oil. The Korean president is openly feuding with the nation of Israel. He's obviously very upset. 50 ,000 Japanese people actually took to the streets a couple of days ago to protest the Iran war. This doesn't really happen all that often. So can you break down, you know, we just talked here about U.S. economies. The situation seems way more dire for them where the vast majority of their oil comes through the strait. You know, what shortages and other prices can we see in the Asian economies in the coming months?

1:10:57So everything that I was talking about for North America or Europe about jet fuel is kind of doubled or tripled for Asia. The vast majority of oil from the strait of Hormuz goes to Asia. While not as much as, let's say, the direct diesel and jet fuel that goes to the European continent, the vast majority of the crude oil. So you've seen Asian refineries pull back their operations considerably. And you saw Asian or Singaporean jet fuel jump above$200 a barrel equivalent in the first week of this war. And that has continued to mount higher. You've seen the steepest service cuts to airlines, everything that's going to be coming across Asia.

1:11:34You've also seen Asian economies, you know, coming out of the very recent experience of COVID also being far heavier handed than kind of Western counterparts on forcible reductions in kind of policies meant to reduce mobility. So you've seen governments talking from work from home. You've talked, you know, you've already heard people talking about like, you know, the odd even license plate days of who can drive into cities. And I think for a lot of these economies, you also see heavy government subsidies or kind of support in these prices, which if this if that level of support persists through a price shock, shifts this from a consumer shock to a fiscal shock, which which kind of has all of these kind of government bankruptcy concerns that begin to mount.

1:12:14So at the same time, these consumers are used to very stable prices. And if this continues, you're going to need to see governments rapidly and kind of abruptly pull back support. So that price shock is going to be doubly painful for those consumers that are used to prices that really don't move around nearly as much as we see them at the pump. Very true. Thank you for – oh, sorry. Go ahead. Oh, I was just going to say thank you. That's all. Thank you, Rory. Thanks, guys. Always appreciate your analysis. It's always great to see you.

1:13:13We'll be right back. For the entire family, like our 15-acre tropical water park, wildlife sanctuary, world-class golf course, and so much more. Visit Bahamar.com today. Go on, get a little out there, into the big heart of Nevada, where you can go off-road and off the map, on two lakes, or on horseback. Dip into hot springs and dive into deserts. Climb a mountain, or make your best effort. See thousands of stars in some of the darkest skies. stake out haunted hotels. Can you make it to sunrise? There's always something new to see because we've got plenty of space to just be. Plan your trip at TravelNevada.com.

1:13:54Rory Johnston:Ever wonder how to make hosting look effortless? Here's a secret. When prepping for cooking and baking, get ahead of the mess with new Reynolds Kitchen's countertop prep paper. Just lightly wet the counter so the paper grips. Lay it down and drips and spills stay on the paper, not on your counter. Cleanup is as simple as lifting it away to reveal clean counters. Effortless it is, thanks to Reynolds Kitchen's countertop prep paper. Wet it, set it, prep it, done. Available in the Reynolds Wrap Aisle at Walmart. This is an iHeart Podcast. Guaranteed human.