Iran war’s global energy impact

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0:32Joshua Franklin: Good morning from the Financial Times. Today is Friday, March 6th, and this is your FT News Briefing. The threat of an energy supply crunch is causing problems for a lot of countries, and American data centers have become a target in the Iran conflict. Plus, America's biggest bank wants to buy an historic New York City hotel. But there's a problem. The wrinkle is that the Pakistani government doesn't want to sell the whole thing. There is a kind of political element to this. I'm Victoria Craig, and here's the news you need to start your day.

1:14Joshua Franklin: As the war in Iran enters its seventh day, the world's energy supplies hang in the balance. The Gulf's biggest oil producers are expected to start shutting down oil fields in the next few days. That's because they're running out of storage space, and that means they're now racing to export existing supply. All of this is happening because energy shipments through the Strait of Hormuz have essentially ground to a halt. U.S. President Donald Trump earlier this week offered naval escorts and additional insurance to encourage tankers to make the journey, but the FT has learned that doesn't actually look like a viable option.

1:50Joshua Franklin: Jamie Smith is our U.S. energy editor. He joins me now to dig into the complexities of this promise. Hi, Jamie. Hi. So you've gotten a hold of new research from JP Morgan on this. Why is it such a challenge to backstop these ships that are transiting through the Strait of Hormuz? I think there's a number of issues at play here. One of them is actually to do with the huge expense of insurance. So the way the Trump administration has laid out this new strategy is they're going to use the Development Finance Corporation to backstop the insurance. The DFC is the international investment arm of the U.S.

2:26Joshua Franklin: government. That's right. We've got several hundred tankers waiting to try and get through the Strait of Hormuz. If you add up the potential liability for all these tankers, you could get a huge figure, somewhere in the region of$350 billion. That's because you've got to cover the potential loss of the tanker, but also extremely expensive oil spills, third-party liability, loss of life. It's a hugely expensive situation. And actually, the maximum contingent liability under law for the Development Finance Corporation is only$205 billion. So Congress would probably have to sit and allocate some more money for this plan to go ahead.

3:13So that's the financial issue at the heart of this scheme.

3:16Joshua Franklin: So we should note that the White House contends that this research from J.P. Morgan is based on what it calls faulty assumptions, and it says that more announcements from the president are coming on this issue. But Jamie, if passage through the Strait of Hormuz remains effectively cut off, what does that mean for crucial energy supplies that are destined for some of the world's biggest manufacturing economies? I mean, the Strait of Hormuz is key for Saudi Arabian oil, LNG from Qatar, oil from UAE, and a lot of it flows to Asia. So Asia is probably the area that is most impacted by this shutoff at the minute.

3:55You've got countries like South Korea. It imports about 70 % of its crude oil. Japan is also very heavily dependent. They're looking at how they can get alternative supplies. So I think that's the first thing that these countries are going to do. They're going to scramble to try and maybe source LNG from Australia or the USA. The next phase is probably energy substitution. So when gas prices go really high, people switch to coal power. The final stage, if this crisis persists, is that you get demand destruction. So when physical supplies run short, then industry has to slow down or shut down. And that's sort of what could happen if this problem in the Strait of Hormuz and in the Middle East continues for several weeks and months ahead.

4:44Joshua Franklin: What about here in the U.S.? It's fairly insulated because we produce a lot of our own energy supplies, right? But if President Trump needed to, could he tap the strategic petroleum reserve to offset maybe huge price increases or supply concerns? Certainly, but there was a huge drawdown of that after the energy crisis in Russia-Ukraine. Now, what's happened there is you've seen that the amount in the reserve is actually still quite depleted. You've got it just over 50 % full. So they could draw that down. But for the moment, the Trump administration has said that they're not looking at that as a potential solution.

5:24But I would suggest that if the crisis continues over a number of weeks, you get prices of oil, for example, going above$100. That's the time this strategic petroleum reserve could be called to play. And then there's a question about whether we have enough in it right now.

5:43Joshua Franklin: Jamie Smith, the FT's U.S. Energy Editor. Thanks so much for your time. Thanks very much.

5:54Joshua Franklin: Drone strikes hit Amazon Web Services facilities in the United Arab Emirates and Bahrain this week. It took cloud services down across the region, and it complicates plans to set up AI facilities in the Gulf. The UAE and Saudi Arabia plan to set up billions of dollars worth of AI infrastructure over the next several years. It's how these oil-rich states want to diversify their economies. But these strikes might make them think twice. Amazon recommended clients in the Middle East look to migrate workloads to alternative regions. The problem, though, is that you can't just snap your fingers and move these IT workloads.

6:29Joshua Franklin: It would be complex and expensive for the corporate customers of these hyperscalers, especially if they're moving sensitive data across borders. Though one expert told the FT the heightened risk likely won't stop companies from building data centers, there are major questions about how they can be protected worldwide. President Trump sacked the head of his Department of Homeland Security, Kristi Noem. He made the announcement on Truth Social yesterday. DHS oversees agencies like Customs and Border Protection and Immigration and Customs Enforcement, or ICE. Noem was roundly criticized for her heavy-handed immigration crackdown.

7:07Joshua Franklin: Under her watch, ICE agents killed two U.S. citizens in Minneapolis, which sparked massive protests. The final straw for Trump apparently came after Noem participated in a combative Senate hearing on Tuesday, where several Republican lawmakers criticized her. Her firing is the first major shakeup to the president's cabinet since he took office last January. Trump will nominate Oklahoma Republican Senator Mark Wayne Mullen to replace Noem. The president said Mullen will take over at the end of the month.

7:42Joshua Franklin: It's been a busy week of intense news, so let's end it with a stroll around New York City. That's because J.P. Morgan is considering turning part of a Manhattan office building into a hotel. The idea would be to use it for the company's hundreds of thousands of employees who visit the city and potentially clients too. But America's biggest bank also has its sights set on buying an actual hotel, the Roosevelt. It's played host to history and Hollywood over its 101 years. It turns out, though, the process of acquiring said hotel is not so easy. To find out why, I took a little trip to the bank's headquarters at 270 Park Avenue with my colleague Josh Franklin.

8:23Joshua Franklin: He's our U.S. banking editor who broke this story.

8:34Joshua Franklin: So to understand why J.P. Morgan has an interest in the Roosevelt Hotel, you sort of have to understand its broader real estate strategy. And we are standing in the middle of Midtown Manhattan looking at the company's new flagship headquarters. Just tell me what we're looking at. What is this building? So this building is the signature achievement, but also the first milestone in what is this J.P. Morgan campus that is slowly taking shape in Midtown Manhattan. and it is this enormous steel building that really does tower over everything around it. And you can see even there's shapes of the metal that form diamonds all across the building.

9:13And then there, it's not a big leap to see why some people are calling this a monument to its CEO, Jamie Diamond.

9:19Joshua Franklin: So we're going to take a walk over to the Roosevelt now. And on the way, this is what's so fascinating is we're going to pass a couple of other buildings that are central to this plan. They stretch about two city blocks here in New York City. What does Jamie Dimon want to do with all of this real estate? Yeah, so as we're at the corner of 47th and Madison right now, in front of us, we have the flagship JPMorgan Chase Bank Branch, which has more than$700 billion in deposits registered to it. And then just across the street is actually the old Bear Stearns building that JPMorgan bought in 2008, and it was its temporary home and actually is now also in the process of being renovated to make sure that the outside of this building matches the new design of 270 Park.

10:00Joshua Franklin: There's a lot of thought that's going into this. You know, they like to talk about all the jobs they're creating in New York City as part of this, which, you know, there's some truth to that. The problem, Josh, is that there is a wrinkle in this plan for the Roosevelt, and it's the Pakistan government. Tell me about that. Yeah, so the Pakistani government, through one of its state-owned companies, controlled the Roosevelt Hotel, which is a pretty famous hotel in New York City. The Pakistani government acquired it in the late 2000s. And really, the hotel has fallen into a bit of disrepair in the last few years.

10:30It became a bit of even a political issue during the 2024 election because it was leased out as a processing center for migrants coming into the United States. But really, it's right on the doorstep of JPMorgan Chase. So it stands to reason that if this worked to come up for sale, they would want to buy it. The wrinkle is that the Pakistani government doesn't want to sell the whole thing. And so it's looking like, at least right now, JPMorgan, this isn't the sort of thing that they would want to share with someone. So this is a potential roadblock in their efforts to expand their burgeoning Manhattan campus.

11:03Joshua Franklin: And part of the reason that the government doesn't want to sell it is because it sees this as a sort of diplomatic strategy. Is that right? Yes. So this has actually become almost a kind of political tool for the Pakistani government. They've talked about this being a joint initiative with the United States. The Pakistani government has talked about speaking with the U.S. envoy Steve Wyckoff about helping restore the Roosevelt Hotel to its former glory. And so, again, there is a kind of political element to this. OK, so we're coming up on the Roosevelt Hotel. It's been closed for a year now after the migrant processing center was closed by the city.

11:41Joshua Franklin: And you can tell. I mean, the signage is a bit dirty and dark and there are gates up by the door. Clearly, no one is coming in. So, Josh, is there any clarity about what the future holds for this hotel? The whole situation's a little bit murky. The Pakistani government has said publicly they're looking for a partner to do a joint venture to renovate the building. But they're still in the process of reappointing an advisor on the process. So it's a little bit uncertain about what could happen. JP Morgan officially has declined to comment. And at the end of the day, where there's enough money and there's enough will, there's a way.

12:15So we'll see whether or not, you know, J.P. Morgan, it's not looking like they're going to be successful right now in their bid for the Roosevelt, but who knows in the future.

12:22Joshua Franklin: All right. Well, we'll come back to you with any developments. Josh Franklin, our U.S. banking editor, thanks for coming on this field trip with me. Thanks very much. It was fun to moonlight as a New York City real estate reporter. You can see photos of the hotel and a map of J.P. Morgan's sprawling campus when you click the links in our show notes. This has been your daily FT News Briefing. Check back next week for the latest business news. The FT News Briefing was produced this week by Nisha Patel, Safiya Ahmed, Henry Larson, Julia Webster, Fiona Simon, and me, Victoria Craig. It was edited by Mark Filippino.

12:57Joshua Franklin: Our show is mixed by Alex Higgins and Kelly Gary. We had help this week from Peter Barber, Michael Lello, and David DeSilva. Our executive producer is Topher Forges. The FT's global head of audio is Cheryl Brumley, and our theme song is by Metaphor Music.

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