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

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1:01Ed Elson:Today's number? 14. That's how many months Kristi Noem 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.

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1:31Ed Elson: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 1.5%. 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 Homoz closed for the first time in recorded history, pushing the price of oil above$100 a barrel on Sunday.

2:19Ed Elson: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 Mohamed Sergi, editor at Semaphore Gulf. Mohamed, 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.

3:07Ed Elson: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?

3:14Jonathan Kanter: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 a 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.

4:01Jonathan Kanter: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.

4:40Jonathan Kanter:And I think once you start factoring that in, the supply scenario changes a little bit. And that's potentially one of the reasons why the prices came back down so quickly.

4:50Ed Elson:Help me make sense of what exactly markets are reacting to, because there seem to be so many different stories here, one of which is Israel striking many of the oil facilities over the weekend in Iran. We all saw that giant cloud of smoke in Tehran that was going viral and seemed to be kind of the image of this war. There's also the fact that they announced the new supreme leader, who is going to be Khamenei's son. There's the fact that Trump was then saying that he had opinions on how this regime change would work. So that seemed to be a signal, oh yeah, they're going after a regime change. Then they kind of pulled back on that.

5:33Ed Elson:There's the fact that the trade of Hormuz was closed. And then there's also the factors that seem to be bringing prices down, which is that I guess G7 nations said, oh no, we have our own oil anyway, so it's fine. The price action is so temperamental, and it's hard to understand exactly what traders and investors are actually reacting to here, and therefore, which things are actually important for people like us who just live in the US, who probably aren't going to get shot down in this war, but will be affected on the consumer side. So my question being, what exactly have markets been reacting to?

6:15Jonathan Kanter:I think it's more the first part of the factors that you were mentioning. So if this war is extended, if we see no off-ramp for the US and Israel and it has to continue and therefore that choke point stays closed. So at some point, you're gonna see a supply crunch. And that's really the major fear. Now, the world is oversupplied with oil. a major theme really over the last couple of years, looking forward, so if you look at IAEA reports, they had it at 4 million barrels a day. Obviously OPEC for years has been constraining its supply and they've reversed some of their cuts over the last year or so, year and a half or so, because they felt that demand was growing, particularly in India and other Asian markets.

7:15but if you take out 20 % of the oil

7:19Jonathan Kanter:then obviously that's a huge supply shock so that's the reaction so it's a fear that this thing is going to last a long time and now we're seeing messages even just before coming on here President Trump had an interview I believe with CBS where he's saying that the major operations the large part of the war is over with Iran and hence, is there an end in sight? And he also, I think he mentioned that some ships are starting to come through Hormoz. Some supermax, they're called the biggest tankers. If they come through, you can basically make a case that there's going to be at least enough supply to meet demand in the market and hence prices should not be rising at such a rapid pace.

8:07Jonathan Kanter:But that initial fear, that trigger of fear, Yeah, that's exactly what it is. The traders shot everything up.

8:13Ed Elson:Well, he wrote on Truth Social, he said, quote, short-term oil prices, which will drop rapidly when the destruction of the Iran nuclear threat is over, is a very small price to pay for USA and the world and safety and peace. Only fools would think differently. I mean, I think the big question here is like, what will this actually do to the price of gasoline in America? I mean, we've spoken with experts who've said that, you know, basically like a$10 increase in the price of oil is going to increase prices at the pump per gallon by around 25 cents. But then the question becomes like, well, what happens if it goes up by$50 one day, down$50 the next day, and keeps on swinging back and forth as we are literally seeing right now?

8:56Ed Elson:I mean, what can you say about what the price of oil will actually do to consumers in America right now?

9:05Jonathan Kanter:Yeah, it's a tough question because it doesn't necessarily— Oil goes up to 110, and all of a sudden they go out and change all the signs, and they're like, here you go, you were at 250 or 285, and now you're at 450, right? So there's a lag in some of this. I think there's a certain averaging that happens and there's a moving average over a couple of days that they price into the pump because it's a refined product. This is obviously no huge relief to people who are really worried about their pocketbook and how much their main factors in life and gas prices are going to go up. But it's like a question of like, what is the real price of oil and what should it be?

9:52Jonathan Kanter:and should it always be stable at like$75 to$80 a barrel or that's a fair price or does it change over time? But then how does it affect inflation? It's inflationary. There's no question about that because it increases the cost and the factors in every single input of the economy.

10:08Ed Elson:Yeah. Just before we end here, a thought on how you do your job as a reporter, as a journalist covering this stuff, something that I have been struggling with. I can't tell if the markets right now are proactive or reactive. I can't tell if I'm looking at the price and oil traders are saying, this is a reflection of what we expect to happen in the future, or if they're completely just something changed, someone got shot, an oil facility got blown up, and now the price of oil is different. And so my question to you, as a journalist who covers this stuff, are you looking to the price of oil as an indication of what is to come?

10:50Ed Elson:or do you look at the price of oil and does it simply tell you things that you've already known, things that you've been covering as a journalist on the ground when it comes to what is actually unfolding in this war and in the conflict?

11:04Jonathan Kanter:It's probably a mix of both, right? So it has been that geopolitical risk premium has been muted for a long time. So there have been certain things that have happened in the Gulf And, you know, between the June war, expectations were that oil should have increased, should have popped higher. And even the first few days of the strikes in this last week or so, we haven't seen, you know, of course, oil did jump, but it didn't jump at the same level. It's that closing, I think a psychological switch happened with Hormuz, attacks on oil facilities, attacks on processing plants. And there was always this understanding in a way between all of the Gulf countries that we're not going to hit critical infrastructure.

12:03Jonathan Kanter:The retaliation from the Iranian regime would be against perhaps U.S. assets, military assets, that sort of thing. And very quickly, we saw that there was an attack on Rasafan, which is the LNG complex in Qatar. There was another one on a processing plant in Bahrain, in a refinery. So that escalated it. And then, as you mentioned earlier, we believe it's an Israeli attack on a refinery in Tehran. So when you start hitting the actual nuts and bolts of export of crude and products from that region, I think it rightfully so changed their trigger. There's still question. And the Qatari energy minister said over, I think on Thursday or Friday, that he believes that oil can go up to$150 a barrel if this continues for a long time.

13:07Jonathan Kanter:There are two, the bypass pipelines that I mentioned earlier from the east-west line in Saudi Arabia and the one that goes basically north-south through the UAE. If those are hit as well, then I could see oil going way back up again because of this, because people would say, are they going to be able to get enough oil out to the market? Yeah. If this all ends in March, there's a lot of analysis out there that says oil stays within this range and is manageable. If it's more prolonged, it changes. There's also the question of the precedent that's been set. So the Gulf, the Arab Gulf states where most of the oil comes out from and where all the really good facilities are in terms of that export, and they have all the ships and all that stuff and the customers in Asia.

14:00Jonathan Kanter:Now that they've been attacked and attacked repeatedly, even if you have a ceasefire or some sort of arrangement with the Iranian regime, but they still maintain their drone capability, their short-range missiles and their mid-range missiles, they can always play spoiler over any type of negotiation or any type of changes. and that would just bake in a premium into the price. So that's kind of longer term. Do oil prices remain elevated despite a resolution to this current conflict?

14:31Ed Elson:All right, Mohamed Sergi, editor at Semaphore Golf. Thank you, Mohamed. Thank you, Drew. After the break, the DOJ settles with Live Nation and Ticketmaster. And for even more Markets Insights, you can subscribe to my weekly newsletter, simply put at profgmedia.com.

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17:24Ed Elson:We're back with Prof G Markets. After just one week in court, one of the biggest antitrust cases in decades is nearing a resolution. On Monday, the Justice Department announced a settlement with Live Nation and Ticketmaster. In the sweeping monopoly case filed in 2024, the DOJ, along with 40 state attorneys general, argued that Live Nation legally dominates the market for live events. One proposed remedy was to break up Live Nation and Ticketmaster. Now, under the proposed settlement, Live Nation will pay damages to states and change how it structures ticketing deals with venues. But the case is not over yet.

18:03Ed Elson:Only 10 states have signed on to the settlement, while others are expected to keep fighting. Plus, the terms of the agreement must be approved by a federal judge. Still, shares of Live Nation rose 6 % following the news. Joining us to discuss this case, we're speaking with Jonathan Cantor, former Assistant Attorney General for the Antitrust Division of the U.S. Department of Justice. He's also the man who originally filed this case. Jonathan, thank you for joining us. I want to get right into this because because this is a case that you have been talking a lot about. I remember when we last spoke, I said, what is the most important antitrust case that no one is talking about?

18:42Ed Elson:And you said, this is it, because this is something that really affects consumers. Consumers really have a stake in this because consumers, they know that the price of tickets for live events have gone up significantly over the past few years, and it's because of this monopoly dynamic. And now they're settling. This, to me, seems like a win. for Live Nation, but tell us your thoughts. What do you make of what's happened here?

19:08Mohammed Sergie:Sure. It is a win for Live Nation, and it's disappointing to the extent that this is ultimately the settlement that gets approved by the court. But as you indicated, Ed, we have a situation where you have maybe as many as 30 state attorneys general, as of today, I think 27, who are not going to settle. They want to continue trying this case. And so I'm encouraged by the willingness of the states, bipartisan group of states to fight for what they believe is right. Also, to your point, this is probably the most popular antitrust case in history. It is widely regarded as beneficial to an issue that affects so many consumers and performers on an issue that they care deeply about, which is live music.

19:52Mohammed Sergie:And in an era where affordability is top of mind for pretty much anyone, it strikes me as politically deficient or political suicide to settle a case like this. Let's put it this way. Breaking up Live Nation Ticketmaster is more popular in this country than breaking up Iran.

20:13Ed Elson:That is definitely true. Just in terms of what anti-trust officials have said here, I'm trying to understand why they have settled here. Because as you say, this is not a popular move uh people are not going to like this i don't like it i don't see what i mean if the if the option was to break this company up and now they've decided to settle and that's good for good for live nation that doesn't seem great for consumers and then the question becomes like why did they settle uh and perhaps it's because there was some lobbying happening here i mean gail slater who was the the antitrust chief before she was just dismissed she was ousted Like, why are we settling with Live Nation if it's so unpopular?

20:58Mohammed Sergie:There are a whole host of questions that have to get answered here, and it hopefully will get answered. But the fact of the matter is the DOJ started the trial, and after four days, the case was going extremely well. By all accounts, DOJ was doing an extremely good job in court and was on a trajectory to have a big victory if they finished the trial to its end. And that was an extraordinary case with an opportunity for an extraordinary result. And when you're winning, you don't pull the plug. It's not how that works. Right. Especially when you don't get the remedy that you asked for when you filed the case, which in this instance was a breakup.

21:33Mohammed Sergie:So it's quite unclear and raises a lot of questions about when and why and how and who. And hopefully we'll get answers to those questions. Because under something, a little-known statute called the Tunney Act, antitrust settlements like this one have to get approved and investigated by the court. And so in this instance, the judge in New York will have the opportunity to interrogate the settlement and actually get discovery from the Department of Justice and Live Nation and others about what was said, to whom what was promised is in exchange for this deal.