IEA Says Iran War Causing Biggest-Ever Supply Disruption

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0:32Luke Vargas:Oil rallies yet again as Iran strikes several tankers in the Persian Gulf. Plus, President Trump returns to the tariff drawing board, targeting a number of big exporters. And a new study finds that AI isn't lightening workloads. Quite the opposite.

0:48Chelsey Dulaney:And so basically the conclusion was that AI doesn't necessarily create as much efficiency as many had hoped. What it instead does is replaces that with even more work and different kinds of work, but more work nonetheless.

1:03Luke Vargas:It's Thursday, March 12th. I'm Luke Vargas for The Wall Street Journal. And here is the AM edition of What's News, the top headlines and business stories moving your world today. The war in the Middle East is causing the biggest disruption to oil markets ever seen, according to the International Energy Agency. The IEA this morning slashed its forecasts for oil supplies, saying it now expects supply to grow by just 1.1 million barrels a day this year, a dramatic cut from the 2.4 million daily barrels expected previously. All supply growth is now expected to come from outside of the OPEC-plus alliance, with the conflict forcing major Gulf producers to curb output and effectively shutting the Strait of Hormuz.

1:49Luke Vargas:Overnight, crude prices topped$100 a barrel after Iran attacked three cargo ships trying to transit the waterway and hit two oil tankers in Iraqi waters with projectiles. And the threat to international shipping isn't confined to the Persian Gulf any longer. Iranian media is reporting that Houthi rebels in Yemen could join the fight against the U.S. and its partners and force the closure of a narrow passage at the southern tip of the Arabian Peninsula. The Bob El Mendeb Strait is the world's fourth largest shipping choke point and allows vessels to access the Suez Canal via the Red Sea. Meanwhile, 13 days into the war, the economic winners and losers are coming into focus.

2:29Luke Vargas:It's something reporter Chelsea Delaney has been doing the math on. Chelsea, I think we've got to start by talking about energy first. Earlier, we quoted the barrel price of oil, but that's not what people are paying at the pump. Tell us what we're seeing there, specifically in the U.S. so far.

2:43Chelsey Dulaney:The conflict in the Middle East has very quickly filtered through into gas prices at the pump for Americans. Across the U.S., gas prices have risen about 20 % since the attacks on Iran. But if you look at specific states, the move has been much more dramatic. For example, in California, gas prices are nearly at$5.40. In some areas, it's less than that, parts of the Midwest. But this is very quickly filtering through into people's everyday lives. And that has a big economic consequence because the more you spend on gasoline, the less you have to spend elsewhere.

3:18Luke Vargas:Bad news for households and probably other businesses reliant on fuel costs as well.

3:23Chelsey Dulaney:Yeah. I mean, for companies, energy prices are a huge input for a lot of industries. So if you think about tourism operators, cruise lines, airlines, they have been hit pretty hard by the conflict in the Middle East. It'll very quickly raise their prices. We're already seeing airfares going up for companies that use a lot of energy for production, steel companies, companies in the industrial sector. This also has a big impact. The longer this goes on, the more it filters through to everything. So pretty much everything we have in our lives is transported to us by ship, by truck. All of those prices go up whenever fuel prices go up.

3:57Luke Vargas:OK, so there's our inflationary risk beyond the U.S. There are other losers on the energy front, unsurprisingly, as well.

4:04Chelsey Dulaney:Yes, most of the world will see inflation rise because of this, especially import dependent countries like Japan. China is the largest crude importer in the world. They're seeing higher energy prices. Europe in particular depends quite a lot on imported energy for about 60 % of its energy supply. So all of these countries are seeing energy prices go up and that is expected to drive up inflation and that is expected to contract growth.

4:30Luke Vargas:The Gulf particularly hard hit as well, even though often in conflicts, their energy exporting status has been a bit of a cushion for them.

4:37Chelsey Dulaney:It's probably no surprise that the Gulf is the most exposed part of the world to this. Obviously, a lot of these countries in the Gulf are major energy exporters, but they can't actually sell it because the ships are getting attacked in the Strait of Hormuz. Their facilities are getting attacked. So a lot of them have shut down production or drastically pared it back, which means they actually can't capitalize on this rise in energy prices at all. And this will have an economic impact for economies in the Gulf. If this war is brief, they could see their economies contract by about 2 % this year, according to capital economics.

5:08Chelsey Dulaney:But if this drags on, which increasingly looks like it will, that could move to a 15 % contraction, which is quite dramatic. And one of the other areas where the Gulf is very vulnerable is on tourism. Right now, that's ground to a halt. Flights have been canceled. And so tourism economics is now expecting that international visitors to the Middle East could fall by as much as 30 percent this year. And that would be a huge loss of revenue. They say about$56 billion in lost revenue for these economies.

5:38Luke Vargas:Chelsea, as for winners here, none immediately come to mind, but I know you've found a few.

5:44Chelsey Dulaney:Yeah. So there are a couple places that stand to win. And the most obvious one is Russia, which has been sort of shut out of global energy trade. They've had some buyers like China and India. But the fact that there are so many disruptions from other major oil suppliers has really put Russia back on the map. People want to buy their oil now. And for Russia, that means they're bringing in a lot more revenue to fund the war in Ukraine. So analysts usually estimate that Russia needs oil to be about$59 a barrel to balance its budget. It's far above that now. So for Russia, this has been a big win.

6:22Chelsey Dulaney:Some of the Latin American economies, Venezuela in particular, which is kind of also being reintegrated into the global oil trade, starting to increase production again, could benefit Canada, probably see a bit of a growth impact Norway as well. But a lot of these economies as well will see a little bit of inflation because even though they produce a lot of energy themselves, it's still a global market. So they still will also see prices rise at the pump and higher prices for things like airfare.

6:47Luke Vargas:I've been speaking to Wall Street Journal reporter Chelsea Delaney. Chelsea, thanks as always. Thanks for having me. And we want to know how volatile energy and commodity prices are affecting you or your business. Are you rethinking your plans? Is your bottom line being impacted? And what about your pricing strategy? Let us know by sending a voice note to WNPOD at WSJ.com or by leaving us a voicemail at 212-416-4328. Just make sure to include your name and your location so we can use your comments on the show.

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7:54Luke Vargas:Texas Republican Senator John Cornyn is backing President Trump's call to eliminate the filibuster rule, requiring 60 votes to advance most legislation. Trump has been pushing Senate Majority Leader John Thune to find a way to pass the Save America Act, which would impose strict new voter ID requirements nationwide and which Trump has called critical to GOP success in the midterms. The Senate has 53 Republicans, and it would take just 51 to change the filibuster rule. However, at least four GOP senators have publicly said they oppose such a move, and two others, West Virginia's Shelley Moore Capito and Wyoming's Cynthia Loomis, voiced their concerns about the move yesterday.

8:35Chelsey Dulaney:Many of us don't believe that we should undo the filibuster because it holds the rights of the minority, and one day we'll be back in the minority. It also protects smaller rural states from being overwhelmed by the larger, more urban areas.

8:58Luke Vargas:Cornyn's reversal on the issue comes as he faces a tough primary runoff in which Trump has yet to make an endorsement. The Trump administration has announced new Section 301 tariff investigations to replace the duties that the Supreme Court deemed illegal. One probe targets industrial overcapacity from export-reliant countries, while the other is expected to investigate forced labor regulations in dozens of nations. But as the Journal's Jason Douglas explains, the probes actually provide some much-needed certainty for Asian economies.

9:30Chelsey Dulaney:So several major Asian economies are being investigated, including China, including Japan and India. So the idea that these economies, all of which have these big trade surpluses with the United States are boosting production at the expense of their domestic economies, and that creates a flood of exports that is overwhelming manufacturing elsewhere in the world. And this is a very familiar charge against China. This new investigation does give the Trump administration maybe just a little bit of extra leverage as head of Trump's planned summit with Xi Jinping in Beijing. I think these investigations weren't greeted with a huge deal of surprise in Asia.

10:05Chelsey Dulaney:This is, after all, a way for the Trump administration to try and recreate, to some extent the tariff regime that they had before the Supreme Court struck down the so-called AIPA tariffs. So I think what economies here are looking for, particularly those that have a trade deal, is something that looks just like what they had when they had the trade deal.

10:21Luke Vargas:U.S. Trade Representative Jameson Greer aims to complete the probes by mid-July. Meanwhile, Tesla is betting big on its first new car in years, aiming to produce 31 ,000 driverless cyber cabs at its Texas factory this year. Tesla reporter Becky Peterson says the vehicle, which is designed to run exclusively on autonomous software, represents a high-stakes pivot for CEO Elon Musk and a major challenge for U.S. safety regulators.

10:49Chelsey Dulaney:On X, Musk has said that Tesla will sell a cyber cab to a customer for less than$30 ,000 by the end of the year. That said, people who follow the company more closely are skeptical about the timeline. I spoke with analysts who say they really don't expect Tesla to sell cybercabs to anyone, but its own ride-hailing service for many years. Part of that is consumer habits. Some of that is regulatory. U.S. safety regulations currently require car companies to get exemptions in order to make vehicles that don't have certain safety measures like side mirrors, and they're capped at making just 2 ,500 units.

11:31Chelsey Dulaney:So this is far shy of the two million cyber cabs that Musk has said that Tesla will make each year.

11:41Luke Vargas:And finally, one of AI's great promises is that it will free up white collar workers to do more high level creative work. But workplace reporter Ray Smith says that new data from productivity tracking software company ActiveTrack shows the opposite is happening after it looked at how AI impacted 160 ,000 people.

12:01Chelsey Dulaney:They looked at digital activity 180 days before and after people started using these tools on the job. And it's interesting because the time they spent on things like email and messaging and even chat apps, that more than doubled. And even things like using business management tools, that rose. And the amount of time that people devoted to, like, focus work, in contrast, declined.

12:28Luke Vargas:And that is backed up by another study underway at UC Berkeley's Haas School of Business, which found that work has intensified for people using AI tools.

12:36Chelsey Dulaney:And so employees were either working at faster paces or taking on broader scopes of tasks. After they had done their original work, if you will, with AI, they just found more work to do. And sometimes it involved work that was beyond their job descriptions. You know, the dream goal is AI will free us up to do more, you know, creative work or engaging work or more thoughtful work. And this study is showing that that's not quite happening yet. And so companies and employees need to figure out a way to make AI truly free them up to do more creative and engaging work rather than just more run-of-the-mill work.

13:13Luke Vargas:And that's it for What's News for this Thursday morning. Today's show was produced by Hattie Moyer and Daniel Bach. Our supervising producer is Sandra Killhoff, and I'm Luke Vargas for The Wall Street Journal. We will be back tonight with a new show. Until then, thanks for listening.

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