Why a Hormuz Toll Makes Economic Sense

0:00This message is brought to you by Nuveen. How would you invest if you knew the future was watching? At Nuveen, this isn't a theoretical question. It's a perspective that comes from navigating 125 years of market cycles, using foresight to innovate and adapt to the changing needs of investors, and remaining steadfast in the pursuit of lasting performance. Nuveen. Invest like the future is watching. Visit nuveen.com slash future to learn more. Investing involves risk. Principal loss is possible. The White House races to contain Israel's deadly war in Lebanon ahead of peace talks with Iran. Plus, President Trump sends mixed messages about a potential toll on oil tankers in the Strait of Hormuz.

0:45The oil price might go up by between 5 and 40 cents per barrel as a result of a$1 or$2 charge. If you think that because of these problems in the Strait of Hormuz, the oil price has risen$30,$40,$50 a barrel, That's peanuts. It's affordable for the global economy. And what's at stake for MEGA in this weekend's election in Hungary? It's Friday, April 10th. I'm Daniel Bach for The Wall Street Journal, filling in for Luke Vargas. And here's the AM edition of What's News. The top headlines and business stories moving your world today. The Trump administration is racing to contain Israel's expanding war in Lebanon as the U.S.

1:22prepares for high-stakes talks with Iran this weekend. In a video statement addressing Israelis, Prime Minister Benjamin Netanyahu said direct negotiations with Lebanon would begin toward a lasting peace and disarming Iran-backed Hezbollah militants. But he also said Israel would continue striking Lebanon with the full force of its military until security is restored in northern Israel. That message came after a phone call with President Trump yesterday. A U.S. official told the journal Trump was concerned that the fighting could undermine the ceasefire and efforts to reopen the Strait of Hormuz.

2:00Meanwhile, President Trump has warned Iran against collecting tolls from ships transiting the vital waterway, while also suggesting tolls could be a joint venture between Iran and the U.S. Tehran has said it is charging some ships$2 million. Only eight ships carrying Iranian cargoes got through yesterday. Before the war, it was about 135 each day. And while consumers have been feeling the effects of the straits closure, global economics correspondent Tom Fairless says a toll wouldn't have as broad an impact. If this arrangement, this toll booth in the Strait of Hormuz were to be institutionalized and Iran was allowed to do this, say charge one or two dollars per barrel of oil flowing through, economists say most of the burden would actually be taken by the Gulf states.

2:46And the reason is essentially that it's a global oil market. And the Gulf producers, once they've paid their toll, they need to go and compete in the market. And if they're charging$1 or$2 extra per barrel, then the purchaser is going to buy from somewhere else, from an American producer. I think the other point is that the cost of production is extremely low in the Gulf. And so the Gulf producers have got a lot of room to pay this kind of fee. But while the economics suggest a toll in the Strait of Hormuz could be part of a peace deal, Tom says the geopolitical consequences might be too big. It's essentially a type of institutionalized piracy that you can use your geographic position on a choke point to extort money from people who need to get past and say, we're going to bomb you if you don't.

3:29So, I mean, that was a feature of the global economy for centuries. So this would set a precedent that sort of takes the world back. And especially China, which is a key ally of Iran, the biggest exporter in the world, might not want to see this return to the past in terms of trade. So the geopolitics would potentially speak against a deal. The reopening of the Strait of Hormuz is expected to be top of the agenda when Iran and the U.S. begin peace talks in Pakistan this weekend.

4:02We are exclusively reporting that the White House has warned staff about placing bets on the Iran war in futures markets. That in an email from the White House Management Office, which came the day after President Trump announced a sudden pause in strikes on Iran. A flurry of trading activity kicked off about 15 minutes before Trump posted the news on social media, with Dow Jones market data showing that more than$760 million worth of oil futures contracts changed hands in less than two minutes. More recently, three accounts on Polymarket earned more than$600 ,000 by correctly betting on the timing of this week's Iran ceasefire.

4:39The White House confirmed the warning, but there is no evidence of leaks or that anyone within the administration is using inside information for well-timed bets. We should note, Polymarket has a data partnership with Dow Jones, the publisher of The Wall Street Journal. And now to Florida. I'm Attorney General James Uffmeyer. Today we are launching an investigation into OpenAI. In a video posted on X, Uthmeyer says he's probing ChatGPT's potential role in facilitating a shooting at Florida State University and raised national security concerns. There are concerns about whether OpenAI's data and AI technologies that could be used against America are falling into the hands of America's enemies, such as the Chinese Communist Party.

5:24OpenAI's ChatGPT has also been linked to criminal behavior, including child sex abuse material, use by child predators, and the encouragement of suicide and self-harm. OpenAI said it plans to cooperate with the investigation. A spokesperson for the company defended AI's benefits, citing that 900 million weekly users rely on the technology for tasks ranging from skill building to healthcare navigation. The company emphasized that its ongoing safety efforts ensure ChatGPT remains a secure and helpful tool for daily life. News Corp., owner of The Wall Street Journal, has a content licensing partnership with OpenAI.

6:02Hungarians will vote in a national election on Sunday, with opinion polls suggesting longtime Prime Minister Viktor Orban could lose. Journal correspondent Matthew Luxmore is in Hungary to cover the election and says the Trump administration has thrown its full weight behind the European Union's longest-serving leader. Victor Orban has in many ways been a standard bearer for the international MAGA movement, as you might call it, the international movement of conservative leaders and strongmen who want to bring back what they call traditional values and patriotism in Europe. And this is something that is a very big thing for the Trump administration, and particularly for Vice President J.D.

6:41Vance, who this week visited Budapest to shore up his ally in Europe, Orban, who both the US and, in fact, Russia as well really hope stays in power because he can be someone who can push their divergent interests inside Europe. Orban has described Hungary as an illiberal democracy, and he's in many ways been a thorn in the side for the EU, vetoing various resolutions relating to the war in Ukraine and other things relating to budgets and migration. Many European Union leaders, they say this privately, would quite happily see him go. Coming up, how the war in Iran is impacting Saudi Arabia's Vision 2030, and the unlikely battle to protect the Great Lakes from the not-so-humble flying carp.

7:26Those stories after the break. truestage companies simplify the complex with 90 years of delivering accessible insurance and innovative financial solutions let's work together and build a better tomorrow today learn more at truestage.com slash wsj truestage is the marketing name for truestage financial group and get subsidiaries and affiliates corporate headquarters is located in madison wisconsin

7:51Saudi Arabia's plan to become a glittering hub of trade, tech, and culture has slammed into the reality of the Iran war. The petrostate was already up against budget shortfalls before the war, including for a host of infrastructure projects connected to the country's Vision 2030 agenda. Journal-foreign correspondent Stephen Kalin spoke to our Luke Vargas about where that leaves the kingdom and its flashy pivot away from dependence on energy exports. Steve and our colleague Elliot Brown, as well as others, have been documenting for years now that Saudi Arabia has been giving a haircut to some of its big construction projects that includes the line, that 105-mile-long building that it had hoped to build through the desert.

8:33What's changing more recently? Yeah, so it's really been just an acceleration of those changes that Elliot and others have been documenting for the last couple of years. But also, just in the past few weeks, there have been more cuts to projects that are part of NEOM, this huge city-state in the northwest of the country. Just a few weeks ago, several contracts were cancelled for a$5 billion dam that was already 30 % finished. But also in the capital in Riyadh, there were plans that were announced for a massive new downtown project centered on this enormous cube building that the Saudi said could hold the equivalent of 20 Empire State buildings.

9:13And they started the works on that last year. And we actually drove past the construction site and could see some of that leveling that had been going on. But that's all been paused as well. And Stephen, up for reconsideration here too, are investments notably outside of the kingdom? That's right. It was just a few months ago that the crown prince made a visit to the White House. And President Trump, when he visited Riyadh last year, said that the Saudis had committed$600 billion. MBS, when he was in Washington, said he was going to up that to a trillion dollars. And these are just enormous figures that they're now reconsidering, given how much of a crunch there is on their own finances.

9:51And Saudi is also, of course, a big investor across the region. They've made promises to help rebuild in Syria after the fall of Bashar al-Assad just over a year ago. And so as the largest economy in the Arab world, we could see cuts in spending in other areas across the region. So what's causing all of this? After all, we've seen in the last few weeks that unlike some of its Gulf piers, Saudi Arabia fortunately has pipelines that are able to take some of its oil over to the Red Sea to reach global oil markets getting around the Strait of Hormuz. So what's causing the pressure here? Yeah, Saudi was very fortunate to have that pipeline.

10:26It's still pumping out a million barrels a day at elevated prices. But the problem essentially was that the Crown Prince's plan announced 10 years ago foresaw spending on a massive scale, which was going to require spending by the Saudi government, but also foreign investment. So to begin with, the Saudi government doesn't have enough money to spend on all these projects. And they've also struggled to attract that foreign investment for a whole host of reasons. And yet, officials are trying to put a positive spin on things. That's right. Since the end of last year, some of this news has been coming out, but it's really accelerated after the war began.

10:59And so we saw just a couple of weeks ago, the governor of the Saudi Sovereign Wealth Fund was at an event in Miami, and he was talking about how the Saudi macroeconomic position remains strong, stable, and resilient. Saudi officials talk about this as being a prudent recalculation and reprioritization of their spending plans. But there's also some question about where oil prices are going, how long Saudi can continue to export, and where that leaves a lot of these big projects. And I should just say here, Neom did not respond to requests for comment on this reporting. I've been speaking to Wall Street Journal of Foreign Correspondent Stephen Kalin.

11:34Stephen, appreciate the update. Thank you so much. Thanks for having me.

11:42And finally, there are many threats facing humans in the world. where the last thing we need is a 30-pound fish hitting us in the face when we're just trying to do a little fishing. The innocent-sounding yet notorious Asian carp have been hurtling into boaters throughout America's heartland where some are now wearing helmets for protection. You may have seen the viral video of a family and their three children who went fishing on the Ohio River in Kentucky on Labor Day. With flying carp flipping, floating, and sailing out of the water, smashing into the children. Thankfully, the kids were all fine.

12:19But Journal reporter Jean Whalen says the invasive Asian carp problem is no joke. The fish are really kind of taking over a lot of rivers in the Midwest and the southern U.S. They're also getting closer to the Great Lakes. There's a big recreation industry all around the Great Lakes where people enjoy boating and swimming and water skiing. And if suddenly there are these flying fish everywhere making it more difficult to do those things. That could also be a knock to the tourism industry. So the governors of Michigan and Illinois in particular have been trying to build a new barrier along a key choke point in the Illinois River.

12:56The federal government has pledged a big pot of money under the Biden administration. The Trump administration, though, has frozen those funds. And so the governors of Michigan and Illinois are lobbying President Trump to release that funding so the barrier can be built and the carp can be stopped. Gene says that in addition to pushing for funds, the state of Illinois has set up a marketing campaign to get more people to eat carp, even handing out samples of fish cakes at the state fair. Because despite being notoriously bony, they are very tasty to eat. And that's it for What's News for this Friday morning.

13:32Today's show was produced by Hattie Moyer. Our supervising producer is Sondra Kilhoff. And I'm Daniel Bach for The Wall Street Journal. We'll be back tonight with a new show. until then, have a nice weekend and thanks for listening.

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