Oil has spiked nearly 8%. How long can prices stay elevated before we start seeing ripple effects on global inflation?
Anurag Singh: Markets worry about uncertainty more than anything else, correct. In some sense, once the tariff wars were behind us and so it seemed as of now, markets were very much prepared to take the next leap. Even in this war, besides a little bit of ripple on oil, the market is willing to move on. Let me also make a distinct point on the war. Even the US has pretty divided views on the issue depending on who you speak to.
In one way, the market might see this as a culmination of the uncertainty that has been on the horizon for the last many years. Iran effectively is quite close to developing a nuclear weapon. The limited point on nuclear weapons is they are a great deterrent but as long as they are only in the right hands and people like me, people from the markets, and people from businesses they worry a lot when the nuclear weapons go into the wrong hands and weapons with Iran is precisely the wrong hands that markets worry about.
So, while there can be a view about the civilian nuclear programme and a peaceful nuclear programme, I do not think there is great amount of trust that the business community places when countries like Iran say that it is only a civilian nuclear programme. In some sense, I present the opposite side of it. Clearly the market is relieved that at least this kind of budding nuclear deterrent will now be put to rest. By the way, I am just speaking from the Wall Street Journal’s opinion, Israel has done it twice to make the world a safer place.
They did that in 1981 with the Iraq nuclear programme. They did that in 2007 with the Syrian nuclear programme and they did this for the third time now with the Iranian nuclear programme. A lot of people would agree with me that they are making the world a safer place. But I understand that there can be two views about it. It does not impact inflation at all.
The other aspect that we are looking at is the crude oil perspective because it seems to be behaving more like a geopolitical barometer than a commodity.
Anurag Singh: One thing we can be sure of after the regime change in the US is that at least for the next four years, oil will not spike beyond a range. There is a range between $60 and $90. Anything above that is detrimental to the markets and the economy in general. Generally, the policy of this administration is to let the oil flow and energy is a core requirement even within the US. All the EV mandates are being done away with and that can only work if the oil continues to be as cheap as it is. Iran supply is about less than 2% of the global oil officially-unofficially and so that is not a big impact. So, once we get past this short-term blip, I am sure countries like Saudi Arabia and all are more than willing to compensate if Iranian oil goes off the market. But that said, the administration has a very hawk-eye on the price of oil and that should not be a concern. I appreciate and you can understand, this is a sensitive issue. I cannot be very sure that I am on the right side of this. It is so safe for me to say sitting in the US that the threat is not as serious or as severe as it is made out to be, but if you are an Israeli sitting in Israel, you know that any of the first experimentative attacks is going to happen in Israel. In that sense, if they are overcautious and there is a trust deficit within the Middle East, we can understand that they have more skin in the game than somebody who is in the US. So it depends on the perspective as well out there.
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