If the strait opens, what happens to the economy?

0:00 All right, everybody.

0:00 Pakistan's prime minister just announced a cease fire,

0:06 effective immediately between the US and Israel,

0:11 on the one hand, and Iran on the other hand, which should.

0:14 Open the Strait of Hormuz for a corresponding period of two weeks.

0:19 So does this mean that the global economic meltdown is canceled?

0:24 Let's talk about it.

0:25 First, by going into what's happening with the three

0:28 major economic crises that the war has set in motion.

0:33 You have the energy crisis, the fertilizer and food crisis,

0:37 and then the emerging market currency crisis, such as the Indian rupee.

0:42 Then after that, we will talk about peace.

0:46 How likely will the ceasefire hold up and lead to peace?

0:50 But before getting into both, here's a quick update on.

0:53 The deal.

0:59 official statement from Iran's Minister of Foreign Affairs

1:03 on behalf of the Islamic Republic of Iran,

1:06 I express gratitude and appreciation for Pakistan

1:09 for their tireless efforts to end the war.

1:12 and in response to their tweet and considering the request

1:15 of the US for negotiations based on its 15 point proposal,

1:21 as well as announcement by voters about acceptance of the general

1:24 framework of Iran's ten point proposal as a basis for negotiations.

1:30 Very important.

1:31 I hereby declare, on behalf of Iran's Supreme National Security Council,

1:35 if attacks against Iran are halted,

1:38 our powerful armed forces will cease their defensive

1:42 operations for a period of two weeks.

1:46 Safe passage, very important through the Strait of Hormuz,

1:50 will be possible via coordination with Iran's armed

1:53 forces and with due consideration of technical limitations.

1:58 Meaning that.

1:59 Yeah, these ships do have to talk to the Iranian army,

2:04 pay $2 million and so forth.

2:07 So it is not super easy, but they are committed to doing it.

2:10 And then here is Trump's response on Truth Social.

2:14 Based on conversations with the Prime

2:16 Minister of Pakistan And the Islamic Republic

2:19 of Iran agreeing to complete immediate and safe opening of the Strait of Hormuz,

2:25 I agree to suspend the bombing and attack of Iran for a period of two weeks.

2:32 The reason for doing this is that we have already

2:35 met and exceeded all military objectives and are very far,

2:39 along with a definitive agreement concerning long time

2:42 peace with Iran and peace in the Middle East.

2:46 We received a ten point proposal.

2:49 There we have it again from Iran,

2:51 and I believe it's a workable basis on which to negotiate.

2:55 Almost all of the various past points of contention

2:58 have been agreed to between the US and Iran, but a two week period will allow

3:04 the agreement to be finalized and consummated on behalf

3:08 of the United States as president and also

3:10 representing the countries in the Middle East.

3:12 It's an honor to have this long term problem close to resolution.

3:17 So in summary.

3:19 Duration of the deal 14 day suspension

3:22 of all military operations starting today, 8th April.

3:26 Immediate reopening of the Strait of Hormuz for civilian,

3:30 of course, and commercial vessels.

3:33 But under Iranian military coordination.

3:36 Formal negotiations to begin in Islamabad, Pakistan, Friday.

3:41 This Friday, April 10th.

3:42 The U.S.

3:43 commits to suspension of strikes on Iranian infrastructure and civilian targets.

3:47 The Iranians cessation of retaliatory drone and missile attacks,

3:51 and the maritime blockade of the Strait of Hormuz.

3:54 This all is verified, as you've just seen.

3:57 but there are some disagreements as well.

3:59 According to Iran.

4:01 Operations in Lebanon by Israel are part of this agreement.

4:05 But Israel has said that's not the case.

4:07 So what really jumped out to me in both of these communications,

4:11 they both said that Iran and Trump, the US has their 15 point plan.

4:16 It's secret.

4:17 But Iran has a ten point plan.

4:19 And that plan is the basis for the negotiations, not the US plan.

4:25 So what is this plan?

4:26 What is this ten point plan?

4:28 Well, the Iranian embassy in India had this to say.

4:32 They said you started this war, but Iran will set the conditions for its ends.

4:39 That conditions are specifically and the US

4:42 has accepted them as a workable non-aggression zone,

4:45 a commitment to no more attacks by the US and Israel,

4:50 continuation of Iran's control over the Strait of Hormuz.

4:55 Acceptance of enrichment of uranium.

4:59 Lifting of all sanctions, both primary.

5:04 So that is against Iran directly and secondary, that is against, for example,

5:09 European companies that do business with Iran,

5:11 or Chinese companies that do business with Iran.

5:13 Termination of all U.N.

5:14 security resolutions against Iran.

5:16 Determination of all International Atomic Agency resolutions that have sort

5:21 of condemned Iran for being too secretive with their uranium,

5:26 payment of compensation to Iran.

5:30 So far, at least looking to be in the form

5:32 of these $2 million per ship going through the Strait of Hormuz.

5:36 But maybe there will be more very crucial

5:40 withdrawal of US combat forces from the entire region,

5:44 the entire Middle East, cessation of the war on all fronts,

5:49 including against the Islamic resistance of Lebanon.

5:53 So, yeah, obviously both parties are claiming victory, Trump said.

5:57 Yeah, we have achieved all of our objectives.

5:59 Iran said, you started the war, but we are setting the conditions.

6:02 So we are in the driver's seat.

6:04 And yeah, I have my opinions on who

6:06 clearly looks to be in control of the negotiations.

6:09 But honestly, I think most of the world

6:12 can now agree that we should just say whatever.

6:16 Sure, you both won.

6:17 Now let's just stop killing people and let's

6:19 get energy and food prices back down, please.

6:22 Thank you very much.

6:23 But will that actually happen?

6:25 Let's have a look at the.

6:26 Economic impact so far.

6:28 Most importantly, when it comes to energy, not all markets are open right now.

6:32 Not all financial markets are actually open,

6:34 but the ones that are show a clear trend.

6:37 Here you see the price of Brent crude in blue,

6:41 having gone up a lot since the war and also at the same

6:45 time WTI crude which stands for West Texas Intermediate crude, the US index.

6:52 And they have both gone up by quite a lot.

6:55 But since the announcement they have gone down quite a bit.

7:01 However, clearly still quite a bit above before the war levels.

7:08 And actually if we look at, for example,

7:11 diesel prices from the Deutsche average, we see the same trend, right.

7:15 So massively going up after the war and then

7:18 going down a little bit now after this announcement.

7:23 And same is true for gasoline, for your car and kerosene for airplanes.

7:28 Which, by the way, it means that it will probably take a couple of days

7:31 or even 1 or 2 weeks before prices at the pump will go back to, well,

7:36 not normal, but a bit lower since they still have

7:39 a lot of inventory that was very expensive to buy.

7:43 Next, let's have a look at the Dutch Natural Gas Price Index,

7:46 which is a proxy for Europe,

7:47 which is a proxy for Asia where the markets were not open yet.

7:51 Americans have luckily so far mostly been spared.

7:55 So let's have a look at European gas prices.

7:57 Which when the Strait of Hormuz closed,

7:59 they shut up by quite a lot, then remained somewhat stable.

8:03 And now you can clearly see that they have gone down quite a bit,

8:08 but again, not at all at the nice level that they were before.

8:15 Next.

8:16 When it comes to fertilizer prices, very important.

8:19 What matters most is the so called urea, which is a type of fertilizer.

8:22 Future prices.

8:24 But at the time of recording,

8:25 these were not yet updated because the markets were closed.

8:28 So have a look yourself,

8:30 but I expect the same pattern to hold a slight drop in prices.

8:34 And the same goes for currencies of major emerging market economies like India,

8:39 Pakistan, Bangladesh and the Philippines.

8:43 These currencies went down by a lot because fuel import

8:47 prices from the Middle East went up by a lot.

8:51 So they had to buy dollars to get them.

8:54 At the same time, they were getting a lot

8:56 of money from workers working there in the Middle East.

9:00 And that money went down by a lot.

9:03 And then at the same time, global interest rates were either going up or not

9:08 going down by as much as expected, because.

9:11 central banks all over the world were expecting inflation.

9:15 And this made it much more difficult,

9:17 or at least more costly to borrow money for countries like India.

9:22 So looking at the Indian rupee, for example,

9:24 right after the war, it went down by quite a lot.

9:28 And then yes, it went up back a little bit,

9:32 but most crucially it went up a little bit already today.

9:36 But as you can clearly see, this is really not yet a return to normal.

9:41 The crisis is not over.

9:42 And that, I think, is a good summary for all of these crises.

9:46 Here are my two takeaways one.

9:47 Yes, the ceasefire is great news for the global economy.

9:50 We can already see it in prices.

9:52 It has slowed down the three major economic crises that the world was facing.

9:57 But just as it took a few days before end, use of gas, fuel and food fell.

10:01 The impact of the start of the war.

10:02 It will now take a while before you feel slightly lower prices.

10:06 Which brings us to takeaway number two.

10:08 Despite ships starting to go back through the Strait of Hormuz,

10:11 prices will remain higher than they were for weeks,

10:15 if not months for at least four reasons.

10:18 reason number one, insurance premiums on ships going

10:21 in and out of the Gulf will likely remain pretty high,

10:26 making it less interesting to go in and out of the Gulf

10:29 Because ships are unsure if they can actually get out again.

10:34 Reason number two ships are very, very, very, very slow.

10:39 So even if shipping fully resumes,

10:41 it will take days for shortages to get better.

10:44 In Asia.

10:45 And then reason number three,

10:46 the war has damaged production capacity in many, many of the Gulf countries.

10:52 And so we will feel this in energy prices for quite a while longer.

10:55 And then reason a number for countries

10:58 all across the world will likely start hoarding.

11:02 Crucial products from the Gulf for a while To prevent another.

11:06 Massive crisis.

11:07 If the Strait of Hormuz closes again.

11:09 Therefore, while this ceasefire is great news,

11:12 the only real way out of the global economic crisis is peace, not a ceasefire.

11:18 So.

11:19 Is peace plausible?

11:20 How likely is peace?

11:22 Yeah, that is $1 billion question.

11:24 Let's be honest, the problem we have been

11:27 facing so far is that nobody really knows.

11:30 Even the best geopolitical experts do not know what

11:33 exactly has been discussed between the Foreign Minister of Iran,

11:37 President of Pakistan, and representatives of the US and of course, the US.

11:41 President Trump has a fairly unorthodox negotiation style, to say the least.

11:47 what these experts did mostly agree on, though,

11:49 is that this ceasefire looks very fragile, mostly due to Israel.

11:54 You see, Iran has said that part of the ceasefire

11:57 agreement was that Israel stops its invasion of Lebanon,

11:59 and Israel has already contradicted that.

12:02 But if we forget about that for now

12:04 and just focus on a potential peace agreement, how far apart are the two sides?

12:09 Actually, let's go back to the Iranian demands.

12:13 How likely are they?

12:15 The way I see it, there are three major pain points.

12:18 The first is non-aggression.

12:20 That is, how credible can the US really

12:23 make it that they will definitely not attack again,

12:26 given that they have an armada that can just

12:28 sail all over the world with their airplanes and missiles?

12:31 Then the second one is withdrawal of all US forces from the region,

12:39 which many analysts think that no U.S government would ever do,

12:43 although perhaps Trump.

12:44 Well.

12:45 And then third, I think this is the most

12:47 tricky one cessation of war on all fronts,

12:51 including against the resistance in Lebanon.

12:53 Which of course means that Israel has to stick to the deal.

12:56 On the other hand, the US's 15 point plan is confidential,

13:00 but details that appeared in Israeli

13:02 newspapers suggest that they include the following.

13:05 Iran must dismantle its existing nuclear capabilities,

13:10 commit to never pursue nuclear weapons, which again, we'll be committing to.

13:15 That like that will be very tricky.

13:18 You just have to trust them.

13:19 There will be no uranium enrichment,

13:22 which already clashes with the Iranian demand for uranium enrichment.

13:28 Iran must hand its stockpile of uranium

13:32 to the International Atomic Energy Agency.

13:34 Nuclear facilities must be dismantled.

13:36 Iran must abandon its regional proxy paradigm,

13:40 referring to the groups like the Houthis in Yemen,

13:45 like Hezbollah in Lebanon and various militias in Iraq.

13:49 Relates to that sees the funding of these regional proxies,

13:54 the Strait of Hormuz, must remain open and function as a free maritime corridor,

13:58 which seems to clash with Iran's demand for controlling it.

14:01 Iran's missile program must be limited in both range and quantity.

14:06 And any future use of missiles would be restricted to self-defense.

14:12 But in return, Iran would benefit by a full lifting of sanctions.

14:16 So that is actually the same that Iran once the U.S.

14:19 would assist Iran in advancing its civilian nuclear program.

14:23 So there perhaps they could both claim a win

14:25 that that is what they wanted all along.

14:28 Supposedly.

14:28 And the so-called snapback mechanism,

14:31 which allows for the automatic reimposition of sanctions.

14:35 So sanctions come into place immediately after Iran fails to comply.

14:39 That would be removed.

14:41 So as we already saw there,

14:43 there is actually some overlap between these demands.

14:45 Iran could claim victory on its civilian nuclear program.

14:49 But at the same time,

14:50 Trump could claim that they have abandoned their nuclear bomb ambitions.

14:55 The proxy system very importantly meaning that Iran

14:58 supported militias like the Houthis and Hezbollah.

15:01 According to my interview with us,

15:03 Iranian Professor Nasser on money macro talks,

15:05 go check it out was a largely for the during the US and Israel,

15:09 but with its control of the Strait of Hormuz,

15:12 Iran now has a much stronger deterrence.

15:14 So that may help to convince them that the proxies are really no longer need it.

15:19 The only thing that seems super unlikely is that the US retreats from or basis,

15:24 at least according to most experts, but actually,

15:27 Trump could credibly claim that this is what he wanted all along,

15:32 because it was a core part of his 2025 national security strategy.

15:36 According to this document,

15:38 his administration wanted to focus on the Americas and, to a lesser extent,

15:43 China, not the Middle East.

15:45 So in theory, the US and Iran are actually less far apart than you may think.

15:51 However, that does not account for Israel.

15:53 Israel seems to want to simply that all

15:56 their regional rivals end up like Lebanon, Libya, Iraq and Syria,

16:00 a shadow of themselves no longer able

16:03 to threaten Israel in any way, shape or form,

16:06 even if that means that they are stuck in a brutal state of civil war.

16:10 So it seems in Israel's best interests to quite literally blow up this deal.

16:16 But yeah, we'll have to see, won't we?

16:19 What do you think?

16:20 Will Trump and Iran seal the deal?

16:22 Will Israel spoil the party?

16:24 Let me know in the comments below.

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