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Obviously, the overarching news and market themes of the day is Israel hitting nuclear sites as the world is now awaiting Iron's response to the US wrecking its nuclear sites in Iran over the weekend as well. All right, joining us now is doctor Aeriel Cohen, Senior Fellow Atlantic Council, joining us on the latest. How do we rank the probability of an Ironium response?
It will be a response they unless the Iranian regime collapses. They will be trying to save face. The problem is their options are not great. One, they could try and attack tankers, and we see that the tanker rates, the insurance rates are all going already. Two, they could try to mine or close the Strait of Hormus.
That will piss off.
Their Chinese customers and endanger their political support from China. Three we see that Russia is talking but so far is not getting involved. Why because Russia benefits from high oil prices. The higher the prices, the happier puts in is so what else can they do? They could attack their neighbors. They would be cautious not to attack American Basis. It looks like because they could already could have attacked,
they didn't. The regime is have broken because a lot of generals were taken out, so the decision making chain is WOBBLI. But if the attack American Basis, us will deliver devastating blows against their on if they attack the neighbors, same thing. And here's a question that a lot of people did not ask about the alleged closure of the Strait of Hormus. The pathway in the strait is through the Omani waters, it's not the Iranian waters.
So are they going.
To endanger their fragile relationships with other Gulf states a big question mark. Also, they're normalized with Saudi Arabia under the Chinese umbrella, the China broker that deal. Are they going to endanger both Saudi and China connections? So the option don't look good for the regime. And what I am worried about, what keeps me up at night, is all that highly enriched uranian. They enriched several hundred kilos
to sixty percent. If the ability to build a deliverable nuclear weapon is destroyed, now what about a dirty bomb?
And I think that should be on the table.
US and Israel do not put regime change on the table yet. All the Trump had these musings about it. But all the boxes need to be changed in terms of ballistic missiles, in terms of enriched uranium, in terms of proxies, and eventually if we move to an agreement, that should be addressed in the future.
Great Aeriel, is it your opinion that some people are talking about regime change but that seems far fetched? Is your sense that if there were to be regime change in around it would have to come organically from the people?
Absolutely one percent.
It's a country with three plus thousand year history, ninety plus million people.
It's fractured. You have the Shah, the former.
Shah supporters, the Crown Prince lived several miles from me here in Potomac, Maryland.
We have the far left, the mujahidin Hulk people.
We have the liberals in the regime, and of course we have IRGC and the Mullahs.
So different components with diametrically.
Opposed views of Iran society, the role of religion, the role of women. Don't forget this is a regime that was executing more people per capita than any other country in the world. This is a regime that a woman could be beaten and killed for not wearing the hijab in a proper way. So a lot of people inside Iran are very unhappy. But this is a totalitarian regime or quasi talk to all their terror or rechi that picks up, picks out dissidents and publishes them and kills.
Them, which then makes an internal regime change enormously complicated. All right, doctor aiel Colemen, thank you very much, senior fellow Atlanta Council, for the latest in the Middle East or of what the actual options may be for Iran and the rest of the world.
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All right, let's turn to the non market reaction. I mean, when you see the kind of headlines that we saw over the weekend. The impact was estimated to be huge on financial assets, and that has not seemed to play out. Emily lavell as Chief investment officer in New Mexico Climate Investment Center broadcase, Emily here, what do you make of what many are saying are a subdued market reaction?
Hi, good morning to be here. I would agree.
I mean, I'm pretty surprised that the markets haven't reacted a lot more forcefully. I think that, you know, this attack really expands the range of potential outcomes and creates a lot more potential downside and a lot more risk
in markets. And I think it just underscores the need, the strategic need in the United States to have, you know, sources of energy coming from from all different sources, because you know, if we get an escalation from Aron, then we could really see, you know, some some pretty big energy shocks which could really impact inflation and prices all across the world, the US being no exception.
What does the Trump administration mean for climate? Your Climate Investment Center thinking about alternative sources of energy?
How are you guys.
Kind of positioning what you do in terms of addressing the challenges of climate change with this new administration.
Yeah, well, that's a it's a good question, it's a tough question. I mean, honestly, you know green Banks if if you're not familiar with with what they are, you know, we know that we need an estimated three and a half trillion dollars of investment into the energy sector in order to transition away from fossil fuels by twenty fifty.
And green Banks stand in almost.
Every state to really support that acceleration of the energy transition. And you know, New Mexico is really interesting because we're the second largest producer of oil and gas in the country, but we're also second in wind potential, is second in solar potential, third and wind, and sixth and geothermal, and so the potential for real diversification of our economy is
really significant. Unfortunately, what the Trump administration is doing through a variety of policies enacted, the most significant of which is the budget bill, the reconciliation bill that's currently going back and forth between the Senate and the House, is it really removes the majority of the incentives that have been in place since two thousand and five to bring cleaner electrons onto the grid, and so you know, unfortunately, I think what that means for the whole economy is
going to be higher energy prices, less resilience, less manufacturing, fewer jobs, you know, big multiplier effects for us Here at the Green Bank, we continue to see a lot of projects that are really interesting and benefit both you know, the low income communities that we're trying to serve and the broader economy.
But it's definitely going to be more challenging.
And there are estimates that fifty percent of the backlog and that's in the interconnection queue right now on the grid could be at risk if the bill passes in its current.
Form, and that's not even take into account how long that line is to actually get connected to AGRID. So, if I was looking at individual stocks, is this like a fossil fuel play then at the end of the day, or are there are more nuanced ways to play this?
You know, I sort of think of the way the US has been in the last couple of months in the way that I'm used to looking.
At emerging markets.
I invested in emerging markets for almost ten years, and frankly, I think you've got a skate where the puck is going when it comes to Paul, it's it's really hard to stick your neck out there. That being said, I do think there is maybe some potential in the utility scale UH solar and wind market. And the reason for that is, you know, at the same time that we're doing all these things to hurt this cheap, easy to get on the grid energy, we're having this big national
discussion about how we become AI leaders. And we heard next to our CEO, John Ketchum say last week, if we kill solar and wind, we're going to lose the AI race. And so I do think that there's the potential for you know, lawmakers to come back to the table to try to support some utility scale solar plus storage. In particular, the administration is still very focused on domestic manufacturers, so I think a name like First Solar my benefit.
You've got the you know, gas turbine manufacturers GeV and Siemens.
But this is a cyclical industry.
They've got backlogs to twenty thirty two now, and I just see more downside than upside at this point, with the back clogs the way that they are.
Then you've got clean firm power.
Which is you know, nuclear geothermal, and that's all well and good, and I think that that does need to be built out, but there aren't that many ways to play it in the market. You know, you can look at the Spraught Uranium Trust. There's a geothermal pure Play, or Matt there's Constellation Energy Group, but it's you know,
it's it's tough out there. I think the reality is that you're going to start to see some people have to come back to the table because solar and storage is the cheapest and fastest way to get new energy onto the grid.
Emily, thanks so much for joining us. Really appreciate it. Emily Levelle, chief investment Officer for the New Mexico Climate Investment Center.
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Taking a look at the market here, you're looking at Brent off by one point one percent and WTI crewed off one point two percent. The question I'm getting is why why aren't we higher in prices? So I'm gonna ask that question to Emri Descent. She is founder and director of Market intelligence for Energy Aspects. All right, Amrito, what's your answer?
Why are we lower in prices today? Yeah?
Well, because again we haven't seen any actual supply disruptions. You know, we've been saying that, Yes, while Iran is threatening to close the straits or Foremos, that remains very much the last resort for them, right because if they did that, they are really going to get the US involved in a much much bigger way than they have been so far. Any country that's even neutral towards it will basically become far more kind of angry about the
whole situation. And I don't think Iran necessarily wants to attract the hour of the whole world, given how weak the regime is right now, So I think that's a big part of it. The other one is a bit more technical. We've seen most of the crude traders trade this via the ouptions market, So when you are short call options as prices are going up, you actually are taking profits all the way through, right because you're kind
of selling out of your position. So that's kind of adding to it, I would say, generally speaking, unless Iran actually escalates to the point of disrupting supplies, we are probably not going.
To see any significant increase in prices.
From here, Amrina. Is there a consensus about how much geopolitical risk premium is in oil these days?
I don't know about consensus, but I think this one's relatively easy, right because we were in the high sixties for Brent, we were already moving higher, just based on the fact that fundamental had been stronger than people expected.
But I would say, given where.
We are now versus where we start started when the conflicts kind of headline started coming in, it's about ten dollars.
What's your question then?
So if I'm assuming the question you're getting is why aren't oil prices higher?
But what's you question?
I mean, for me, the real question becomes the medium term, right, Like I know the focus for the marketers in the Straits and Foremost, but we know this isn't over yet, right.
We know Israel while kind of.
You know, walking typrope around this, they are talking about regime change and what does that mean? A political upheaval has never been associated with a good outcome for oil production.
Be It Eerrah bit Kuwait, be It Iran in the past, be.
It Libya, and I do wonder for the medium term outlook, like do we actually see lower Iranian production over the next couple of years at a time when OPEC plus will also have less PEC capacity because they're bringing back a lot of production. I know this is not the time because of you know, the focus obviously has to
be does Iran react and clos the straits? But for me, that's the more interesting thing that our long term ail price is undervalued given everything that was already going to happen, and now we added around to the mix.
How has OPEC been behaving OPEK plus Has it been rational over the last I don't know, just since maybe you know October seventh of last year when things got really really ratcheted up in the Mid East.
Yeah, I mean it's a great quitiontive. They're rational.
I mean you have to understand kind of their logic to this, and I think they have.
Been consistent, is what I would say.
Saudi Arabia has been saying, Look, it needs to be equitable cuts, everybody needs to be a part of.
This, and I think that's what they have been doing.
But at the same time they have also been kind of obviously there's been disagreements between OPEC members, with Kazakhstan cheating clearly and some of the others as well with regards to, you know, what that kind of policy should be. I think that in terms of what's going on with the Middle Eastern conflict, one thing they're very very clear is they don't want to get drawn into it.
They want to make sure that their.
Genuine infrastructure, not just energy, it's protected, and I think they're going.
To try and be as neutral as possible.
And again, this is one of the reasons why I don't think they're going to be surging production if there were to be an Iranian outage, because the last thing they want is to then get attacked because Iran's going to be like, you're taking advantage of our situation.
Right.
Well, speaking of here's an extremely unfair question. When President Trump tweeted earlier, I want lower oil prices. Drill baby drill, Come on you, guys, I'm watching who's the you. I mean, who is he talking to specifically?
I mean drill baby drill refers to the US producers, right, and I mean it's I did smile when I saw that because I was like, yes, you say that, but at the same time, you know, thanks to tariffs, thanks to just kind of broader his economic policies, oil prices are a lot lower. Again, if you take away the ten dollars geopolitical risk premium, then it has been in the in the last you know, couple of years, so there is no incentive for their producers to drill.
We know we've talked.
About this, Alex, you and I about how Gassi are the acreage is getting all of these reasons right. So Drew baby drul remains a five dream. I think that it's regardless of why the prices are simply because you are you know, you are in a situation, at least for the crude oil side of things, is geology is playing.
It's pot we're going to get nngs, We're going to get gas.
But I don't think that's going to necessarily translate into oil production.
All right, I'm Rita.
Thank you so much for we appreciate that. I'm Rita send founder and research director of Market Intelligence joining us.
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Terry Hayes, founder of Pangea Policy, joining us in the middle of all of this. Terry, and let's just start with what we're seeing overseas. Are we too complacent about further action between the US around and is real? Or do you feel like one and done? Moving on?
Good morning, Alex, I apparently am the uh am, the person urging humility and a sea of certainty. You know, I've heard, he written, heard and and read a lot of people saying this morning, well I can dandalists so saying, oh, I know exactly how this is going to go. Iran's going to super peace and this will happen, and that happened, and the other happened, and here's the you know, here the the the knock on effects from China and Russia
and elsewhere. We're in the phase of this conflict where downside economic risk is heightened, much more heightened than people think, because the possibility for irrational action is much greater at route. So Terry, I could go on, I will know.
It was just it seems like President Trump's policy seemed to change a little. There's the outlook seemed to change a little bit from you know, America first to now, you know, really ratcheting up the stakes in Iran. You how do you think has outlook changed.
I've never looked. I got to tell you, Paul, I've never been the guy that thought, I think I said this to you yesterday too. I've never been the guy that thought that that this is some sort of a
U turn or anywhere close to it. I think Trump is absolutely right to come in and put a fresh take, a fresh eye on the nature of the United States commitments and how and what's most important for America certainly, But you know, this got taken as withdrawal all over the world, and that was never going to happen.
Uh.
You know, we are. We're in it to our teeth in Taiwan, our interests in the Middle East are are are very very important to the national interest in the United States. And even in a situation like Ukraine, you know, we haven't left. They're not crazy about where we are, but we've given him more weapons, We've signed a minerals deal. We're not gone, and and we're not going to be gone either. And now it's very apparent to those for whom it wasn't obvious already that we're going to be
in it to to stay. And you know, this is a clear situation I think where the uh, the duties of the president O weigh the preferences of the candidate.
Well, what is in it to stay?
In it to stay?
I mean, like what what does that really entail?
Well, you know, it's you know, we have we have continued to defend Taiwan and UH and you know, to work our work our military and economic interests there Middle East. UH. You know, it's not for nothing that the President made a centerpiece of his early second term a week long trip to the Middle East with the idea that we're going to be using interconnected economic alliances in part to ring fence the Iranians and the Ring then the Iranians or client state of China, so in essence ring fence
China and Russia as well. So that's not uh, that's not new. And it's clear now that you know, the President would like the Europeans to stay up up to the plate on defense. UH, and you see that from from the NATO resolutions that they're finally getting serious about that. But you know, even then, we haven't completely withdrawn from Ukraine, as was widely assumed in the United States six months ago.
Uh.
So you know, we're we are not melting away from our from our global responsibilities here by any stretch.
Terry you mentioned Ukraine. Does a calculus there for mister Putin change given the actions of the US in the in the Middle East over the weekend.
Yeah, and well, you know, good news bad news. The increased price of oil helps him. Uh, and and and around does something that that sparks a significant increase in the price of oil. Obviously Putin has helped. So uh,
that's not good news for Ukraine. But but on the other hand, what you have is increased not only increased resolution, uh, demonstrated by the European allies, wells, the United States and you, you and my estimation could do an awful lot more than they than they already are, which is the precious little but the U. But not only that, but you've got a situation here where there's a clear commitment by the president with a clear follow through. And that's that
alone is bad news for Putin. So uh, you know, kind of a mixed a mixed bag overall. But I'd say for Russia. It's overall negative.
And before you let you go, Dave palat test to find to the House tomorrow and the Senate on Wednesday, what do you think the biggest talking point is going to be?
Well, you know, here's the thing. It's uh. I think we all know this. Pal's not going to say anything new personally. Secondly, you know, as Mike McKee just reminded the audience, Uh, you know, the the key here with the Fed is read every word, and he pointed out a number of words uh in Mickey Bowman's statements that the market isn't reading, for example. But Paul can't say anything new in this testimony, in this twice year testimony. While Mickey Bowman may talk about the possibility of July
doesn't mean July. Pali is certainly not going to to endorse that or anything else. He's speaking for the entire bed. What's going to happen on Tuesday and Wednesday really is that Congress is going to talk over Pal's head. They
know that. Then none of that's going to happen. What markets get out of this is is a look forward on the meaning of the tax bill and promises for growth and also for fiscal and why that situation is not going to clear get cleared up anytime soon, you know, with the actors taking their usual stances and their usual marks.
Terry, thanks as always for joining us. Always appreciate getting your perspective there. Terry Haynes, founder of Pangaea Policy, joining us from Rhington d C. Via that zoom thing.
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