The oil market navigates a shaky ceasefire

Good morning from the Financial Times. Today is Thursday, April 9th, and this is your FT News briefing. The ceasefire in the Middle East is on shaky ground, and the oil markets are watching all this uncertainty very closely. Plus Pakistan sees an opportunity to bring two adversaries together.

I think Pakistan sees this as an opportunity to show the world that it's a useful country that can play a responsible role in the region, that it can impress the United States.

I'm Mark Filipino and here is the news you need to start your day.

Iran has threatened to withdraw from a ceasefire with the U.S. Tehran says that's because of a wave of Israeli attacks in Lebanon that killed hundreds of people. In response, Iran has halted tanker traffic through the Strait of Hormuz. The US and Israel said they did not consider the ceasefire to include Lebanon. Gulf states also continued to face missile and drone attacks yesterday. Those included a hit on Saudi Arabia's east-west pipeline that carries oil to the Red Sea.

Hello Mark.

So yeah, Jamie, how are oil markets reacting to all this?

Well certainly whenever we got the announcement late on Tuesday that there was gonna be this two week ceasefire, oil plunged in value. It was down seventeen, eighteen percent, below a hundred dollars. it seemed like it was all good news because traders were thinking this is de-escalation. But there's a lot of uncertainty. We've seen missiles shot from Iran into their neighbors.

Jamie, countries in Asia have especially felt the pinch of this disruption to global energy supplies. You have a scoop that they are actually looking to the US now and that could set a record for American oil exports. Is that right?

That's right. So Asia is definitely one of the most vulnerable parts of the world to oil and fuel shortages because eighty percent of oil and oil products were actually passing through the strait to get to Asia. So they are scrambling to try and find alternative sources. And of course, the United States is the biggest oil and gas producer in the world. And what we're seeing is a huge armada of empty tankers. making their way to the US to collect crude and potentially deliver this into Asia.

I guess I wonder if this is just a temporary fix for those buyers, or is this going to be a long-lasting change in the global oil market?

I think for it to be a long-lasting change, you'd have to see an increase in production in the United States. We aren't really gonna see a lot of that over the next twelve months. There isn't really the capacity to ramp up production here as there would have been in past crises. Because the shale sector, you know, they will want to see a sustained period of high prices before they risk investment. And also there's just less good prospects to drill in the shale patch in the United States.

Jamie Smith is the FT's US energy editor. Thanks, Jamie.

Thank you very much.

U.S. central bankers are worried that if the conflict in the Middle East drags out, it could hit American jobs. We got the minutes from the Federal Reserve's March meeting yesterday. They showed that policymakers sparred over whether to raise rates or cut them. Quote, most Fed policymakers think a drawn-out war will require a rate cut to support the jobs market, but quote, many think a rate rise will be necessary to combat rising prices.

One country is trying very hard to broker peace between Iran and the US. That's Pakistan. It helped with the ceasefire agreement on Tuesday, and now it's urging both nations to come to its capital, Islamabad, for further negotiations. But how did Pakistan put itself in the middle of all this? Here to discuss as the FT's Hamza Jalani in Islamabad? Hi Hamza.

Hi, thanks for having me.

So yeah, what has Pakistan been doing?

Pakistan for the last few weeks has been serving as a mediator or a message carrier between the US and Iran, which haven't been speaking directly to each other since talks broke down right before the beginning of this war in late February. Pakistan is a rare country in that it borders Iran, has a kind of complicated political relationship but largely warm ties with Tehran.

Hamza, aside from trying to help out two allies here, what's in it for Pakistan? What's their motivation?

I think the main motivation Pakistan faces is trying to just see the war end. I mean, Pakistan is In a lot of ways, in the middle of the storm that's been caused by disruptions to the Strait of Hormuz and attacks on Iran, Pakistan is an import-dependent country. It imports most of its oil and a large portion of its gas. It's a fragile economy. It can face a balance of payment crisis if fuel prices increase considerably and we're already seeing that tick up.

Sure, I mean and that makes a lot of sense. But what problems might Pakistan face if this conflict worsens or if attempts at peace talks?

The peace talks go south. I think there's quite a few dangers for Pakistan in that. I think the first danger is that we return to the world where the energy supplies are in doubt and the price for the shipments that they can get goes through the roof. So that's one area where they're quite concerned that they could see themselves going back to say the time of twenty twenty three after the Russian invasion of Ukraine, where they almost default.

That's the FTs, Hamza Jalani and Islamabad. Thanks, Hamza.

Thank you.

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