Jeremy Hutton: Milford Asset Management expert on what the Middle East crisis is doing to oil prices

There's been growing concerns about what the ongoing crisis in the Middle East could do for petrol prices.

There's fears Kiwi motorists will soon pay the price at the pump over the escalating conflict, and retailers have been warned not to take advantage of the conflict. 

Milford Asset Management expert Jeremy Hutton explained further.

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Episode Transcript

Speaker 1 (00:00):
With us. Now is Jeremy Hutton, Milford Asset Management. Hi Jeremy, Hi,
Heather he doing, I'm very well, thank you. Now, all
the financial market's attention has been on the Middle East.
What's going on there. I'd imagine oil and energy prices
are leading the moves across many asset classes globally.

Speaker 2 (00:13):
Yeah, yeah, that's right. There are a few moving parts here.
But unsurprisingly, oil has shot up aggressively over the past
few days. Recruite oils up almost fifteen percent since the
Iranian strikes began on the weekend. Now, this is important
for many areas of financial markets, as it does flow
through into many areas. But I suppose all the markets

(00:33):
are trying to grapple with at the moment is how
long this disruption in energy delivery is going to be.
And I suppose that's really important for global inflation and
for how long we could have a little spike up
of inflation. And we know the straight up for moves
by Iran that carries about twenty percent of the world's
daily oil supply. And if this stays closed or impacted

(00:55):
for a while, then we could get some persistent higher inflation,
will get high costs flowing through into economies, and central
banks may have to increase interest rates and response to this,
And this could happen at a time where economic activity
is falling, and that's what the market fares is a
slightly ugly stakeflationary environment. Now Iran they've declared the straight closed.

(01:18):
You know, Trump was trying very hard this morning to
reassure markets and reopen it. But I think many countries
around the world will want this energy flow to continue
pretty soon.

Speaker 1 (01:27):
So how have the major market indicy has been faring
so far?

Speaker 2 (01:33):
At a headline level in the US markets, the SMP
five hundred and NASDAK, they've both opened down around one percent,
which doesn't seem like much given the situation, But below
the surface in certain sectors there's been some huge shifts
and a lot of volatility, but I suppose the mood
has generally been very risk off. Some of the economically

(01:53):
sensitive sectors like airlines, travel tourism unsurprisingly has been hit.
Commodities that are linked to economic growth have also fallen.
The US stoller. There's been plenty of discussion on this,
but at the moment, it's still acting as we expected
it as a safe haven and gold is probably the
most interesting one. I mean, this is down sharply. Normally

(02:13):
gold would be up in an event like this, but
I suppose it's given how hot it's been, how much
positioning and risk has moved into gold, it's actually moved
the other way. In this risk of environment.

Speaker 1 (02:25):
I see the europe and the Asian markets are getting
hit a lot harder.

Speaker 2 (02:29):
Yeah, this is arguably the story that markets are a
little bit more concerned about. I mean the European and
Japanese main indexes they're both down of five percent, and
Korea that's down around seven percent. And again this is
linked to energy and the flow of LNG and gas
this time. But it does show that how reliant these
countries are on Middle Eastern energy, and a lot more

(02:50):
so than the US. You're seeing spot gas prices in
Europe rise very sharply, and this is sort of reminiscent
of the Russia Ukrain crisis in twenty twenty two. And
then Japan and Korea. You know, they've got some very
valuable industrial and chip production that relies on the flow
of this Middle Eastern gas. So investors will get a

(03:12):
little bit more nervous on these markets if disruption continues
for an extended period of time.

Speaker 1 (03:16):
Jeremy, can we quick run down on how we're doing
here on the INSIDEX.

Speaker 2 (03:20):
Yeah, Insietet's been a little holding up recently well, but
it is still down one and a half percent over
the past few days and travel stocks are leading leading
the falls like Circle and tourism holdings Iman. In fact,
there are only a few companies in the green so
far this month or over the last few days. So yes,
the INSIDEX under a bit of pressure as well.

Speaker 1 (03:39):
Good stuff, mate, Good to talk to you. Thank you,
Jeremy Hautton, Milford Asset Management. For more from Hither Duplessy
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