Shane Solly: Harbour Asset Management expert on the economic impact of the war in Iran

There's growing concerns about the economic impacts of the war in Iran.

Crude oil prices have topped $100 US dollars a barrel for the first time since 2022 - and our petrol prices surged another 14 cents over the weekend.

Harbour Asset Management's Shane Solly says these attacks are directly impacting key fuel sources, which has got economists worried about future prices.

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Episode Transcript

Speaker 1 (00:00):
Hither the Commerce Commission will do absolutely nothing. The fuel
companies pull this truck every single time that oil price
is spike. Then there's the public complaints on talkback for
a few weeks, and then eventually we all move move on.
I'm disgruntled, but submissive. I agree, and it's going to
play out the way it always has. But they will
probably be a little bit more careful in rocketing the
price up because everybody's watching so closely at the minute. Anyway,

(00:20):
that's what i'd like to think. And on that very subject,
we have Shane Solly, Harbor Asset Management with US high Shane, Okay,
where's the oil price at now? How does this compare
with previous events?

Speaker 2 (00:30):
Yeah, look, it's really moving quite quickly. So today it's
closing about one hundred and fifteen dollars per barrel. That's
for Brent, up sixty percent from the twenty seventh of February,
which is the day before they're strucks. Last time we
saways Heather was back in twenty ten, twenty fourteen, which
is the hour of spring disruptions. Difference this time around
is these are the attacks on refineries. Are seeing an

(00:53):
increase in gas prices and crackspreads. It's the cost of
turning a barrel of the world into you feel for example,
it's about ten times up, so quite a widening. Normally
we see the worst early on until we see the
scope and the breadth of the disruption. But look, it's
nobody's interests for the straits of home is to be closed.

(01:14):
But they are. They affectively are. So we expect to
see a bit of a demand and supply response. Historically
about one hundred dollars a barrel. We start to see
demand turning off, and we also start to see the
US releasing some of its strategic reserves. So look, it's
going to be pretty dynamic. But how high energy prices go,

(01:35):
how long they stay elevated, that will impact the global economy,
central bank policy responses, and how investment markets go. At
the moment, people are taking the negative view.

Speaker 1 (01:44):
Okay, talk me through what you're seeing in the capital markets.

Speaker 2 (01:48):
So long term bond yards that doesn't get talked about
a lot. This is the like ten year government bond yards.
In the US, they've gone up by zero point two
percent to about four point one. Here in New Zealand
they're up about zero point three five percent to four
point seven percent. That means we're all paying a bit
more for borrowing, so the cost of borrowing money has
gone up for particularly businesses and consumers. At the time,

(02:10):
shere markets actually have been relatively the risk hasn't come
through quite as much. US S and P five hundred
down two percent from its pre strike price, but the
futures of a night here that they're looking like they're
going to be down about two percent. We've seen some
really big moves in other markets that are sort of
secondary markets. The career market, for example, is down eighteen percent.

(02:34):
Japanese market down twelve percent from before that pre strike level.
They're both very oil intensive importers, so they're more exposed.
Europe down about seven Locally. Here in zeal we're about
four point six percent down from that pre strike level.
Today a bit of a soft day, down three point
one percent, led by weakness and companies like Fishing and
Bugle health Care and A two which have been strong

(02:55):
performance before this, and then travels sensitive companies like Upen
Airport and binds companies like and for two and gin Talis.
But New Zealand we tend to be a little less
volatile and more defensive, so not surprising to see us
do less bad.

Speaker 1 (03:09):
Yeah, hey, thank you very much. Shane has always appreciate
your time. Mate. That's Shane Solly of Harbor Asset Management.
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