Gerard Lyons: Former Chief Advisor to Boris Johnson on the volatile oil prices and impacts of the resumed conflict in the Middle East

There is confidence global economic resilience is growing in response to volatile oil prices and conflict in the Middle East. 

The US will soon block Iranian ports again, but Donald Trump's abandoned his plan for a 20% fee on cargo passing through the Strait of Hormuz. 

It comes as the US and Iran continue to trade strikes and oil prices climb to their highest point in a month. 

Boris Johnson's Former Chief Economic Advisor, Gerard Lyons told Mike Hosking it takes time for economies to adjust. 

He says in the Gulf, oil pipe facilities are being built to remove the dependency on the Strait. 

Lyons says earlier this year, people were fearing the worst-case scenario for the global economy, but there’s a lot more resilience now, and so there’s more confidence we can weather a setback in Iran. 

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Episode Transcript

Speaker 1 (00:00):
So it brings us back into the eighties, but down
a little bit on where it was earlier on this morning,
after Trump put a toll on but then took the
toll off, almost as though he's got no idea of
what he's doing. So how long? How do we dig
ourselves out of this particular hole? Jared Lyons is back
whethers he was chief chief economic advisor to Boris Johnson,
candidate for Governor of the Bank of England. Jared, morning
to you, Good morning. How do you navigate around this mess?

Speaker 2 (00:23):
Yeah? Well, it's very difficult. The key message really from
President Trump's comments has continued unpredictability. A few weeks ago,
the markets and indeed economists generally were quite upbeat about
the prospect of the war ending that would have allowed
inflatory worries to ease or prices down. Now we've seen
more volatility in the markets and this I think, unfortunately,

(00:45):
this is likely to continue. It's important to say, though, Mike,
that this is only one of a number of factors
at the moment, and even though today's and the last
couple of days news from President Trump regarding the war
in Iran has been unpredictable at the same time, the
markets have been very folk because on some relatively good
news from the US in terms of inflation and also
testaly by the new Fair Sherman Wash, and that has

(01:08):
eased some of the worries about inflation. So the worries
about inflation easing in some respects have superseded the unpredictability
of President Trump.

Speaker 1 (01:17):
Today, glass half full. If it's a problem and the
bombing continues, the Strait in its state won't be as
bad this time as it was last time. Is that
fear or not?

Speaker 2 (01:30):
Well, it's fair in the sense that we've had four
months or so for economies and markets to adjust. There
still is naturally some impact. But also another key factor
is there back at the end of February when the
war began, there were worries about the US and about
the globe economy. Since then, there's been a lot more
resilience shown in terms of the data out in the

(01:52):
US and indeed globally, So there's more confidence that the
world economy, including the US, can cope with a setback
in Iran. But also at the same time there's an
expectation that even though there's unpredictability, we're not going to
have the worst case scenario that people were fearing a
few months ago. So resilience in the face of continued
problems and continued volatility and will prices.

Speaker 1 (02:15):
It's one of the great lessons we learned in this country.
Is a very good example of that. We went out
and got oil from other places, and a lot of
other countries went out and got oil from a lot
of other places and made it work. So I suppose
that too is glass ow fall, isn't it?

Speaker 2 (02:27):
Well, it takes time to adjust. One of the big
news stories this week has been the fact that in
the Gulf there is now moves under way to actually
remove that sort of dependency on the Strait of hor
Moves by putting ports and other pipe facilities elsewhere, but
that does take some time. Obviously, the US economy, while

(02:49):
is the world's most important one in some respects, is
less reliant on some of the oil coming through the
Strait of hor Moves and say other economies, say India,
and indeed some respects even China. So there is resilience.
It's glass half fall, coming back to your point, But
is also important to put it in the wider perspective
that we have seen strength in economies despite the war.

(03:11):
And the latest news on inflation, whilst it's not easing
all those inflation fears, it's far better than people thought.
US inflation today was down to three and a half
percent in the year to June. It was four point
two percent in the year to May, and it was
a bigger four than the markets expected. But let's see
how much volatility there is in coming days. If what

(03:32):
President Trump said today is repeated tomorrow, that is, he's
not putting the tariff on, then it's possible that all
prices might start to fall further, and that would help
the situation.

Speaker 1 (03:42):
Grydon's sideers always appreciate it. Jared Jared lyons once we're
with Boris Johnson.

Speaker 2 (03:46):
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