UBS On-Air: Paul Donovan Daily Audio 'Trickle or treat?'
5/21/20263 min
News that Iran has allowed some ships to cross the Strait of Hormuz encouraged a modest drop in the oil price. The volume of oil exiting the Gulf is a fraction of pre-war levels, but allowing some flow might diminish physical shortages. Assuming Iran benefits economically, it also lessens pressures on Iran to deal with the US. In terms of the Wile E. Coyote trajectory, this implies the economy is still over the edge of the cliff, but might continue running through thin air for longer.
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First 90 secondsPaul Donovan· Host0:01
Good morning. This is Paul Donovan, Chief Economist at UBS Global Wealth Management. It's seven o'clock in the morning London time on Thursday the twenty-first of May. News that Iran is allowing oil tankers to pass through the Strait of Hormuz has brought oil prices down. Presumably, Iran is exacting some kind of economic benefit from these voyages, but that has not been disclosed. Clearly, the volume of oil being shipped through Hormuz is a fraction of pre-war volumes, but allowing some oil through delays extreme physical shortages. Assuming Iran is benefiting economically, it also lessens the pressure on Iran to do a deal with the United States. Removing the urgency for a deal is not going to bring down oil prices significantly further, but establishing the principle of allowing some oil through avoids the very worst-case economic scenarios. In terms of the Wile E. Coyote trajectory, the global economy is still off the edge of the cliff. But if these oil shipments do continue, it may run through thin air for a little longer than would otherwise have been the case. US President Trump said the United States was in the final stages of discussions with Iran, but without independent verification, investors