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The price of oil has dipped back to under US$100 today (25 March) as countries continue to seek a way to reopen the Strait of Hormuz.
While there is continued scrutiny over the veracity of US President Donald Trump’s claims about substantive peace talks with Iran, more than 30 other nations are looking to build a “coalition” to work on “appropriate efforts” to safeguard the trade route. The UK hopes to host a summit of these nations.
Also today in trade, the EU-US relationship is in focus again, ahead of tomorrow’s (26 March) vote in the European Parliament on ratification of last year’s trade deal.
UK bids to host Strait of Hormuz summit
Following a joint statement last week by more than 30 allied nations expressing “readiness to contribute to appropriate efforts” towards reopening the Strait of Hormuz, the UK is now bidding to host a security summit on how this coalition could collaborate.
Among the 30 plus nations were the UAE, France, Germany, Italy, Canada and Japan, as well as the UK. London or Portsmouth have been touted as possible locations, the latter being the home of the Royal Navy.
An anonymous British official told Politico yesterday that the UK wanted to help "build this coalition and develop momentum" in order to "open a route safe through the Strait of Hormuz, and provide that reassurance to merchant shipping."
While there’s been a level of scepticism among some of the coalition nations about how impactful they could be, the UK official said they expected to “see different nations coming forwards with different offers to support us".
Options for safeguarding the strait include deploying autonomous mine hunting systems from a mothership in the Gulf. The official said, however, that such a move wouldn’t be effective with levels of hostilities as they currently are.
The Guardian reports that the UK Ministry of Defence (MoD) has sent military planners to US Central Command to look at options. An official from the MoD said:
“There will be a further meeting, military to military, the chiefs of defence staff of the wider group that has now signed that [statement], and potentially inviting other nations that have not signed it, later this week. I anticipate that at some point in the near future there’ll be some kind of strait of Hormuz security conference.”
Oil back below $100
Brent crude oil dipped to US$98 per barrel this morning and is currently at around the US$100 mark at the time of writing.
Trump has said Iranian officials were “talking sense” in negotiations, while Iran has also sent a letter to the International Maritime Organization saying “non-hostile vessels” could go through the Strait of Hormuz “in co-ordination with Iranian authorities”.
The letter said:
"Non-hostile vessels, including those belonging to or associated with other States, may - provided that they neither participate in nor support acts of aggression against Iran and fully comply with the declared safety and security regulations - benefit from safe passage through the Strait of Hormuz in coordination with the competent Iranian authorities."
Global Trade Today reported previously that some analysts believed that, based on the nature of the ships that were transiting, Iran was only permitting their own vessels to travel through the strait.
Despite Trump’s positivity about negotiations, the US is preparing to send airborne troops into the region. Iranian military officials have reportedly mocked the 15-point framework plan for peace that Trump claims is being discussed.
UK economic fallout latest
The economic fallout from the war for countries such as the UK is going to be significant.
New inflation data from the Office for National Statistics (ONS) published this morning (25 March) showed that inflation had stayed at 3% in February before the start of the war, but this data is already being called a “relic” by some economists.
The boss of financial giant BlackRock, Larry Fink, told the BBC today that there will be a global recession if the price of oil rises to US$150 a barrel. He warned that countries should be considering accelerating their use of alternative energy sources.
"Use what you have unquestionably, but also aggressively move towards alternative sources too,” Fink said.
The UK government remains committed to increasing the proportion of its energy sourced from renewables as part of its bid to enhance energy resilience, despite renewed calls to extract more oil from the North Sea.
The UK’s oil and gas industry has also written to regulators to urge the country to reduce reliance on imports of liquefied natural gas (LNG) from the US, saying it is no longer a reliable partner.
Industry group Offshore Energies UK wrote that LNG imports from countries including the US and Qatar are “are more expensive, more carbon intensive and, as recent events have dramatically shown, exposed to geopolitical and supply chain disruption.” The letter, which was seen and reported by Politico, says that the case for domestic gas has been enhanced by the US-Irael war with Iran.
US threatens EU over trade deal
The EU may also be questioning its reliance on US LNG after Trump’s ambassador to the bloc said it could lose preferential access to the energy source if it doesn’t ratify the EU-US trade deal negotiated last year.
The agreement was landed last year at Trump’s Turnberry golf resort in Scotland following his administration’s imposition of ‘reciprocal’ tariffs on trading partners around the world, including the EU. The European Parliament is due to vote on the deal tomorrow.
Ambassador Andrew Puzder has told the FT that the EU could lose “favourable” terms with the US on LNG imports should it not vote in favour of ratification.
“I don’t know what will happen with respect to energy if they don’t go forward with the agreement,” he said.
“If Turnberry isn’t implemented, I mean, we’re back to square one. I’m not sure where we go.
“I think the US will continue to want to do business with Europe, but just the terms may not be as favourable. The environment certainly won’t be as favourable. And... there are other buyers out there.”
Pudzer has also called for the EU to review its laws on digital services and markets. These calls have been met with short shrift by European politicians.
“There is a certain level of tiredness in Brussels when it comes to responding to these talking points from Washington,” German centre-right MEP Andreas Schwab told Politico.
Other news
- Canada and Norway are aiming to position themselves as more reliable trading partners for oil amid instability in the Middle East, according to the FT
- Danish prime minister Mette Frederiksen won the most votes in her country’s election and will now try to build a new government; her campaign was bolstered by her tough stance against Trump’s threats over Greenland, but nonetheless resulted in her party, the Social Democrats, having its worst performance in more than a century
- The price of gold has fallen than 15% since the start of the Iran war, leading to questions over whether it is still a safe haven commodity during times of geopolitical crisis, the FT reports
- David Taylor, MP for Hemel Hempstead, has been appointed by the Department for Business and Trade as the UK’s trade envoy to Japan
Yesterday in trade
- The EU and Australia signed a landmark free trade agreement
- Oil prices rose after Iranian media questioned Trump’s claims that peace talks had taken place over the weekend
- UK chancellor Rachel Reeves delivered a statement to the House of Commons regarding the government’s approach to supporting Brits through the energy crisis
You can read yesterday's trade news here.
