Analysis: ‘No guarantee of anything’ in face of Iran war

Wild gyrations in US pronouncements and see-sawing impacts on the oil price continued into a fourth week of the war with Iran.

 

President Trump threatened to “obliterate” Iran’s energy infrastructure within 48 hours last Saturday, a day after suggesting a “winding down” of the war. Then on Monday, Trump claimed the US and Iran were in talks on a ceasefire. 

 

Oil and energy prices soared, then fell back despite Iran dismissing Trump’s claim, only to rise again on Tuesday (March 24)  in a repeat of what happened after Trump described the war as “very complete” a fortnight earlier.

 

Meantime, at least three contingents of additional US troops – marines and paratroopers – head by sea to the Gulf, presumably to take part in a ground assault.

 

Trump’s subsequent declaration that “I’m not guaranteeing anything” is all we can take at face value, with Keir Starmer warning on Monday against “the false comfort that there will be a quick and early end” to the war.

 

The head of the International Energy Agency warned of “the gravest energy shock of all time”. The Bank of England forecast 3% inflation by June, and the markets priced in interest rate rises this year rather than cuts – perhaps even three. 

 

Deloitte chief economist Ian Stewart warned of “a raft of downgrades to growth forecasts”.

 

Amid the uncertainty, the heads of US carriers Delta Air Lines, United and American Airlines reported record bookings last week, suggesting customers rushing to book in anticipation of fare hikes. Delta chief Ed Bastian reported sales revenue up 25% year on year in the war’s second week.

 

However, a senior aviation analyst warned we would see “a lot less bravado” in coming months.

 

European airline chiefs, meeting at the Airlines for Europe summit in Brussels, warned of shortages of jet fuel and acknowledged discussing contingency plans.

 

Fuel suppliers would give no guidance on availability beyond the next month, easyJet boss Kenton Jarvis reported, saying: “They’re not prepared to say, ‘We’ve no issues in six weeks’.”

 

Air France-KLM chief Ben Smith reported discussing “scenarios on how we deal with the shortage of fuel”, suggesting it could mean cutting back services to Asia even as some carriers propose additional flights.

 

Smith noted: “Southeast Asia is much more dependent on fuel coming over the Gulf than Europe. When we go to [a] southeast Asian city we’re not going to be able to fly back.”

 

The oil price remained around or a little above $100 a barrel at the time of writing, nowhere near the $147 a barrel we saw in 2007 and way off the $220 a barrel it would need to hit to equal that 2007 high allowing for inflation. Yet Iata director general Willie Walsh warned: “This is a bigger supply issue than we’ve seen before.”

 

Speaking at a Tourism Insights conference in London, Iata government affairs manager Peter O’Broin insisted: “The sector will adapt and get through this. But the Middle East is so central and there is the scale of the problem. Are we going be in this situation in six months or a year? A lot of markets have about a one-month supply of fuel.”

 

He said: “The industry has systems to manage gradual changes in oil price. [But] we’re in a shock right now, a bit like when Covid struck.

 

“It’s a cost challenge, an energy security challenge and a network shock.”