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Welcome to the Daybreak Asia podcast.

I'm Doug Krer. Oil prices are trading

higher due to an escalation of military

activity in the war with Iran.

Earlier,Qatar reported extensive damage

at the complex housing the world's

largest LNG export plant. It was struck

by an Iranian missile. And this strike

came just hours after Iran threatened

energy facilities across the Gulf. That

threat, incidentally, was issued after

the US and Israel struck the South Pars

LG field. South Pars is jointly owned by

Iran and Qatar. Cutter called the strike

a dangerous and irresponsible step and

later cutter expelled Iran's military

and security attaches from the country.

for a closer look at what's happening in

the LNG market. I'm joined by

Bloomberg's Singiong. Singi covers

energy. She joins us from our studios in

Singapore. Thank you for being here. Can

you describe for me what you're seeing

in the LG market right now?

>> Thank you for having me. Well, for LG

right now, we're seeing, you know,

prices being really elevated. So, um,

ever seen ever since Qatar halted its

production, we've seen Asian LG prices

double. And right now they're still at

around that level. It's pulled back a

little bit, but it still remains really

high. And that is, you know, causing a

lot of buyers to wait and see. We

already see some Asian buyers not being

able to secure cargos that they need for

the coming months.

>> So much of the conversation around the

war has to do with the straight of

Hormuz and the fact that it's been

effectively closed. give me a sense of

the LNG traffic that typically goes

through the straight.

>> Yeah, so it's it's a really big impact.

We are also seeing about 20% um of LNG

shipments go through the straight of

Hormuz and um of these shipments

actually a lot of these shipments are

towards Asia. So Asia is actually seeing

a lot of that impact. One of the things

that I remember about LNG that it has to

be cooled, liquefied and then compressed

when it is transited. And in my mind

when you talk about an environment where

war is the central issue here, it would

be very very dangerous to transport this

kind of cargo through a war zone. Right.

>> Yeah. Exactly. So that's why we're

seeing that you know a lot of these

cargos there right now they're stuck in

the straight of Hormuz. We don't see any

shipments carrying LG passing through

the straight at the moment, but that's

something that we're keenly watching out

for.

>> I'm curious, Singi, are other LG

producers stepping up to compensate for

the interruption of LG out of the Middle

East?

>> Hey, so right now we're actually seeing

like a lot of the other major producers

that includes um Australia and the US,

they're actually already running at

almost full capacity. So in that sense

it's really hard for them to increase

their production and to export more. And

uh one big impact that we're seeing

right now is that in Asia parts of Asia

like South Asia and Southeast Asia they

are seeing you know hot weather and that

might increase gas consumption in the

coming months. And then if we look a

little bit further ahead from May

onwards um we have countries like Japan

like Korea they're going to experience

really hot weather because of the summer

and that is also going to further strain

the market because that will lift gas

demand basically for like air

conditioning electricity power demand

and yeah that we we see like a real pain

point there

>> and European countries I know are

heavily reliant on LG as well. Yeah,

exactly. And for Europe, we see that

their stockpiling season is coming up

right in a few weeks. And so that will

sort of increase the competition with

Asia for this limited pool of supplies.

>> In terms of the actual price, can you

talk to me about how much we have seen a

price appreciation over the period where

the war has been uh kind of prosecuted?

So for Asian LG prices um before the war

broke up we saw spot prices trading at

about $10 or $10 plus but right now they

are above $20. So in terms of Asian LG

prices that has you know doubled and

that is actually causing a lot of pain

as well for countries that are more

price sensitive. I'm wondering whether

power producers have been able to switch

to an alternative fuel that they would

use to create electricity.

>> Yeah. So that's something really

interesting that we're seeing. I mean

like for Europe they can depend a lot

more on renewables because they have a

really huge share of wind power but for

Asia you know the the grid is more

accustomed to coal. So we see actually a

lot of um countries looking at coal as

an option. So for example um we're

seeing Bangladesh has already you know

increased its coal fired power

generation and then we have countries

like Taiwan that has mentioned it is

looking at increasing that as well.

>> So the LG story is quickly becoming an

inflation story is it not?

>> Well what's the most important is that

LG is central to consumers because you

know we use power we use electricity

everywhere. So this problem where LG is

stuck in the straight of Hormuz and

where Qatar has effectively halted

production, it's going to affect the

world in a sense that consumers are

going to see rising prices for

electricity and you know especially

industries that use large amounts of

electricity like for example the

semiconductor industry they will see

prices increase quite a bit as well.

>> Singi thank you so very much. We'll

leave it there. Bloomberg Singiong

energy reporter from Singapore joining

here on the Daybreak Asia podcast.

Welcome back to the Daybreak Asia

podcast. I'm Doug Krer. We turn next to

the Fed. Policy makers left the Fed

funds rate unchanged and they continue

to expect just one rate cut this year.

The Fed also acknowledged increased

uncertainty due to war in the Middle

East. Chair J. Powell said it's simply

too soon to know the scope and duration

of the potential effects on the economy.

For a closer look, I'm joined by

Bloomberg strategist David Finity. David

joins us from our studios in Singapore.

Thank you for being here. This was not a

surprise that the Fed funds rate was

left unchanged. So far though, it seems

like the war has been a dollar positive

story because of what's been happening

with crude oil. What is your

expectation, David, given everything

that you heard from the Fed? Will the

dollar remain strong or do you see some

sort of risk now that things could

falter?

>> I think certainly in the near term risks

are skewed towards dollar strength at

the moment and we don't see any

near-term end to this war in Iran and

with the escalation and on the strikes

oil prices are pushing higher which

adding to inflation expectations and

therefore you're seeing the expectations

for market expectations for Fed rate

cuts dial back quite severely. If you

think of before the the war started, I

think the market was pricing 61 basis

points of Fed rate cuts this year. Now

it's down to 14. So considerable

adjustment being made. And I think if

you look at the Fed dot plot yesterday,

there are signs in there that even yes,

one rate cut was predicted this year

which was in line with expectations and

the same at the December um dot plot.

There have been subtle adjustments. The

number of Fed governors predicting two

rate cuts was reduced from eight in

December down to five and then the

long-term or the neutral rates we say

basically edged up from in the dot plot

edged up from three to 3.125%.

So the hawkish sentiment is starting to

build again that could change but

certainly you're seeing that. So the

idea of that that adds to this idea of

dial back the expectations for freight

cuts which is dollar positive. So in the

near term, yes, you would save anything.

Not hugely unexpected what it did, but

it does add to the idea of that it's,

you know, not a tailwind for dollar

sentiment.

>> So David, you and I both remember that

coming out of the pandemic, the Fed held

to this idea that inflation was

transitory. And at the end of the day,

it proved to be a lot stickier than

people had imagined. I'm wondering

whether the risk for the market right

now is even when the dust on the war

settles there are simply too many

unknowns on the inflation story.

>> Yeah, I mean there's obviously that's a

worry that inflation expectations uh

become unanchored again and start to

push higher again. How it really comes

back to again that how high how long

like you know if hypothetically the war

was to end in 2 weeks and you'd guess

that oil prices would drop quite quickly

and then sort of we go back the market

react moves forward very very quickly

indeed. So it really is this uncertainty

of how long and obviously we don't have

that answer. You know theoretically it

could go on three two weeks it could be

2 months it could be 6 months we just we

just don't know at the moment. Um and

that's why I think keeping the market

uncertain but what we do know is the

longer it goes on that certainly not

good for inflation expectations which

you know does put pressure on the Fed

certainly to leave rates unchanged for

upcoming meetings. I'm wondering given

the level of uncertainty as a result of

the war whether there is a risk small as

it may be that the next move on the part

of the Fed is a rate hike. Is that too

much to say? Look,

>> yeah, I think you can never say never. I

think Fed Chair Pal was interesting. He

certainly said, look, we're not at that

stage yet. And I think for that to come

to fruition, you would need, you know,

oil prices to remain elevated for quite

a long while. Um and that really feed

into inflation expect inflation and

inflation expectations. So while you can

never say never um I think at the moment

the sentiment is look we need certainly

a lot more data for that to happen. It

will take several months for that to

feed through to economy. So at the

moment the idea of look one rate cut is

still on the priced in it is fair. The

Fed is saying but as we know they've

always said look they're data dependent.

Ironically, now it's state dependent war

dependent. Um, how long this goes and

again we have no idea. President Trump

has indicated we may be nearing an end.

Um, whether that comes to fruition or

not, we will see.

>> Terms of the currency behavior, I'm

looking at a euro at a buck 14, a yen

that's just shy of 160 against the

greenback. What are the currency crosses

that you're looking at most closely

>> uh against currency crosses? So, you

know, obviously if you want to take

dollar out of the equation, which a lot

of traders try to because you're

basically just if you train dollar,

you're heavily just trading headlines at

the moment. Um, so ones that certainly

popular are the Aussie crosses. The

Aussie given the RBA sentiment of you

know, hish sentiment. So any Aussie

cross, certainly Aussie Kiwi has been a

very popular cross that's being traded

relatively heavily. I say relatively

because Aussie dollar Aussie dollar

versus the greenback uh was quite

heavily traded because it's a bit more

liquid. But obviously Kiwis's been a

popular one and that's been just going

higher and higher. So that's a popular

trade. Um outside of that you I think

you're looking at want to keep an eye on

certainly with SMB today is Euro Swiss

Frank it's sort of it has picked up from

a a bottom but I think the question is

you know with SMB Swiss National Bank

today is you know they don't like this

the strong Swiss Frank they said that

several times you know how much you know

how I don't want to say hish because I

don't think they're going to raise rates

obviously but how much they push back

against you know on this Swiss Frank

strength I think that's going to be

interesting so that's Another cost I'd

keep an eye on.

>> David, we'll leave it there. It's always

a pleasure. Thank you so very much.

Bloomberg strategist David Finery

joining us from Singapore here on the

Daybreak Asia podcast.

Thanks for listening to today's episode

of the Bloomberg Daybreak Asia Edition

podcast. Each weekday, we look at the

stories shaping markets, finance, and

geopolitics in the Asia-Pacific. You can

find us on Apple, Spotify, the Bloomberg

Podcast YouTube channel, or anywhere

else you listen. Join us again tomorrow

for insight on the market moves from

Hong Kong to Singapore and Australia.

I'm Doug Krer and this is Bloomberg.