I was um reading this morning a piece

that Muhammad Alien wrote for the FT

this week in which he warned that the

Iran war is a risk to the flow of Gulf

funds around the globe. How significant

an issue are you seeing that to be?

>> It is significant if you think about the

relationship between the Gulf and the

global economy. The Gulf economies

provide the world with three things. It

provides them with energy, oil and gas.

And we're seeing the impact of this in

terms of shortages in energy and u other

items that's feeding into higher

inflation. The second item is a trade

route. Straight of hormones is an

obvious one and it's making the

headlines now and the war is centered

around what's going to happen to the

Straight of Hormuz. But the third thing

is capital. Uh you know when Trump

visited the Gulf last year, he wanted

more oil and he wanted more capital.

Trillions of dollars of deals. Now where

does that capital come from? It comes

from the fact that these Gulf countries

sell um oil and gas have surpluses

reinvest them into the world and

reinvest them into text companies in the

US. it reinvests them into Egyptian land

into Turkish and British real estate uh

but also in the deepest market in the

world which is the US debt market. We've

written a book in Bloomberg economics

looking at the future of global interest

rates. We actually had a chapter on

petro dollars and how they're reinvested

in the US and that reinvestment helped

lower US interest rates over the past

few decades and the reversal of that the

fact that money is drying up will have

an impact on not just small and marginal

markets but even the deepest markets in

the world.

>> Yeah, I think that's so interesting and

such an important point, isn't it? all

of the companies that you think about

that have got stakes you know with uh in

terms of sovereign wealth funds out of

um those Gulf states it is massively

important

but in terms of the market reaction then

what is the view Christina the guard

suggesting that maybe markets are just

being a bit too optimistic in reaction

to what's happening in the Middle East

your take on it as an economist

>> I think a couple of weeks ago Marcus

looked like mispricing uh the war risk

premium we actually wrote about this

when oil was below 100. That didn't look

uh like a reasonable price. Not that oil

is between 100 and 110. It depends on

what's going to happen in terms of war.

It depends actually on three factors.

The war is already very hot, but there

is room for further escalation. If there

is, you know, ground troops, you know,

ground sort of uh uh confrontation

between Iran and the US. So that's the

first thing. The second thing, which is

very important, probably most important

of all, is the duration of the conflict.

Tomorrow it will be one month since the

war has started and it's been quite

significant had an impact on the world.

Can the global economy and financial

markets uh withstand another month or

two of war at this intensity? And the

third factor is the long-term damage if

and when the war ends. Will we be able

to resume the energy flows? Will we be

able to reopen the straight of hormones?

Will traffic there uh go back to normal

to the pre-war level? And I think

depending on your view of the these

three factors that shapes what basically

a lot of assets in financial markets

today.

>> I mean we we've been following energy

very closely here and we're already

starting to see that uh sort of ripple

through to some of um the fuel um prices

around emerging markets. I mean where do

you think could be some of the real hot

spots for for shortages in sort of say

cooking fuel, shipping fuel, jet fuel?

>> Right. With high oil prices and high

fuel prices, you have two choices.

either you pay up the higher sort of

price or if you can't afford it then you

face shortages. Um and basically the

richer you are the more you'll be able

to afford and that leaves emerging

markets in an exposed sort of u uh

setup. If you can't pay off for high

energy prices gone up significantly then

you have to have fa face shortages.

Household will face that and that might

lead to social and political unrest but

also businesses and companies and

manufacturers may face that. Um they may

that may lead to slower growth that may

lead to disruption to uh you know

manufacturing in these countries that

may lead to lower income and that could

feed back into basically the economic

the social the political uh

ramifications of the war which is now

not centered just in the Middle East but

the you know growing into different

pockets of the global economy um and the