Good morning from the Financial Times.
Today is Monday, March 9th, and this is your FT News Briefing.
Iran names its new supreme leader, and global oil prices rocket past $100 a barrel.
Plus, worries are mounting about the Iran war's impact on food supplies.
We'll see the amount of food that is produced dropping, and that's a really big problem.
We could really see this contributing to hunger.
I'm Victoria Craig, and here's the news you need to start your day.
Iran's senior clergy have picked Moshtaba Khamenei as the country's next supreme leader.
He is the second son of Ayatollah Ali Khamenei, who ruled Iran for nearly four decades and was killed in US and Israeli airstrikes last Saturday.
The Assembly of Experts is the body responsible for the appointment.
It said, a majority of members voted for Khamenei in the early hours of Monday to become the third leader of the Islamic Republic.
Khamenei is largely unknown to many Iranians, but he had backing of regime loyalists and had been a leading candidate to replace his father.
Khamenei's appointment is seen as an act of defiance against U.S.
President Donald Trump, who last week called him a, quote, lightweight.
It's also viewed as a signal that the Islamic Republic will maintain its hardline policies toward the US, Israel and the West.
Global oil prices surged as much as 20 in early Monday trade, topping 110 a barrel, as the Middle East's largest producers curb their output while the war in Iran continues.
It's the first time both the Brent and West Texas benchmarks have hit triple digits in nearly four years.
Goldman Sachs predicts oil could continue rising and exceed its 2008 peak above 140 if energy shipments do not resume through the Strait of Hormuz.
That waterway moves a fifth of the world's oil supplies.
Last week, Qatar's energy minister told the FT that disruption could quote.
Indeed, the biggest economy is already grappling with the impact of more expensive oil, which has pushed prices at US fuel pumps higher.
The cost to fill up a car is at its highest level since the summer of 2024.
So, as the war enters its second week, what does all of this mean for the Federal Reserve, which plays a key role in keeping the US economy on an even keel?
Claire Jones is our U.S. economics editor, and she joins me now to dive into all of this.
Hi, Claire.
Hi, Victoria.
So just how big of a risk is it that the surge in energy prices could cause a fresh round of inflation here in America?
So the usual kind of central banker logic on oil price shocks is that they have a short-lived effect.
And even though prices at the pump have shot up a lot, the sense is that you know in a few months they could be back down below levels they were before the conflict with Iran began.
However, the longer the conflict goes on, the less certainty central bankers are going to have at following that message, especially in a scenario such as the Fed's, in where inflation is above their 2 target.
It's been above that target for five years now.
And there's a big risk that if gas prices remain high, US consumers, US businesses are going to think that inflation is going to remain high too.
And that's going to make the Fed's job very tricky indeed.
So for the U.S., as you mentioned, it's not just inflation from the war that's an issue.
We got data on Friday that showed that the labor market contracted last month.
So how is all of that also going to play into the conversation about what to do next with interest rates in the US?
?
It just really adds to the challenge that central bankers are under.
You know you've got a labour market that is really slowing down from where it was in the years that followed the pandemic, when it was a pretty strong labour market.
Now the Fed's in a scenario where, if oil prices remain where they are and the labor market carries on weakening, that's a very, very tough place for US rate setters to find themselves in.
What about other global central banks?
I'm thinking particularly of the ECB, which has to manage many European economies that are vulnerable to these energy price swings.
How are they likely to deal with this shock?
So the big advantage the US has is that it's a net energy exporter.
So over time, if prices remain high, there will be some sort of lift to energy producers in the US.
That's not the case in Europe.
The risk to European central bankers is far more acute than it is to ones in the US.
And A lot of people have thought that the European economy is so exposed to this that we could even see interest rate rises by the European Central Bank this year.
The sense that we got from comments by ECB Executive Board Member Isabel Schnabel on Friday was that that is not on the cards yet.
But there is a sense in which Europe is a lot more exposed to this shock than the US.
Claire, I'm just thinking back to Russia's invasion of Ukraine in 2022.
And I remember global central banks couched that risk as a transitory one to inflation.
Is there a risk that with this war there's a similar expectation that the economic risk is not that great?
But central banks could be caught on their back foot this time around as well.
I think that's the fear.
I mean, at the moment, it does look like it's going to be a transitory shock still.
But the fact that central bankers got it wrong in 2022 and that the inflationary shock endured far more than they initially expected, I think will be on rate setters' minds.
And they'll really not want to make the same mistake twice because they're.
The credibility hit from that would be very, very damaging indeed.
And that would make it a lot more difficult to get inflation down if there's not that trust in the central bank to be able to control price pressures.
Claire Jones is our US economics editor.
Thanks so much for your time, Claire.
Thanks, Victoria.
Business owners in the Gulf have been flooding insurers with requests for coverage against political violence and terrorism.
Brokers say customers are trying to limit their exposure to the escalating conflict in the region.
That might include everything from debris from intercepted missiles to protests and even revolutions.
Solar energy projects in Saudi Arabia, hotels in Bahrain and Qatar and Western businesses with operations in the Gulf are among those seeking cover.
Brokers say before the war some businesses already had insurance against terrorism, but now they're telling clients to buy full coverage, which includes strikes riots, civil commotion as well as state-backed violence.
Before conflict broke out.
Such coverage for an energy project in Saudi Arabia or the UAE might have cost less than 1 percent of the insured value.
Brokers said.
But as of late last week, that price rose to as much as five times that level.
The conflict in Iran could cause a global food shock worse than when Russia's invasion of Ukraine in 2022 sent prices to record highs.
That's because this war is disrupting fertilizer production and exports in the Middle East.
That could cause a cascade of problems for food producers in many parts of the world.
Susanna Savage is the FT's commodities correspondent.
She joins me now to talk about what's happening and how countries are preparing.
Hi, Susanna.
Hi there.
So let's start with fertilizer because that seems to be at the heart of this problem.
How important is the Middle East to that production?
So the Middle East is one of the world's largest fertilizer producers.
It's one of the regions that's most important for fertilizer production.
And also the Strait of Hormuz is probably one of the most crucial shipping routes for exports of fertilizer in the world.
So about 35% of global urea exports pass through the Strait of Hormuz.
Now, urea is a type of fertilizer, but what really matters is that it's the most widely used nitrogen fertilizer.
And nitrogen fertilizer actually underpins around half of global food production.
So this is incredibly important for us having enough food to eat.
So if farmers around the world are not able to get this fertilizer supply, as you say, that could hit food production.
Where will this be most acutely felt?
So I think it will be really acutely felt in Europe, in Asia and also in Africa, especially as in the Northern Hemisphere.
Farmers are just about to plant, they're just about to put seeds in the ground, and they would normally use fertiliser at this time.
So the application for fertiliser should be happening in the near future.
And so the fact that prices are going to shoot up or they've already shot up is a really big problem.
And further down the line.
If this continues and farmers can't get fertilizer, then it's not just a question of prices, but also in poorer countries they might just not apply it at all.
They might not be able to get hold of it.
And so this isn't just a problem of input into food being more expensive and therefore food becoming more expensive, but we could see yields of crops decline and there being less food.
And there are some similarities on this issue between this conflict and Russia's invasion of Ukraine.
Time of year and the disruption to planting seasons is one, but you report that this war could have even more severe impacts on global food prices.
Why?
Yeah, so in 2022, when Russia first invaded Ukraine... that sent food prices soaring.
And this was partly because Ukraine was one of the world's grain baskets.
And so as soon as that grain couldn't get out, grain prices shot up.
Whereas with the Middle East, it's really important for fertilizer.
So that's one step further back.
So it takes a for growing the grain, if you like.
So it's the fertiliser that can't get through.
So then, farmers in other parts of the world can't grow as much grain, or it costs them more to grow not just grain, but everything.
And then that pushes up the price.
So everywhere in the world that uses fertiliser, and particularly that uses fertiliser that comes either from production in the they're going to have to pay more for fertilizer or they're not going to be able to get hold of enough fertilizer.
And so that's going to massively impact how expensive it is to produce food and also the amount of food that can be produced.
Are there regions of the world that are more exposed to this problem?
So, yeah, definitely there are some countries that will be more exposed.
As we saw last time, African countries or poorer countries in other parts of the world.
If there's going to be a bidding war to get fertilizer, if there's not enough supply, then they are less able to win that bidding war.
And then we'll see the amount of food that is produced dropping.
And that's a really big problem.
We could really see this contributing to hunger, according to some of the analysts I've spoken to.
And is there any way for these countries to really prepare for this disruption?
I mean that's really difficult because We've seen fertilizer prices rise already for various reasons over the last few months or so, or a bit longer.
And so in a lot of cases, no one was stockpiling ahead of this.
People were sort of getting just enough to cover what they needed.
And so I think the world isn't really prepared for this.
You know, there were signs that this might happen, but it was to some degree unexpected.
So no, I don't think there's been any preparation really.
Potentially far-reaching impacts then for countries around the world.
Susanna Savage is the FT's commodities correspondent.
Thanks so much for your time, Susanna.
Thank you.
You can read more of our ongoing coverage of the Iran war and all of the stories in today's podcast for free when you click the links in our show notes.
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