Mm-hmm.

Um, from two months to seven years old, I lived in Guyana.

I was raised by my grandmother and my uncles and grew up around my cousins and was just so, just fully enmeshed in that beautiful culture.

It is my culture.

You know, besides that, both sides of my family are Guyanese, so, like, there's nowhere to go.

[laughs] But yeah, I just had the incredible privilege of, um, being raised there, um, and also just being loved on by, you know, the folks around me, and just the diversity of Guyana in and of itself.

From the food to, you know, the foliage, the experience of just growing up there, um, really informed me a lot, and I feel like it was something that I, I held close and cherished and it gave me a sense of self when I came back here to the US at seven.

Mm-hmm.

And just talk a little bit, Karen, put that in the broader context of what we are seeing in the Red Sea, how this conflict seems to be widening and is or is at risk of escalating, uh, that would be affecting, uh, Saudi concerns with their energy infrastructure.

Yeah.

Well, thanks, Jason.

Um, Saudi Arabia is absolutely now being squeezed from both sides, from the Bab el-Mandeb and from the Strait of Hormuz.

And they're...

You know, these are really two different kinds of threats.

So the traffic that's going through Strait of Hormuz is, uh, threatened by the Iranians and limited kind of transit availability.

The BRICS countries are coming together and saying, "Maybe we can find a way out of this."

Uh, what have companies been doing to find ways around this?

this?That's right.

So normal traffic through the Strait of Hormuz before February 28th was, uh, you know, as much as 130, you know, vessels per day.

Not all of those are those VLCCs, those very large, um, containers of, uh, that mostly traffic crude but also refined products.

So we found some workarounds for crude.

We have two pipelines, one that goes through Saudi Arabia, the East-West pipeline, and the other that goes through the United Arab Emirates, um, and comes out at Fujairah.

So those pipelines have been really important for a diversion of a substantial amount of, of, of crude oil.

And have these pipelines for crude been able to keep, uh, oil prices, uh, perhaps not spiking as high as was initially feared at the beginning of the conflict?

[laughs]

Very interestingly, and I think one of the biggest desires within the entire, like, you know, consumer psychological map or whatever is belonging, right? Um, if you can solve belonging, uh, you've gotten a very, you know, you've, you've gotten a good part of the way there.

And belonging in that case was like, I think a lot of people felt weird.

I felt weird because my skin is, you know, melanated, and I was just like, "Well, how come you don't have razor burn?" You know? And I was just like, "Well, how...

Well, so nobody's talking to me about razor burn," you know, and they're selling me, like, these, like, you know, five, six, 10-blade razors, and I'm like, "I cannot take a Mack truck to my legs.

Like, that just doesn't work for me, so let me talk to the folks who are in that same category as me, who belong to that, like, sensitive skin, melanated skin, you know, that is experiencing this, and let me see if there's interest there."

Yes.

They performed like body products, you know? Um, and I put all of the- the things and the ways and the ingredients and the formulation and the attention to detail, all that stuff that I learned at Lauder.

Should be clean, right?

The problem is with that one is that some oil-producing countries include some oil-derived products in non-oil GDP growth.

Yes, which is that it only tracks goods.

So things like tourism or the financial services industry, more of the service sector side.

So that's, um, you know...

It's, it's not just about what you export.

Why is Iran doing this?

That is, uh, the question, Daniel.

I mean, is the motive to, um, really demonstrate the political and coercive control over the strait and to be able to set into place a system that could last for decades? We're talking about a tolling system or a fee system, um, or simply the, the power of intimidation of the neighbors.

Um, and this extends, of course, uh, you know, across the Gulf, but also to the Levant.

And so we've got a parallel process really happening inside of Lebanon right now, which is very important, where, um, Iranian-supported group Hezbollah, um, i- is really at the center of, you know, internal Lebanese, um, discussions of, of who will be in tr- in control and have military, um, power in, in that territory.

Um, and it of course then brings in the issue of Israel.

Israel was not a party to the MoU, um, and this has been one of the sticking points.

H- how do you see the trajectory of this?

Karen Young is a senior fellow at the Middle East Institute.

The biggest challenge now, I think, is for the PIF and the government to communicate clearly what its spending and investment priorities are, and they're doing that, and there's a bit of a, a concentration now on projects that are gonna be more closely aligned with industrial policy, with logistics, um, still looking forward in the tourism.

But of course, we've seen some of the more vanity projects, the gigaprojects being scaled back.

I don't think that's problematic from a society point of view, but it needs to be communicated clearly.

Young what impact this war could have on the Saudi economy.

This could be a prolonged period of threats to exports, both in terms of traffic of the Strait of Hormuz, but also, like, an unresolved conflict with Iran, where Iran may decide at any point to threaten its neighbors either directly or indirectly.

So I, I think we do have to prepare for a perhaps extended period of instability, unresolved sort of warm or lukewarm conflict within the region.

So, so that makes it hard for everybody.

How do you sort of think about those sort of areas and the areas that, yes, their affordabilities may be stretched, but they've just got like even the pockets just got such a lifestyle X factor that will always attract an extra level of buyer?

Yeah, definitely.

So there's sort of different pockets around.

There's sort of the newer housing.

There's quite a bunch of areas where there's had newer housing throughout.

So you've got areas like Caloundra South, Aura type region.

You've got Patino, which went through a big stretch when the hospital was built there.

How's that helped you?

Uh, does that mean that in, in your view, uh, they are likely to then start charging? And if they do, this would be a, a toll, which is not really common, is it?

No, it's not common, and this would be a real departure and send a signal to other choke points, uh, certainly maritime ones, and give other countries this sort of opportunity to, um, uh, to hold, uh, global trade really in, in, uh, in a, uh, around the neck, so to speak.

Um, so yeah, the, the terms of the MOU are that 60 days are free of tolls.

Iran is already setting up this Persian Gulf administration.

Um, and, you know, the idea is that ships that are trying to exit need to register or signal to Iran their intentions to move.

Now, that administrative capacity could, in the future, become one which also has a cost applied.

What that cost might be, we don't know.

There's all kinds of ways in which this choke point becomes less of a choke point.

Do you think there is a level of action if Israel does something around Hezbollah or Lebanon or Beirut that Iran would overlook? Or will the slightest provocation sort of rip up the MOU?

Well, it's been sort of understood that Beirut was the red line.

And what we've just heard moments ago in statements from the Supreme Leader and then a call from President Trump that we need to respect the ceasefire, basically a warning to Israel, It's not clear.

I mean, Iran has a lot of leverage here.

And so the threat to walk away even over the weekend of, you know, starting formal negotiations within this 60 day window.

It's a point of leverage that they have.

And so it puts pressure on President Trump to try to rein in Israel.

When you look at what happens after this, where does this play out for the relationships among these countries along and around the Persian Gulf and the Red Sea?

Um, are energy markets premature in projecting a normalization in flows? What will this MOU actually do? How will vessel traffic be managed if shipping lanes are still choked by mines? What are we to make about Iran insisting that management of the strait is up to it and the Omanis, but Oman is distancing itself from Iranian proclamations? Will Saudi and the UAE be willing to coordinate vessel traffic with the IRGC? I, I have many more questions, but I'd love to hear how you are looking at what you think is actually going to happen here.

So as you say, Daniel, with the caveat that we haven't actually seen the text of the MOU, we're recording on Tuesday morning.

But still, no matter what the MOU says, my expectation is that no, there is no normalization or return to pre-February 28th traffic patterns.

Now, we could see, you know, some return of volumes, and the pipelines are, you know, have been really essential in, in helping that.

Um, and if Iran gets a 60-day window of, you know, pump and, uh, transit as much as you can, um, you know, that's gonna be important in terms of, uh, you know, getting more oil on the market.

And there's these, you know, uh, as much as or maybe more than 80 million barrels sitting in tankers, you know, ready to go.

So, and the market's probably saying, "Look, more oil is coming.

So h- how is this changing Gulf States' perception, uh, of, you know, h- how, how they're going to manage things in this region and of the value of the US security alliance?

And how much of that is under your control? How much of it can you really sort of relinquish back and take control of? And how much is at the whim of these big behemoths?

So the question is always how much does it make sense to keep control? So, for example, automated bidding in Google has been around, I want to say, seven, eight years, a long time.

And it makes absolutely no sense on virtually all campaigns to bid manually anymore.

You know, you can't, as a human being, change your bid multiple times a second, and the AI can, right? So certain things are just...

sort of not not sensible anymore to do um however would i let google write my ad copy would i let google um decide on my audience to target would i let google expand my keywords that i'm prepared to bid on no generally no because particularly if you're selling something quite niche if you're a consultant in a very niche area of business and you know very clearly who your audience is it really doesn't make any sense to let the algorithms try and guess that from your website.

We can still control most things in Google.

We can control... more or less the keywords that your ads show for.

So was there a specific moment in your journey that made you decide that that needed to exist?

Why the surge this week?

Well, they're probably going to keep going up as well, right? So the surge is happening probably because we're getting into this, you know, nine weeks of the crisis.

We've drawn down now of all the supplies that, you know, were headed to market have arrived.

Now we're dipping into inventories.

And so there's a realization that there are, you know, there are shortages, particularly of refined products.

And what was first impacted, particularly in Southeast Asia, is now equally affecting the United States.

So as a proportion of price increase, gasoline has risen about 37% in Southeast Asia, about 42% in the United States.

... or a day in the future, how long does it take to recover from that? What would we see, how long, and given the mines in the strait?

Why now? Was the war in Iran the last straw?

straw?No, I think actually this timing is probably the least disruptive because this doesn't change volumes that are going out tomorrow.

The UAE can't increase its production and get to market any faster because the Strait of Hormuz is blocked.

Uh, and they're at capacity for the oil that's flowing through the pipeline through Fujairah.

Um, so it doesn't change anything from a, from a market and supply perspective.

But yes, it's true.

Within OPEC, the UAE had the most stringent quota based on, you know, what it had capacity to produce, and its quota was much smaller.

How do you look at that right now in terms of where global oil supplies are?

Beyond this deficit, as you put it, of, of oil and jet fuel, what's your timeline for when consumers in the US and Europe will feel the impact on things like grocery prices and consumer goods?

goods?Well, we're already feeling it, but the, the geographic impacts, you know, it has been varied.

And we've already seen really sharp contractions in Asia and East Asia, and particularly o- in countries that don't have large stockpiles or governments that don't have the financing to subsidize the increased price of fuels.

Um, those countries are experiencing basically shortages and, uh, and efforts to control demand.

So telling people not to go to work, not to drive on certain days, um, to basically diminish their energy demand.

Um, that's not happened in Europe or North America or South America yet.

Um, but the way that we're going to experience this, of course, is first in our transit prices of, of gasoline, refined products.

Does this crisis accelerate any permanent shifts in global energy supply chains? Or in your view, once the strait reopens, whenever that is, everything sort of snaps back to the way it was?

She says hydrocarbon revenue absolutely matters to all of the Gulf States, but they are not affected equally.

There's a real difference right now in terms of the ability to generate that revenue.

For Bahrain, Kuwait, um, very, very tough scenario, not ability to generate any revenues right now.

We have shut-ins in Kuwait, and they are not exporting oil.

They do not have access to a pipeline to divert from the Strait of Hormuz.

But Karen, who spent many years in the UAE, says she doesn't think that this is a long-term trend.

People who come there are looking for the reliability of government provision of services and for also the dream of the lifestyle.

I don't think the, the kind of underlying attraction is really gonna change.

Karen, so first of all, tell us, where do things stand right now? Um, it does seem like the markets are assuming that this will all resolve itself, 'cause the price of oil isn't actually that high given what's happening.

The price of oil isn't as high as we might expect it to be.

That's exactly right, and there's also a lot of difference between the futures market and what's being sold sort of ready to go barrels or the spot market.

Um, and I think there's some wishful thinking of, uh, you know, the, the ability to encourage, you know, more transit of barrels through the Strait of Hormuz.

That's obviously not resolved.

And so since the beginning of this crisis, we've thought about sort of two variables.

One is the duration of the conflict and the duration of, um, the impediment to transit, um, and the damage to oil and gas infrastructure in the region.

Yeah, yeah

What would escalation mean for the energy architecture, an energy architecture that at this hour is still so very dependent on the Strait of Hormuz?

Hormuz?Well, I mean, I think Mehran was, was actually talking about the difference between the GCC states, their exposure, um, and the, the hits they've already experienced.

So Qatar has had this very, um, you know, severe attack on its LNG export abilities, the attack on Ras Laffan, Kuwait, Iraq, not getting any oil out of the Strait of Hormuz.

But the UAE and Saudi Arabia have these pipelines.

And so where we see potential escalation is that if we see attacks on, uh, real production sites and the energy conduits that get oil out away from the strait, um, into the Indian Ocean, into the Red Sea corridor, that would be an escalatory point where I do think we would see reactions and an entry of the war from Saudi Arabia and the UAE.

This is a major disruption to energy markets.

That's absolutely true.

What happens, though, if it remains throttled or endangered for much longer? A- and I note that you pointed out w- what is the real problem here is if the actual infrastructure is damaged.

So can you just help us understand how this shock is being felt within the Gulf? And is it similar across all the GCC states or are there specific Gulf countries that are feeling the pain more acutely?

Well, thank you, Adi, and just fabulous to be with this panel.

Respect all of your work so much.

Yeah, I mean, the point is well taken.

The GCC states as a unit are not feeling this pain the same way, and they have different capacities, certainly in continuing the ability to earn revenue from oil exports because of pipelines.

So that's the first kind of differentiating factor.

Many people have seen the Goldman Sachs estimate that came out last week, which was basically looking at an end of hostilities by the beginning of May and a gradual resumption of flows through the Strait of Hormuz would mean that we would see on a yearly basis a contraction of GDP in places like Qatar and Kuwait of about 14% in the UAE of about 5% and 3% in Saudi.

So I wonder if you can sort of piggyback on what Megan was talking about in terms of what the Gulf might be expecting from the U.S. And then in turn, can the U.S. still kind of look to the Gulf as a key to the AI race as well?

What possible ramifications could what we've seen in Israel, Iran and with the United States have on Saudi Arabia and the Gulf states?

So the economic transformation that's happening in Saudi Arabia really since Mohammed bin Salman and his father King Salman came to power in 2015 has been this idea of Vision 2030, of opening up the economy, trying to increase foreign direct investment, encouraging women's participation in the economy, and opening up new sectors, particularly tourism, as well as new energy, renewables, perhaps green hydrogen, a whole lot of sports investment, entertainment.

None of those things work if we see a region where there are ballistic missiles falling from the sky.

So, the missiles that Iran sent into Doha to hit the Al Udeid base as a retaliation against the United States, I think for the entire Gulf Cooperation Council, was a moment of real terror and fear, even though it was pre-communicated and was not targeting the Qataris themselves, it's just not something that goes along with having the World Cup or having major tourist destinations.

That will sit in people's memories for a long time.

If, in fact, there is that turmoil and it's not clear who's in charge for some protracted period of time, what does that mean for the region?

I think that's the worst-case scenario for the region, particularly if we get rival military factions or break-offs from the IRGC, competing commanders, so to speak.

We're definitely not there yet.

Is that your read of the situation? And what's the likelihood of that?

Yeah, the sort of intra-GCC Iran relationship is in a very different place than it was six years ago.

It's remarkable the amount of diplomacy, of rapprochement, of basically, you know, from a U.S. perspective, this is something that the American government has wanted for the Gulf states to take more responsibility and interest in their own security and in their own regional kind of relationship, or as Obama said, to share the region.

So that is happening.

But there's a certain cost to that.

And I think the cost is that there is not necessarily increased trust with Iran or of leadership, particularly within the Revolutionary Guards, but there is an effort to at least engage.

And My fear is that that engagement will include some sort of payoffs for security and willingness to trade in the activities that happen in other countries.

How much progress is the region actually making in that effort?