Plans B To Z

Last year, Trump announced his reciprocal tariffs on April 2, not April 1, to ensure they weren’t taken for a joke. This year, he couldn’t care less. While he delivered his rambling 19-minute monologue on Wednesday evening – his time – the world spent all of yesterday parsing it, for clues to the likely trajectory of Iran war. It needn’t have bothered. We still don’t know what Trump wants. Suddenly, Iran’s uranium is buried “so far underground” that it isn’t a red flag anymore. Regardless, Trump might bomb the country “back to Stone Age”. Will he put boots on the ground? No idea. All told, he might pack up and leave in 2-3 weeks. Or not.

After all the ups and downs of the past month, the lesson for India, Europe, Gulf states, markets, and everyone else, is clear: in Trump we can’t trust. He’ll do what he wants, on the spur of the moment. We can hope for the best, but must prepare for the worst. What’s the best? That war stopped and Hormuz Strait reopened, to all ships, while you slept last night. That didn’t happen. Second best is that war stops soon. But that’s up to Israel more than US. Omens on Kalshi, America’s top prediction market – and currently a better barometer of geopolitics than the prez – aren’t good either.

Yesterday, 71% of bets were on Hormuz reopening only by Jan 1 next year, not June or July this year. This, despite UK’s ongoing efforts to explore “diplomatic and political measures” to unlock the Strait, along with more than 30 other countries.

If this war lasts even six months, economies will suffer everywhere. India’s fast-growing economy needs all the oil it can get, currently around 5mn barrels per day. A dollar’s increase on crude adds $5mn a day in costs, and at current prices, crude’s about $40 costlier than it was in Feb. That’s a drag on transport, manufacturing, and agriculture – not only as diesel for tractors, but also fertilisers. Oil is a key input for plastic, manmade fibres, thousands of different chemicals. So is gas, half of which India gets from the Gulf.

India has managed its fuel supplies well through the first month of war, but at some point retail fuel prices could rise, leading to inflation. Prices of jet fuel for international flights have already doubled. Sea freight rates have also risen by 40%, making exports and imports costlier. While some things are beyond India’s control, diversifying oil and gas sources, and resuming Russian oil purchases, have been smart moves. We need more of them, anticipating the worst.

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