Let's get to the big story.
Breakdown while the conflict in the Middle East sent shock waves through oil markets and also forcing a rewiring of global trade in the weeks since the US and Israel began their offensive in Iran, the Strait of Hormuz has essentially been choked off, sending global oil and gas markets into a frenzy.
Now while US energy executives may double down on fossil fuels, Chinese electro tech firms are surging as climate tech is showing resilience.
Well joining me to weigh in this morning is Brendan Ahern, CIO at Crane.
Brendan.
To have you here.
Thank you so much for joining me.
No, thank you for the opportunity.
Well, of course we're keeping an eye on this fragile truce in the Middle East between the US as well as Iran, and there are a lot of moving parts, and you've been spending a lot of time overseas.
So give us the lay of the land right now.
Yes, Asia is highly dependent upon the Strait of Hormuz for oil and LNG, in particular in terms of auto consumption, you know, energy used.
Think about countries like Particularly Japan and the Philippines, virtually all of their oil comes from the Middle East, South Korea, Taiwan, and Malaysia.
About 2/3 of their oil comes out of the Middle East.
And then the other interesting part is looking through the lens of electricity consumption that Singapore basically burns oil and LNG for all of their electricity consumption.
Thailand it's about 2/3, so Asian countries are really feeling the effects of this.
I mean Australia, you have diesel rationing.
The Philippines is going to run out of gasoline in about a month.
So we really believe that as this situation calms down, Chinese companies have the solution.
They really are the global leaders in clean technology, not just electric vehicles and hybrid, nuclear, which Malaysia is already exploring, hydro and of course solar and wind, and then battery technology.
So we really think the China clean technology space is really appealing to investors.
Countries, companies and individuals are going to look to try to protect themselves going forward.
Yes, and Brendan, you and I are here at the New York Stock Exchange in the Northeast in the US, so when we're talking about energy, you know, we might be focusing on the price of a regular gallon of gasoline, but when we're talking about other economies, we're hearing about potential state of emergencies when it comes to oil.
So I do want to zoom in on China, as you mentioned.
So what's actually happening when it comes to renewables as well as clean tech?
It's not just EVs.
China, like many rich country in terms of Oil has very significant reserves, so big countries like Japan, Korea, Taiwan, China, they're going to have significant revenues.
In the case of China, the oil inventories could be between 1 to 2 years on electricity, 50% of their electricity generation comes from renewables.
The other half is from domestic coal, which obviously is negative for the environment.
So they're very China is very well insulated now.
They're not.
I just obviously the global economy faces a headwind.
Oil and import, oil prices are global, so that makes inputs into, say, the China petrochemical industry, plastics, you know, oil goes into a lot of different things besides just your car.
So China is not immune to some of the implicit second derivative type knock-on effects.
That's explicitly they're pretty well protected. and Brendan, I do want to ask you about the macroeconomic cracks as well as factory risks and inflation because those things do play a part when we're talking about all economies, but in particular China with tariffs going on what is actually affecting their forecast?
I think I think one that I think you're seeing a little, little inflation in China could be a good thing that they've.
Facing this kind of deflationary spiral, China will be affected if the global economy slows.
That's that's, you know, they're the world's factories, so there's less customer demand at the same time, the only place you don't see Chinese EVs and hybrids is the United States.
I mean, you go any place in the world, they're all over and that's because they're great cars.
They're inexpensive and anyone who's filled up their car recently, you know, you're paying upwards in my for myself.
I paid $100 for my SUV.
One of my kids is going to turn 16.
I don't think she's going to get a car, but, but there's no way it's not a hybrid.
If it's not, there's just no way, and I don't think the way I'm thinking is unique to anyone else on the planet and China makes great cars.
They're exporting them, but even within China, only 12% of the cars in China today are EV or hybrid.
So just within China there's huge demand, and that's on top of the 16 million that they're producing and selling in China annually today.
And finally, Brendan.
I want to ask you about the diplomatic play here because of course it focuses on the Middle East, but when we're talking about the Strait of Hormuz and even the upcoming meeting taking place between the officials of the US and Iran and Islamabad, Pakistan this weekend, there are a lot of moving parts and things happening behind the scenes.
So when it comes to US and China in terms of diplomacy, what's realistic and do you think Trump and Xi Jinping will actually be meeting next month.
Yes, I mean, one, you know, China clearly, as President Trump mentioned that they played a role with Pakistan in finding this truce which hopefully holds.
China said that they that they had 26 phone calls with different participants, the US and Iran, so they clearly had a big role and yes, we're very constructive on.
President Trump is going to go to China next month.
He's not going there to shake Xi Jinping's hands.
He's he's there to announce deals like the big bosses, they want to say look what we did.
So we know there's been a lot of back channeling.
What I don't think the market is not consensus is like what are the things that China can buy from the US because let's be real, if it's India, Japan.
China, Taiwan, what do people in those countries want that we make?
It's Boeing airplanes, Nvidia chips, soybeans, oil, and LNG.
So I think what we anticipate is can they allow Chinese companies to come here and actually manufacture?
Can they partner and there's already talk about Ford partnering with BYD.
Yes, we anticipate.
A lot more deals like that could be announced as well as the kind of givens, you know, the soybean purchases, Boeing airplanes.
Yes, in less than 60 seconds.
So before I let you go, you mentioned manufacturing and that is something that we're watching across all industries and sectors, and we know that manufacturing takes time, especially when it comes to R&D.
So it's not like flipping a switch, is it?
Definitely not.
I mean, there are no art.
Majors in China.
Like what do they study for the last several decades?
They've been producing STEM graduates, science and technology, engineering, math.
So this is the fruition.
They're very good at manufacturing.
The US very good with tech and so we see them, can they bring that knowledge and know-how just as Taiwan is forcing TSMC to build this factory in Arizona.
This is what President Trump wants.
He wants man.
Manufacturing done here.
Who's the global leader in manufacturing?
China.
Why not allow them to come potentially make humanoid robots, solar, wind, you know, autos like why, why, why not?
Why not allow them?
And I really don't believe that's a market consensus view.
Well, Brandon, I did want to address robotics, but hopefully we'll have you back on very soon to address that as well.
So thank you so much for joining me today.
Thank you.
