Mark Filipino hosts this Financial Times news briefing covering the escalating Iran conflict and its global economic impact. Key contributors include Charles Clover, the FT's defense and security correspondent, Anastasia Stogni covering Russia, and Monday host Victoria Craig discussing central bank implications.

The discussion centers on a two-week-old conflict involving U.S. and Israeli strikes on Iran, which has closed the Strait of Hormuz and disrupted global oil markets. The conversation explores military strategy, economic consequences for Gulf states and Russia, and upcoming central bank responses to energy price volatility.

Iran Conflict Disrupts Global Oil Markets

Gulf oil producers lost $15 billion in revenues with the Strait of Hormuz closed, trapping millions of barrels of crude and causing at least 18 ship attacks in two weeks.

Brent crude prices exceeded $100 per barrel while equity markets declined, with the S&P 500 down 1.5% and Stoxx Europe 600 down 0.5%.

Government bond yields reached conflict highs, with 10-year US Treasury and UK gilt yields hitting their highest levels since the war began.

Iran's Strategy and Military Capabilities

Iran's new supreme leader Mustabah Khamani made his first statement calling for continued Strait of Hormuz closure and warned of targeting U.S. military bases.

"Iran wants to establish deterrence. So it wants the U.S. to bear some pain for its decision to go to war" - Charles, explaining Iran's motivation to continue fighting despite U.S. desires for a short conflict.

The U.S. conducted over 5,000 strikes destroying targetable military assets, but Iran's underground missile stockpiles may remain largely intact and operational.

"Even if they fire one missile a day and it gets through, they can actually respond and be a threat to the U.S." - Charles, on Iran's continued capability.

Russia Benefits from Oil Price Surge

Russia earns $150 million daily in extra budget revenues as oil prices rose and Russian crude trades near Brent levels instead of at traditional discounts.

Moscow increased physical oil sales to China and India while benefiting from reduced U.S. pressure to stop Russian oil purchases during the Middle East crisis.

Russia's budget deficit remains under 2% but is growing due to war spending against Ukraine and slowing economic growth reducing tax revenues.

"Russia needs this to go on for at least a couple of months in order for this situation to reverse the public finances erosion" - Anastasia, on duration requirements.

Central Bank Response to Energy Price Shock

Four major central banks meet next week (U.S., Europe, Bank of England, Bank of Japan) with oil surge reshaping inflation expectations.

U.S. markets now expect only one rate cut this year, down from two cuts forecasted before the war began, with cuts pushed past November midterm elections.

ECB expected to raise rates by at least 0.25% before year-end, reversing Christine Lagarde's February signal about potential near-term rate cuts.

Key uncertainty is whether central bankers will treat energy price increases as a one-time shock or sustained inflationary pressure requiring extended policy action.