Oil hits $108 ahead of Iran’s meeting with Gulf states

Good morning from the Financial Times. Today is Friday, September 11th, and this is your FT news briefing. The global bond sell-off gets even worse, and Gulf countries are meeting with Iran to get oil moving in the Strait of Hormuz. Plus, can a block of developing nations rise to the occasion? There is absence of leadership on the global stage, so it's their moment, but can they seize it? I'm Sonya Hudson from ArcFilipino, and here's the news you need to start your day. US long-term borrowing costs surged yesterday to their highest level in nearly two decades. The route deepened in part thanks to higher oil prices. Crew jumped to $108 a barrel. Traders are losing hope that the US and Iran will end the war and restore oil shipping through the Strait of Hormuz. Elsewhere in the region, Iran backed Houthi rebels in Yemen have escalated attacks on Saudi Arabia's oil infrastructure. As this rattles markets, Gulf countries are set to meet with Tehran to discuss how to manage shipping through the Strait. Here to discuss the latest is the FT's Middle East Senator Andrew England. Hi Andrew. Hi. So, what do we know about these talks between Gulf nations and Iran? Yeah, for several weeks now, Iran and Iran have been holding bilateral talks on a temporary solution to managing shipping through the Strait of Hormuz. Now, essentially, they now want to get the buy-in, the endorsement of the Gulf states. So, then they can present it to the Trump administration and say, "Look, at least we've got an agreement on where ships should transit through the Strait, how they go in, how they come out, and then ultimately that could be used as part of any deal that the US and Iran reach and they would hope prevent any further flare-ups over control over the Strait." Now, these talks are coming as the Iran-backed Houthi rebels have been stepping up attacks on Saudi Arabia, like I mentioned, and that is part of the reason why oil jumped to over $100 a barrel. Why has it had such a big impact? Yeah, I think you've got two factors here. So, on the one hand, you've still got this escalatory cycle of tip for tax strikes between the US and Iran over the Strait of Hormuz, still not a free flow of oil or shipping, and then in tandem with that, you've seen an escalation by the Houthi rebels in Yemen. They fired missiles and drones at energy facilities in southern Saudi Arabia, and then the Houthis yesterday advanced further down Yemen's Red Sea coast, took the port of Mokka, and that essentially opens a gap for them to advance on the Babel Mandep Strait, and that's a key waterway for international shipping. It links essentially the Indian Ocean to the Red Sea to the Suez Canal, and if they do take the area around Babel Mandep, that would give the Houthis a greater ability to attack shipping through the Strait and disrupt other shipping going through the waterway. And we should say the Houthis attacking Saudi infrastructure and advancing on the Babel Mandep Strait is separate from the US-Aran War, but these two conflicts and their effects on oil shipping are putting a lot of strain on energy supplies. How much pressure are Gulf countries feeling to get things back to normal? So this situation is urgent for all the Gulf states. If they sat around the table and they agreed, at least on the temporary arrangement that the Iranians and the Amanias have been working on, it would show that the regional states at least are supporting what could be a solution further down the road to getting shipping somewhere back to where it was before the war. But the key thing, of course, is getting the US and Iran to go back to the negotiating table. Ultimately, you know, this war is only going to end when the US and Iran agree to end it. Andrew Angland is the F.T.'s Middle East editor. Virgin media O2's shareholders are targeting about 600 million pounds in cost cuts. The Telecom's group is heavily indebted and investors are getting worried. The company was rocked by a sell-off in its bonds over the summer. The group's debt sustainability came into question, because there's been an influx of competition from dozens of small fiber network operators. Virgin media O2 declined to comment. Leaders of the world's biggest emerging economies meet this weekend. They'll be coming together at the BRICS summit in New Delhi. The group which began as just four nations now includes more than 20 member and partner countries. It also encompasses almost half of the world's population. As the US steps back from global leadership, could this be BRICS moment to take center stage? Michael Stott is the F.T.'s South Asia bureau chief, and he joins me now to talk about it. Hi, Michael. Hi, Sonia. Let's start with the basics. Tell us about BRICS and what kind of position it's in heading into the summit. BRICS started off in 2001 as a collection of four countries which an investment bank predicted would become the leaders of the world economy in this century. That was China, India, Brazil, and Russia. Then over the intervening years, the groups expanded enormously. Economically, BRICS is more and more important. It's now 40 percent of the world's economy, if you use the PPP measure that economists favor. The tricky parts, whether this group had stopped too much politically and diplomatically, because it's a group with quite different agendas. You've got China, which is a one-party communist state, Russia, which is ruled by Vladimir Putin for the last 26 years. Then India and Brazil, which are vibrant democracies, are all shades in between among the other members. What is on the agenda for this BRICS summit? One of the slogans the Indians have been pushing is people-centric development by which they mean development to benefit the masses in these countries with huge populations, because of course, China and India have the world's two biggest populations. Their intention is try to see whether there are things they can do on economic development, cooperation in technical areas, and so on. China, which is unquestionably the big BRICS power, would like to push things further and take things in a more military and security dimension and add that onto the BRICS and make it more of a China-led body. That's something Brazil and India are resisting. No, Michael, as you mentioned, a lot of this meeting is about development and cooperation initiatives, but I want to talk about one thing that is not on the agenda, which is this idea that BRICS economies could challenge the dominance of the US dollar. It's kind of a pet topic for some BRICS leaders. How come? Well, China and Russia would love to talk more about this because they're very keen to dethrone the US dollar. But this is a very sensitive topic, politically, since Donald Trump last year weighed in just after the BRICS summit in Brazil. Threatening BRICS members with an extra 10% tariff because he said they were trying to attack the US dollar. That's led to BRICS leaders this time being much more cautious. They're talking instead about things like linking up their digital instant payment systems. Most of the BRICS countries have a digital payment system, which links banks and buyers and sellers nationally, and they're talking about plugging those in internationally, connecting them to each other, which is a sort of gentler version of this idea of greater use of national currencies. Are there any side conversations that you're going to be watching during the summit? Yes. I think the biggest one is the China-India relationship because that's what you might call the fault line at the heart of BRICS. India and China have very different agendas, their rivals for power in Asia, and relations between them have been testy for decades. So the fact that Xi Jinping will arrive on Saturday for the BRICS summit is enormously significant for India. They've managed to get the single most important leader of the BRICS here in Delhi, and will obviously be working on their bilateral relationship with China. What do you think these countries need to do to really take advantage of this moment when the U.S. is stepped back? So this is the big question. I mean, the stage should be set for BRICS. There is absence of leadership on the global stage. There's a feeling that the old world order from 1945 is ripe for renewal. So it's their moment. But can they seize it? Well, this depends a lot whether they can put some of their differences behind them and work constructively on areas like trade, economic development, reforming international institutions, and steer clear of some of the military and security topics that China and Russia are pushing, but which are very unpopular in other parts of the group. So that's something else we're going to be watching this weekend. Michael Stodd is the FT's South Asia bureau chief. Thanks, Michael. Thanks, Sonia. Before we go, we have a very exciting announcement. You may have heard this voice on the briefing over the past few years, most recently earlier this week. "I'm Josh Gabbardweil, and here's the news you need to start your day." Well, Josh will be joining the team as our regular Monday host starting next week. We are so happy to have him on board. You can read more on all these stories for free when you click the links in our show notes. This has been your daily FT News Briefing. Check back next week for the latest business news. The FT News Briefing is produced by Sophia Fmed, Katia Comkova, Josh Gabbardweion, and me, Sonia Hudson. Our show is mixed by Kelly Gary and Sam G. Avinco. We get help from Peter Barber, Michael Lello, David De Silva, and Gavin Coleman. Our executive producer is Toe for Foreheads. Flow Phillips is the FT's global head of audio, and our theme song is by Metaphore Music. [BLANK_AUDIO]