This BBC podcast is supported by ads outside the UK. It's time to see what you can accomplish with Shopify by your side. Available now on the documentary from the BBC World Service. It's 18 months since a canopy collapsed at a railway station in one of Serbia's largest cities, killing 16. It sparked some of the country's biggest protests for decades. I'm Jill McGivering and I've been finding out what's happened to that explosion of grief and anger. Listen now by searching for the documentary. wherever you get your BBC podcasts. Guns fire in the Gulf and the world's oil supply hangs in the balance. 80% of the world's energy is transported by sea. Very few people understand this. There's a misleading notion that there's a giant red switch that as soon as the strait is declared open, you can flip that switch and then shipping volumes immediately go back up. It's World Business Report from the BBC World Service. I'm Sam Fenwick. The US and Iran are trading fire in the Strait of Hormuz, even as Washington insists the ceasefire holds. Coming up, why the price of oil on your screen may be hiding the real cost of this crisis. And what happens to your fuel bills if this drags into next year? so the u.s secretary of state marco rubio says america is now engaged in a defensive rather than an offensive operation in its conflict in iran um as it tries to get merchant vessels moving through the strait of humoz mr rubio says many countries have asked the u.s publicly and privately to help free their ships. Here he is speaking about Project Freedom to reopen the strait, two ships. He says it has a peaceful objective. This is not an offensive operation. This is a defensive operation. And what that means is very simple. There's no shooting unless we're shot at first. OK, we're not attacking them. But if they're attacking us or they're attacking a ship, you need to respond to that. So his comments come after the defence secretary, Pete Hegseth, said that the ceasefire was not over despite exchange of fire with Iran over the strait on Monday. The United Arab Emirates says that it has come under attack from Iranian drones and missiles. Well, let's get the latest from our correspondent Bernd de Busman. He joins us from the White House. Mr Rubio then saying that this is a defensive operation now, But the UAE says that it's being hit for a second day. Do you think that this ceasefire is still meaningful in any sense? Well, I think today the administration went to really significant lengths to make the point that they see the ongoing fighting that we've seen in the last day and today as little more than harassment. That's the term that the chairman of the Joint Chiefs of Staff, General Dan Cain, used earlier today. They very much would like to see and are signaling that this conflict has moved into a new phase. They said they expected there to be some kind of some hiccups when they announced their Project Freedom to open up the Strait of Hormuz. But as far as they're concerned, they don't see this as a violation of the ceasefire. And there seems to be very little appetite for a return to large scale combat operations. I think part of that is they want to make clear that this Project Freedom is about returning the global economy back to a sense of normality, but also signaling to people here in the U.S. domestically that they're doing what they can to bring down those petrol prices that have caused so much concern. And they're also framing this as a humanitarian mission for the 22,000 or so sailors and captains that are stuck in the Persian Gulf. I think the administration is very keenly aware that this war was never particularly popular with many Americans from the outset. And a return to the conflict that would perhaps further drive up petrol prices at the pump would be increasingly unpopular in the long run. Ben, just briefly, do we get a sense of what the Iranians might be thinking about this operation? Well, the Iranians have been quite steadfast today in that they see this operation as a violation of the ceasefire and that they'll do what they can to maintain some semblance of control over the Strait of Hormuz. That, I think, is where the danger for the administration lies. They've made clear that while they're not going to go on the attack in any sense, If they get the sense that Iranian vessels are somehow disrupting Project Freedom or trying to shut the Strait of Hormuz even further, they're very prepared to engage, which we saw yesterday when U.S. helicopter gunships destroyed seven small Iranian attack boats they believed were posing a threat to shipping in the area. Thank you very much. That was the BBC's Bernda Busman talking to us there from the White House. It sounded a little bit windy, didn't it? Well, that is the political position. Here's the economic reality. The strait has been closed for more than two months. Oil has been trading at over $113 a barrel today. And the SNP Global warns that it could take seven months to restore production once it reopens, with the supply crisis stretching into 2027. So what does it look like from the deck of one of those tankers? Dr. Nikola Sackos is the founder and CEO of 10 Limited. It's one of the world's largest independent tanker operators. He has some vessels trapped inside the strait right now and others are trying to collect their cargo from ports that aren't affected. 80% of the world's energy is transported by sea. Very few people understand this. Under normal circumstances, 99.99%, it's uneventful. But now, the safety of the crew, the safety of the asset, the safety of the cargo was the first thing in our minds to make sure that everybody was well. Last week, actually on Friday, I allowed the vessel to go to Syria, which is not exactly the most peaceful part of the world, but it's less excitable and exciting right now than anything south of that. The trucks actually drove 12 hours to Syria to bring the oil that came into the ship So actually we didn load the trucks but the trucks unloaded their cargo into our ship So I think this is something completely new. So it shows the efforts of the shipping industry to try to find alternative ways to move energy. But then ultimately, do we have to pay at the end of the day as consumers? as people filling up our tanks of petrol or trying to fly to Greece on holiday, for example, in the summer? If the crisis lasts more than six months, I think, yes, it will affect inflation to the pump and to all costs. What I believe right now, this is just a short-term effect that does not have a long-lasting effect on inflation. But I said if we see this thing lasting after the summer, I think then it will be a significant part of inflation on the energy side. And how long does it take for everything in the shipping sector that you've talked about to kind of straighten itself out? If we had a magic stick and everything became friendly and peaceful tomorrow, I think we would need a full quarter to get everybody back to normal, move the ships out. and still don't forget we have damaged refineries, we have damaged oil producing areas, which will take much longer to repair. That was Nicholas Sackos there. He's the CEO of 10 and he's coming up with ways to move his ships around. But for tens of thousands of crew members on vessels that can't move around at all, the situation is becoming really desperate. Around 20,000 seafarers are believed to be stranded in and around the strait. Sasha Meyer is the General Secretary of Natulus. It's an international trade union representing seafarers all over the world. And she says it's a very stressful time for her members. Many of our members have been on board of ships for 10 weeks now. And it's really taking a toll in terms of stress and anxiety. And especially on a day like today, main anxiety over the weeks has been, when will the ship sail again? And when are we going to get home? Our members have not chosen a military career. They've chosen a civil career at sea. The men and women are robust people. If not, they wouldn't have chosen these careers. So they don't get stressed so easily. Some tell us they were getting bored by still doing their watch six hours a day, still doing the maintenance of the vessel, but not sailing. Some seafarers tell us that they have lovely teams on board, crew on board, that they improvised swimming pool, that they became fanatical fishers and they barbecued the fish they caught. But it doesn't take away the stress that a ceasefire can change any moment. We woke up with this morning that the situation is very near to turning into war again. So the human cost is clear, But there's a puzzle at the heart of this crisis that's baffling even seasoned market traders. Analysts have been expecting oil to be trading much higher than it has been. So why, isn't it? Let's talk now to Saad Rahim. He's the chief economist at Trafigura. It's one of the world's largest physical commodity traders. And he says the price you see in the news isn't really the price of oil at all. The price that you're quoting is the price of Brent oil as quoted through something like Bloomberg or Reuters or some other financial reporting mechanism. In effect, it is more of a financial construct than a physical one. That price represents something that you can trade like a stock or a bond, but it doesn't actually really give you the physical barrel of oil. In a sense, there's a gap between the Brent on the screen, as we would say, versus what we would call dated Brent. that differential normally trades at a fairly low spread, so a few cents up to maybe a dollar or two. But it has at this point traded as high as $20. But that's even before we get to things like insurance, freight, location premium, you know, different qualities. So what sort of figures are we looking at? So if you look at diesel, for example, and again, this is an on the screen price, that is trading above $200 a barrel already. And if I look at jet, it's trading at almost $220 a barrel, really in relation to Europe. So in places like Asia, for example, those prices are going to be higher. And I liken it to, for example, if you were to buy a gold ETF and thinking that you actually own physical gold bars as a result. One is really a financial construct, one is an actual physical reality. And these two things right now are very disconnected. Why do those financial markets not take those things into account? I think they're starting to, but I think for them, again, if they're saying, look, we're not specialists in the oil market, we're specialists in equities or fixed income or something else, they're going to say, look, that's outside my area of expertise. So I'm just looking at the price that our community would look at. And to be fair, that paper market is actually many, many times larger than the physical market. It's 18 to 20 times as large. So oil producers, for example, will use the paper market to hedge forward production. But that's a future barrel. It has nothing to do with a physical barrel that is available today. Similarly, if you're a macro fund and your main focus is interest rates or currencies, you might use oil futures as a way to hedge yourself. And again, that has nothing to do with you don't actually want to own a physical barrel of oil. You just want to express the financial construct around it. Now, a lot of people might hear this and think, OK, fine. when the Strait of Hummus reopens, everything will go back to normal. Is that right or is that wrong? I mean, I think the hope is that eventually it does, but I think there is a misleading notion that in a sense that there is a giant red switch on a wall somewhere that as soon as the Strait is declared open, you can flip that switch and then shipping volumes immediately go back up to 100% of what they were. Many of these storage tents in the Middle East have been burned out now, as a result of attacks and things like that. So normalisation, we think, is going to be measured more in months than it is in days or weeks. That was Saad Rahim, chief economist at Trafigura. George Convoy was listening to that. He's chairman of Brighton Securities at Rochester. Saad Rahim then says that Wall Street is often looking at the wrong price when it comes to oil. Is he right about that? Well, he's right about that. But Wall Street almost doesn't care, Sam. Wall Street doesn't trade based on yesterday or today. Wall Street trades on tomorrow. And traders are looking at the Straits of Hormuz may be closed now or restricted, but they won't be forever. And that's where they're trading. So they're trading on the futures market, which Saj was also kind of mentioning there, wasn't he? Right. It's exactly true. I mean, the idea is, yes, we know oil prices, energy prices are high today. Yes, we know they won't come back down tomorrow. But I think there's an expectation that world trade will not allow the Straits of Hormuz to be closed indefinitely, just like they haven for the last 50 years where we had this troublesome Iranian regime So that where traders are looking They looking at tomorrow not at today So if we talking about inflation then and Mr Sackos was talking about that probably, you know, if it carried on after the summer, he thinks that it will probably start to play into inflation. If we're looking at the futures market of oil buying, when might it start to impact inflation, do you think? It's probably about a 90-day lag as far as that goes. But again, I got to tell you, I don't think traders are terribly worried about that or investors are terribly worried because we're seeing pricing power in U.S. companies as we look at the quarterly earnings, meaning investors know inflation is out there or lurking and consumers do. and it allows companies to raise prices and that's baked into earnings. So it's a good scenario. Okay, George, thanks for explaining that. We'll come and talk to you again in just a moment. Starting a business can be overwhelming. You're juggling multiple roles, designer, marketer, logistics manager, all while bringing your vision to life. Shopify helps millions of business sell online. Build fast with templates and AI descriptions and photos, inventory and shipping. Sign up for your one euro per month trial and start selling today at shopify.nl. That's shopify.nl. It's time to see what you can accomplish with Shopify by your side. Available now on the documentary from the BBC World Service. It's 18 months since a canopy collapsed at a railway station in one of Serbia's largest cities, killing 16. It sparked some of the country's biggest protests for decades. I'm Jill McGivering and I've been finding out what's happened to that explosion of grief and anger. Listen now by searching for the documentary wherever you get your BBC podcasts. This is World Business Report from the BBC World Service with me, Sam Fenwick. The Musk versus Altman trial is into its second week in Oakland, California. On Tuesday, it was OpenAI President Greg Brockman's turn in the witness box with his personal journey entries used against him in court. At stake, whether Elon Musk can force a company now valued at over $850 billion to give up its profits and revert back to a charity. Lily Jamali, the BBC's North America technology correspondent, joins us now. She's been with us for the past few days, haven't you, while the case has been heard. Are you outside court again, Lily? I am indeed. So Greg Brockman in the witness box today. What was he like? Well, he's a little bit more subdued than he has been in days past because, you know, yesterday he was under questioning by Musk's lawyers. So today he was being questioned by OpenAI's lawyers. So the tenor was quite different. You know, primarily what he was trying to get across was how things actually went down, that Elon Musk was actually well aware of plans to shift OpenAI to be a more traditional for-profit business, that Musk even supported that path. But the issue, and this was really teased out today, was that Musk wanted control of the company. The other co-founders, including Brockman, weren't comfortable with that. And Brockman talked about a meeting in 2017 where this was conveyed to Elon Musk. Musk grew visibly angry at learning this. And Brockman actually said at one point today, quote, I actually thought he was going to hit me. So it was quite dramatic testimony. It must be quite surprising, really, to be in court because you've got all of these sort of, I mean, they're sort of like tech bro celebs, aren't they? All standing in front of you giving evidence. You do. You do have that. And I have been at events with these people over, you know, more than the last decade. I first came across Elon Musk about 11, 12 years ago at some of Tesla's events. But he was a very different figure back then. He has become much more political now. So he's not as accessible as he used to be. Sam Altman is still hustling, still trying to, you know, take his company, take his company public. So he's a little bit more, you know, available to the media. But, you know, seeing their personal diary entries from someone like Greg Brockman, that's embarrassing. It's very personal to him. And then having their texts and other emails shared. I think, you know, that's pretty it's a very rare glimpse into how these people communicate with one another. And Sam Altman hasn't testified yet. When does he take the stand? Probably towards the end of next week. We haven't gotten a date set just yet, but there's a lot to come. Siobhan Zilis, who is the mother of four of Elon Musk's children, a former OpenAI board member, she is going to be up tomorrow. So we're going to be paying very close attention there. OK, so it's going to go on for a good while yet. That's right. We've got probably another two to three weeks here. OK, Lily Jamali, BBC tech reporter. Thank you very much for joining us today. Well, staying with tech, AMD has become one of the biggest players in the AI boom. It's the world's second largest computer chip maker after NVIDIA. Its chips power the data centres that run artificial intelligence and demand has been extraordinary. The company's share price has surged nearly 60% this year. And today we got an idea of how well they're doing because they've released their quarterly earnings. George Conboy from Brighton Securities has been keeping an eye on what's been happening there. George, the numbers, revenue guidance for the next quarter of $11.2 billion, well ahead of what Wall Street expected. How good is all of this? Really super, Sam. The most recent quarter over last year, top line up 38% and the operating income up 83%. And as good as AMD is, we're seeing it across the sector. So it's really supercharged, these chip stocks. We often talk about chip stocks, don't we, and AI and how, you know, people are suggesting that it could be a bubble. It just keeps going and going, though, doesn't it? Yeah, it probably is a bubble. There's a bubble in there somewhere because not every chip stock is going to triple, quadruple, quintuple its earnings every six months. And so at some point, some of them are bound to hit a little bit of a struggle. But AMD was up and Micron technology way up today, about 15 percent. Intel shares jumped as well, nearly about 13 percent, didn't they? Oh, super. They've just about doubled in a fairly short period of time, Intel. And there's big demand there. It's going to continue. But like any game of musical chairs, you never know when that music's going to stop. So we just need to keep an eye on it don we George We need to keep both eyes on it Sam Let keep both eyes on it George Convoy there thank you so much for joining us as ever on World Business Report Well, here's a question for you. When did you last walk past a Gap store? You might not have even noticed it, but there was a time when Gap was the coolest place on the high street. The store that made white T-shirts and carcicinos, the perfect pair of jeans, a uniform for a generation. It was built by two people, Don and Doris Fisher, and it started, as all the best ideas often do, with a moment of frustration. Don couldn't find a pair of jeans that fit, so they opened a store. That was San Francisco in 1969. Doris came up with the name Gap, a nod to a generation gap for the young shoppers they wanted to reach. Well, Doris died on Saturday, aged 94. From that one store, they built a business with three and a half thousand outlets worldwide, $15 billion in annual sales and brands that you'll still know today, Banana Republic and Old Navy. Here's what Gap sounded like in the 70s. We've got one tonne of Levi's just for girls at the Gap now falling to the Gap. It's the latest, greatest selection in the world at the Gap now falling to the Gap. Catherine Shuttleworth is one of the UK's leading retail marketing experts. Catherine Doris Fisher there and The Gap. How big a figure was she? Oh, huge, Sam. Absolutely huge. I mean, this was an unbelievably successful business, a husband and wife business. And she was the merchandiser in the business. So that meant she was responsible for the way things looked, the way things appeared. And importantly for Gap as well, the sort of ethical approach they took to producing goods and how they looked after their staff. So, I mean, without Doris, the business would never have been as successful as it was. And when we look back and you talk about the scale of it, I mean, 3,500 stores across the world, nobody has that anymore, do they? They certainly don't. It's all online, isn't it? Yeah, absolutely. So she was a huge, huge figure and a life well lived, I think. And they essentially sort of invented a template, don't you think? Kind of affordable, aspirational, democratic fashion that everybody wanted to wear. It didn't matter if you were walking down the street and someone else had a Gap sweatshirt on. Exactly. And I think probably a lot of younger people would think, well, haven't retailers always been like that? Not at all. I mean, it didn't used to be democratic at all. A lot of clothing shops were quite snooty. Things were behind counters. And they brought this whole thing to life and brought it into the modern day. And famously, I think it was about 1985, Michael J. Fox, in one of the Back to the Future films, wore a Gap t-shirt and that was kind of the peak of it and then you know in when it was 100th edition of Vogue the supermodels were on the front looking amazing but they were all in white Gap shirts and white Gap shorts it was of the moment you know the brand that everybody in the world was talking about no matter where you lived a real success an amazing size business really. And was the was it copied was that kind of supply chain the way that they merchandised Did it kind of become a prototype for other retailers? Yeah, I think so. And when we look at global brands today, maybe American Eagle, Inditex, that have the Zara brand as one of their brands, certainly I think they've looked at Gap and seen how they could work across the world and create products that could be sold in lots of different markets with, as you say, the supply chain behind them that actually can deliver that. So I think it was certainly a prototype for a lot of the retail businesses that we've seen that followed. What I sometimes don't understand with some of these retail brands is that they have brands within. I mean, you mentioned Inditex, it's got Zara, it's got Pull&Bear. Gap has Banana Republic and Old Navy. And it always makes me think that are they trying to cannibalise their own consumers, their own customer base? No, I think what they try and do is they try and offer different brands for different kinds of shoppers. I mean, the other business that Gap have got is Athletica, which is a more athleisure sort of business that they opened in the 90s, just as that whole athleisure boom started. Around the pandemic. Yeah, exactly. And that was something the gap didn't have. And so they've gone into that market, and that's quite a successful business for them. So diversification and staying at the top of things and staying in line with the consumer is really critical. And it's quite interesting about the gap because the gap kind of went off the boil a bit. But right now, they're super hot again because a whole new generation of TikTokers have started a Gap craze where they're looking to buy what they call, it's called the blue and white label. So they look for these vintage items because, of course, it's super cool again. Friends is cool. So, you know, people who... Nostalgia, Catherine, isn't it? It comes back. It comes back and these things come around and they kind of want to live that life again. And so for Gap, it's got another wind, if you like. Because it did lose its way, didn't it? Gap as the brand lost its way. a lot of stores in the UK did close. They did. And, you know, they had a real point, I think, when fast fashion became a really big thing. People started to wear different things. And it was a time where they did lose their way a little bit. The last couple of years, they've appointed a new CEO and a new team. They've just done a massive new collaboration with Victoria Beckham, which is giving them good news. They've had Zach Pozen in as their creative director. And I think they've sort of found their groove again. And that's important for fashion businesses, that they can do that, to get people to fall in love with them. But all the way through, Doris was there. The family is still very involved in the business. And a female entrepreneur building a global business in the late 60s, early 70s. How unusual is that? Does she get the credit, do you think? Well, maybe not. I think a lot of people wouldn't know the names behind the gap in that way. I think they're quite private versus some other people. But, you know, here's a woman that went to Stanford University and did an economics degree. You know, was born in the 1930s. I mean, that was very unusual to be able to do that. And then she was clearly a lot of the brains behind that organisation. And perhaps today we should remember just, you know, what a formidable woman she was and what great success she made of that business for the husband. Catherine Shuttleworth, thank you so much for joining us today on World Business Report and filling us in on the history of Gap. That's all for this edition of World Business Report. Thanks for listening. And don't forget, you can always catch us on our podcast. Search for World Business Report. Available now on the documentary from the BBC World Service. It's 18 months since a canopy collapsed at a railway station in one of Serbia's largest cities, killing 16. It sparked some of the country's biggest protests for decades. I'm Jill McGivering and I've been finding out what's happened to that explosion of grief and anger. Listen now by searching for The Documentary wherever you get your BBC podcasts.
