This week marked a simultaneous signing in Versaille and Tehran that should have seen a collective sigh of relief across the world. The 14 point Memorandum of Understanding between the United States and Iran was signed by US President Donald Trump at the G7 summit in France as well as Masoud Pezeshkian, the Iranian President electronically. The backlash to the deal started soon after. On the face of it, Iran seems to have walked away with a much better deal.
A fund of $300 billion for reconstruction, easing of sanctions, frozen assets being released and an ability to sell its oil has allowed Iran to say that it got the upper hand. Even so, the Supreme Leader Mojtaba Khamenei distancing from the deal adds to the general unease over whether it will last. Meanwhile in the US, the political backlash started almost immediately.
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Tough questions on objectives like Iran regime change not being met are being asked. The biggest win seems to be the opening of the Strait of Hormuz and many argue that was exactly the case before the war. The fact, that a day after the deal, talks between the two sides in Switzerland got stalled underlines how flimsy the prospect of peace is.
In the Strait of Hormuz, ships have started moving, but it will be a while before traffic goes back to pre war levels. That has been reflected in the way Brent prices are moving. While oil has come off its highs, the uncertainty over supplies is reflected with Brent near the $80 mark.
Strait May Not Be Free, Nations Will Find Alternatives
The 14-point MOU says that Iran will ensure free passage through the Strait of Hormuz for 60 days. It is entirely possible that a mechanism of tolls is set up after this. There is barely an authority or a nation that gives up an income source once detected, no reason for Iran to do the same.
An interesting news story that caught my eye was a quote from the foreign minister of UAE, Thani Al Zeyoudi speaking about ‘zero Hormuz dependency’. The nation will double down on infrastructure spends to ensure that they don’t have to pass through the Strait of Hormuz at all. While nations in the region still face the threat of tensions flaring up, clearly the effort is to avoid a situation where oil flows are choked again. While one can’t choose their neighbors, one can definitely attempt not to cross paths with them!
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Accenture Casts A Long Shadow Over Indian IT Once Again
On the face of it, Accenture reduced guidance at the upper end by a mere 1% with the full-year forecast now at 3-4%. The fall out for Indian IT stocks was sharp and ugly. The fear of new business drying up has cast a long shadow on Indian IT companies once again. At it’s core, the worry is not really about the next few quarters but an existential threat itself.
Several commentators who told us the fear is overblown. That Indian IT companies are cash-rich, dividend yielding and available at the lowest valuations in recent memory. But when the narrative gets so negative, it is incumbent upon IT companies themselves to prove the naysayers wrong. This will likely take some time. If Indian IT companies do manage to pivot and survive, it will indeed be a sweet victory.
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On The Disruptors This Week
Some founders chase capital. Some chase control. That’s the story of Randeep Singh Kukreja, the founder of the now viral Boojee Cafe. Started in 2019 by then 25-year-old Kukreja, Boojee cafe began as a dream to build Bandra’s neighbourhood spot. Opening strategically next to Blue Tokai, the goal was to elevate cafe food beyond coffee. Six years later, Boojee has grown to six outlets, counts Bollywood regulars among its fans and crossed Rs 100+ crore revenue. Yet, despite investor interest, Kukreja remains bootstrapped and refuses external capital to protect the brand’s soul.