1 00:00:02,360 --> 00:00:06,720 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:11,640 --> 00:00:15,440 Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 3 00:00:15,480 --> 00:00:18,680 Speaker 2: with Lisa Bromwitz and Amrie Hordernt. Join us each day 4 00:00:18,720 --> 00:00:22,280 Speaker 2: for insight from the best in markets, economics, and geopolitics 5 00:00:22,400 --> 00:00:24,880 Speaker 2: from our global headquarters in New York City. We are 6 00:00:24,920 --> 00:00:27,680 Speaker 2: live on Bloomberg Television weekday mornings from six to nine 7 00:00:27,720 --> 00:00:31,280 Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or 8 00:00:31,320 --> 00:00:33,919 Speaker 2: anywhere else you listen, and as always on the Bloomberg 9 00:00:34,000 --> 00:00:37,440 Speaker 2: Terminal and the Bloomberg Business App. Dan Pickering of Pickering 10 00:00:37,520 --> 00:00:40,640 Speaker 2: Energy Partners writing, if the US just stops, then Iran 11 00:00:40,720 --> 00:00:43,920 Speaker 2: holds the keys to chaos by threatening future straight shutdowns. 12 00:00:43,960 --> 00:00:47,400 Speaker 2: This would create a perpetual risk premium on oil prices. 13 00:00:47,479 --> 00:00:49,840 Speaker 2: Dan joins us now for more, Dan, welcome to the program. 14 00:00:49,920 --> 00:00:51,680 Speaker 2: Let's build on that last line. It's important. Do you 15 00:00:51,680 --> 00:00:54,200 Speaker 2: think this is regime change for the price accrude. 16 00:00:56,120 --> 00:00:58,880 Speaker 3: It's certainly putting a lower floor in on crude. 17 00:00:58,960 --> 00:01:01,720 Speaker 4: And it really does depend, as and Maria is. 18 00:01:01,720 --> 00:01:03,800 Speaker 3: Saying, it depends on things that are very difficult to 19 00:01:03,920 --> 00:01:08,080 Speaker 3: understand and predict. And so if we end the war 20 00:01:08,160 --> 00:01:12,479 Speaker 3: in Iran, without some sort of definitive action that controls 21 00:01:12,520 --> 00:01:14,560 Speaker 3: the straits of horror moves, there's going to be a 22 00:01:14,640 --> 00:01:15,640 Speaker 3: higher price to crew. 23 00:01:16,080 --> 00:01:17,400 Speaker 4: Is it going to be triple digits? 24 00:01:17,440 --> 00:01:20,480 Speaker 3: Not necessarily, but it will certainly not go as long 25 00:01:20,520 --> 00:01:21,400 Speaker 3: as it's been recently. 26 00:01:21,480 --> 00:01:24,200 Speaker 2: And we've watched the domino's fall over the past two 27 00:01:24,240 --> 00:01:26,959 Speaker 2: weeks as the energy couldn't move through the straighter for 28 00:01:27,080 --> 00:01:29,840 Speaker 2: most production start at being come and now we're in 29 00:01:29,880 --> 00:01:33,160 Speaker 2: a different phase. They're finding workarounds. First there was the pipeline, 30 00:01:33,200 --> 00:01:35,240 Speaker 2: the East West pipeline in Saudi Arabia, and now there's 31 00:01:35,240 --> 00:01:37,360 Speaker 2: other workarounds too. What face are we in at the moment? 32 00:01:38,720 --> 00:01:43,720 Speaker 3: Yeah, as the market titans, everyone looks for alternatives. Sooner 33 00:01:43,840 --> 00:01:47,200 Speaker 3: or later, you can't tweak around the margin, and the 34 00:01:47,319 --> 00:01:51,720 Speaker 3: problem remains. Fifteen percent of global supply is offline. You 35 00:01:51,800 --> 00:01:55,680 Speaker 3: draw down inventories, you try to reroute pipelines, but that's 36 00:01:55,840 --> 00:01:59,680 Speaker 3: just too much oil to work around. And so at 37 00:01:59,680 --> 00:02:03,960 Speaker 3: some point point, and that point is is months, not quarters. 38 00:02:04,240 --> 00:02:07,800 Speaker 3: At some point price is going to have to solve 39 00:02:07,960 --> 00:02:11,639 Speaker 3: the supply demand equation, and that price isn't isn't where 40 00:02:11,639 --> 00:02:14,639 Speaker 3: we're at today with WTI near one hundred, it's going 41 00:02:14,680 --> 00:02:16,320 Speaker 3: to be twenty or thirty percent higher. 42 00:02:16,720 --> 00:02:17,560 Speaker 1: So what is. 43 00:02:17,440 --> 00:02:20,079 Speaker 5: The oil market right now pricing in given the fact 44 00:02:20,480 --> 00:02:23,320 Speaker 5: that there is a high likelihood that this conflict is 45 00:02:23,320 --> 00:02:25,000 Speaker 5: going to go on for at least another couple of weeks. 46 00:02:26,280 --> 00:02:28,919 Speaker 3: Yeah, I think in a couple of weeks, I stop 47 00:02:29,000 --> 00:02:31,400 Speaker 3: looking at the front month or the near term spot 48 00:02:31,440 --> 00:02:34,680 Speaker 3: prices because those are wildly volatile and move with newsflow. 49 00:02:35,000 --> 00:02:37,080 Speaker 3: I look out to the twenty twenty seven and twenty 50 00:02:37,120 --> 00:02:40,400 Speaker 3: twenty eight crude futures, which have moved from call it 51 00:02:40,560 --> 00:02:43,600 Speaker 3: sixty dollars a barrel WTI up into the sort of 52 00:02:43,720 --> 00:02:47,760 Speaker 3: high sixties, low seventies. That tells me that the market's decided. 53 00:02:47,760 --> 00:02:51,480 Speaker 3: There's five to ten dollars longer term premium that's coming 54 00:02:51,520 --> 00:02:55,520 Speaker 3: in because of potentially how this situation winds up. 55 00:02:55,760 --> 00:02:56,200 Speaker 1: There are two. 56 00:02:56,120 --> 00:02:58,320 Speaker 5: Schools of thought dan On one hand, some people say 57 00:02:58,360 --> 00:03:01,320 Speaker 5: there will be a longer, high, long term price simply 58 00:03:01,320 --> 00:03:03,960 Speaker 5: because it'll be hoarding and a premium on some of 59 00:03:04,000 --> 00:03:07,680 Speaker 5: these physical goods. Other people say that if the short 60 00:03:07,800 --> 00:03:11,959 Speaker 5: term situation of the short term conflict does get worse, 61 00:03:12,160 --> 00:03:14,760 Speaker 5: escalates and creates really high energy prices that actually on 62 00:03:14,840 --> 00:03:18,000 Speaker 5: drive prices down incredibly low on the back end of 63 00:03:18,080 --> 00:03:20,400 Speaker 5: this conflict. Where do you stand on that? 64 00:03:21,520 --> 00:03:25,760 Speaker 3: Yeah, the issue of the higher it goes, the more 65 00:03:25,800 --> 00:03:28,640 Speaker 3: demand destruction you have, the longer it takes to recover 66 00:03:28,680 --> 00:03:31,760 Speaker 3: from that. So the higher it goes potentially the lower 67 00:03:31,800 --> 00:03:36,000 Speaker 3: it falls. Where I stand on this is that it 68 00:03:36,080 --> 00:03:37,160 Speaker 3: is all about the duration. 69 00:03:37,320 --> 00:03:38,960 Speaker 4: If the straits are closed for six. 70 00:03:38,840 --> 00:03:41,360 Speaker 3: Months, we're going to have one hundred and twenty five 71 00:03:41,400 --> 00:03:44,320 Speaker 3: dollars oil for quite a period of time. We're going 72 00:03:44,360 --> 00:03:47,640 Speaker 3: to have economic issues, probably a recession. If we solve 73 00:03:47,680 --> 00:03:50,360 Speaker 3: this in the next couple of weeks, we probably come 74 00:03:50,400 --> 00:03:53,400 Speaker 3: back down to the seventies, Gasoline prices come back down 75 00:03:53,440 --> 00:03:56,000 Speaker 3: to reasonable levels, and we're sort of back to a 76 00:03:56,040 --> 00:03:59,040 Speaker 3: new normal where gasoline and oil are a little bit 77 00:03:59,080 --> 00:04:01,920 Speaker 3: more expensive, but not dramatically more expensive. 78 00:04:02,200 --> 00:04:04,680 Speaker 6: Dan, what's the gap right now between the physical market 79 00:04:04,720 --> 00:04:06,920 Speaker 6: and the futures market, Because I'm looking at Oman and 80 00:04:07,040 --> 00:04:10,280 Speaker 6: Dubai crude and they're fifty five sixty dollars higher than 81 00:04:10,280 --> 00:04:11,280 Speaker 6: we're brent Is trading. 82 00:04:12,640 --> 00:04:16,479 Speaker 3: Yeah, if you have to own the physical barrels, you 83 00:04:16,520 --> 00:04:19,680 Speaker 3: are paying a significant premium over the financial markets to 84 00:04:19,680 --> 00:04:22,039 Speaker 3: get them. I think the financial markets ten times bigger 85 00:04:22,040 --> 00:04:25,080 Speaker 3: than the physical markets. So financial markets pricing where you 86 00:04:25,080 --> 00:04:27,440 Speaker 3: can trade paper barrels, if you are trying to get 87 00:04:27,480 --> 00:04:31,279 Speaker 3: a barrel in the Middle East, you're paying more. Same 88 00:04:31,320 --> 00:04:34,520 Speaker 3: story with jet fuel and other products. So there are 89 00:04:34,600 --> 00:04:38,960 Speaker 3: signs of physical supply tightness that is not being reflected 90 00:04:39,320 --> 00:04:43,560 Speaker 3: in the financial markets. That has happened historically as well, 91 00:04:43,680 --> 00:04:46,240 Speaker 3: so it's not unusual, but it does say that the 92 00:04:46,279 --> 00:04:47,599 Speaker 3: physical market quite tight. 93 00:04:47,960 --> 00:04:52,160 Speaker 6: If we have a prolonged shut or the Iranians continue 94 00:04:52,160 --> 00:04:54,800 Speaker 6: to control and not allow most vessels to go through 95 00:04:54,800 --> 00:04:57,320 Speaker 6: the Strait of Hormuz for a prolonged period of time, 96 00:04:57,440 --> 00:05:01,080 Speaker 6: well the physical market or the future market rather catch 97 00:05:01,160 --> 00:05:02,400 Speaker 6: up to the physical market. 98 00:05:03,279 --> 00:05:06,760 Speaker 3: It'll certainly, it'll certainly drag the financial markets higher. You're 99 00:05:07,520 --> 00:05:13,360 Speaker 3: right now, you're pricing out demand in isolated instances with 100 00:05:13,400 --> 00:05:15,279 Speaker 3: that one hundred and fifty dollars crew in the Middle East, 101 00:05:15,279 --> 00:05:15,719 Speaker 3: for instance. 102 00:05:15,800 --> 00:05:17,839 Speaker 4: On the physical market. 103 00:05:17,760 --> 00:05:19,840 Speaker 3: The financial market's going to move up to the same 104 00:05:19,880 --> 00:05:24,279 Speaker 3: spot and pull basically prices worldwide that direction. And if 105 00:05:24,320 --> 00:05:26,880 Speaker 3: that happens, then we will start to see, you know, 106 00:05:27,040 --> 00:05:30,760 Speaker 3: we will price out the five, ten, fifteen million barrels 107 00:05:30,800 --> 00:05:33,440 Speaker 3: a day that we are not able to get through 108 00:05:33,480 --> 00:05:34,000 Speaker 3: the straits. 109 00:05:34,240 --> 00:05:36,840 Speaker 2: Then what would happen if Iron turned around and said 110 00:05:37,040 --> 00:05:40,520 Speaker 2: any vessel with a Chinese flag on top can come through, 111 00:05:40,839 --> 00:05:42,919 Speaker 2: no problem with that changes things materially. 112 00:05:44,320 --> 00:05:46,280 Speaker 3: I think what we'd see is we'd see a lot 113 00:05:46,279 --> 00:05:49,240 Speaker 3: of Chinese flag vessels moving through the Straits, and I 114 00:05:49,279 --> 00:05:52,200 Speaker 3: mean the market suffision will move quickly to have China 115 00:05:52,240 --> 00:05:54,880 Speaker 3: be the source of shipping through the Straits. 116 00:05:54,880 --> 00:05:57,159 Speaker 4: But I do think we'd see near term prices drop. 117 00:05:57,440 --> 00:06:00,719 Speaker 3: And I'm a believer that when this conflict in regardless 118 00:06:00,720 --> 00:06:03,440 Speaker 3: of how it ends, near term prices come down. 119 00:06:03,279 --> 00:06:04,839 Speaker 4: Because more oil will flow. 120 00:06:05,279 --> 00:06:12,599 Speaker 3: So, whether it's Chinese tankers, a US flotilla, protection, regime change, etc. 121 00:06:13,080 --> 00:06:16,600 Speaker 3: However it ends, prices come down, more oil through the straits, 122 00:06:16,839 --> 00:06:17,640 Speaker 3: prices come down. 123 00:06:17,720 --> 00:06:19,600 Speaker 4: The question is come down to what. 124 00:06:20,040 --> 00:06:21,600 Speaker 2: Well, Dan, this is what I'm trying to work out though, 125 00:06:21,600 --> 00:06:24,240 Speaker 2: where's the pressure point and who holds the case. And 126 00:06:24,360 --> 00:06:26,200 Speaker 2: ultimately it feels like the pressure point is going to 127 00:06:26,200 --> 00:06:27,839 Speaker 2: be in China. It's not going to be here in 128 00:06:27,880 --> 00:06:30,080 Speaker 2: the United States. And they hold the case they can 129 00:06:30,080 --> 00:06:32,119 Speaker 2: get the Iranians to come around. Now, am I reading 130 00:06:32,120 --> 00:06:34,120 Speaker 2: it wrong or other people reading it wrong? Isra path 131 00:06:34,160 --> 00:06:35,560 Speaker 2: there to reopen things. 132 00:06:37,160 --> 00:06:40,080 Speaker 3: Yeah, so China and India both approached to Iran and said, 133 00:06:40,160 --> 00:06:44,839 Speaker 3: let us take tankers through the straits. That's another gambit 134 00:06:45,040 --> 00:06:48,000 Speaker 3: in the strategy. The question is how long does that 135 00:06:48,120 --> 00:06:50,000 Speaker 3: last or does the US allow that? 136 00:06:50,200 --> 00:06:50,880 Speaker 4: Ultimately? 137 00:06:52,200 --> 00:06:56,440 Speaker 3: Are you going to feel comfortable with Iran in charge 138 00:06:56,440 --> 00:06:59,000 Speaker 3: of the straits and allowing some vessels to come. 139 00:06:58,800 --> 00:06:59,839 Speaker 4: Through but not all? 140 00:07:00,400 --> 00:07:03,640 Speaker 3: Do we wind up with this uncertainty premium that creeps 141 00:07:03,680 --> 00:07:06,440 Speaker 3: into the market even if barrels do start to flow 142 00:07:06,480 --> 00:07:06,880 Speaker 3: to Asia. 143 00:07:07,600 --> 00:07:11,120 Speaker 2: Stay with us. More Bloomberg Surveillance coming up after this. 144 00:07:20,240 --> 00:07:20,880 Speaker 1: It's the latest. 145 00:07:20,880 --> 00:07:23,360 Speaker 2: This morning, the Federal Reserve said to deliver a rate 146 00:07:23,440 --> 00:07:26,400 Speaker 2: decision and new set of projections while facing triple digit 147 00:07:26,440 --> 00:07:29,480 Speaker 2: crude prices. Neil Data of Rnmack writing, we're on track 148 00:07:29,560 --> 00:07:32,559 Speaker 2: for three poor core inflation prints in a row ahead 149 00:07:32,600 --> 00:07:34,960 Speaker 2: of a shock to oil markets. I think it's more 150 00:07:35,160 --> 00:07:38,560 Speaker 2: likely that a cut is are raised altogether. Neil joins 151 00:07:38,600 --> 00:07:40,640 Speaker 2: us Now for more, Neil welcome, was looking forward to this, 152 00:07:40,840 --> 00:07:42,840 Speaker 2: So let's go from the top two pm Eastern time 153 00:07:42,880 --> 00:07:43,680 Speaker 2: projections drop. 154 00:07:43,880 --> 00:07:44,560 Speaker 1: What changes? 155 00:07:45,360 --> 00:07:47,040 Speaker 7: Well, I mean, I don't think that the feder will 156 00:07:47,080 --> 00:07:49,080 Speaker 7: be as dubbish as they have been if you judge 157 00:07:49,080 --> 00:07:51,800 Speaker 7: it based on the summary of economic projections. I mean, 158 00:07:51,800 --> 00:07:53,760 Speaker 7: if you just think about this in terms of mark 159 00:07:53,800 --> 00:07:58,040 Speaker 7: to market and you're a forecaster, it's more obvious that 160 00:07:58,080 --> 00:08:01,480 Speaker 7: they need to revise up their core forecast. I mean 161 00:08:01,600 --> 00:08:06,440 Speaker 7: core PCE is basically tracking above three percent as of 162 00:08:06,480 --> 00:08:08,480 Speaker 7: this meeting, and they expect it to go to two 163 00:08:08,480 --> 00:08:10,280 Speaker 7: and a half percent by the end of the year. 164 00:08:10,760 --> 00:08:14,400 Speaker 7: In order to hit that bogie, you basically need core 165 00:08:14,400 --> 00:08:18,120 Speaker 7: inflation prints I think around two tenths of a percent 166 00:08:18,200 --> 00:08:20,600 Speaker 7: for the rest of the year. That's a pretty pretty 167 00:08:20,640 --> 00:08:23,240 Speaker 7: tall order all things considered. I mean, we haven't even 168 00:08:23,280 --> 00:08:27,480 Speaker 7: seen the flow through of energy into core inflation, and 169 00:08:27,520 --> 00:08:29,160 Speaker 7: some of that will bleed it. Not a lot, but 170 00:08:29,200 --> 00:08:33,880 Speaker 7: that's going to happen. And so you know, if you're 171 00:08:33,920 --> 00:08:36,200 Speaker 7: looking at this objectively, I think you just have to 172 00:08:36,240 --> 00:08:39,840 Speaker 7: say it's much more likely that they'll be revising up 173 00:08:39,880 --> 00:08:43,000 Speaker 7: core PC inflation. It could be as much as three 174 00:08:43,080 --> 00:08:50,480 Speaker 7: tenths then revising up the unemployment rate estimate, which basically 175 00:08:50,480 --> 00:08:53,720 Speaker 7: stays at four point four percent. So you put that 176 00:08:53,800 --> 00:08:57,960 Speaker 7: into a simple tailor rule model, John, and you know, 177 00:08:58,000 --> 00:09:01,160 Speaker 7: I think thirty basis points higher on CORNFLA. That's probably 178 00:09:01,200 --> 00:09:03,600 Speaker 7: good for enough of them to take a rate cut 179 00:09:03,640 --> 00:09:04,240 Speaker 7: off the table. 180 00:09:04,360 --> 00:09:06,400 Speaker 5: No, you've been pounding the table about the labor market 181 00:09:06,440 --> 00:09:08,880 Speaker 5: and saying that it is much weaker than people are 182 00:09:08,920 --> 00:09:11,680 Speaker 5: currently giving it credit for, or lacking the credit of. 183 00:09:11,960 --> 00:09:14,079 Speaker 5: I'm just wondering, what do you think the consequence of 184 00:09:14,120 --> 00:09:17,280 Speaker 5: a FED remaining on hold is for the economy. 185 00:09:18,040 --> 00:09:18,840 Speaker 4: Well, it's not good. 186 00:09:18,960 --> 00:09:19,520 Speaker 1: It's not good. 187 00:09:19,559 --> 00:09:23,200 Speaker 7: I mean, it reinforces the downside risk of the job market. 188 00:09:24,160 --> 00:09:26,520 Speaker 7: You know, ultimately, if the unemployment rate is going up 189 00:09:27,240 --> 00:09:31,040 Speaker 7: and the FED isn't easing and you know, providing some 190 00:09:31,120 --> 00:09:33,520 Speaker 7: kind of shock absorber to that, it just reinforces the 191 00:09:33,600 --> 00:09:35,280 Speaker 7: upside risk to the unemployment rate. 192 00:09:35,880 --> 00:09:38,679 Speaker 5: Do you think that it increases chance of recession this year, 193 00:09:38,720 --> 00:09:40,880 Speaker 5: which ultimately no one is really pricing in. 194 00:09:41,600 --> 00:09:43,480 Speaker 7: Yeah, I mean I think that the risk of recession 195 00:09:43,559 --> 00:09:45,800 Speaker 7: is higher than the markets believe. Of course, I've said 196 00:09:45,800 --> 00:09:48,920 Speaker 7: that for some time now. But you know, look, at 197 00:09:48,960 --> 00:09:51,120 Speaker 7: the end of the day, the economy is not in 198 00:09:51,160 --> 00:09:53,840 Speaker 7: the same place it was in twenty twenty two, which 199 00:09:53,880 --> 00:09:58,239 Speaker 7: is why drawing parallels to that period I think are misplaced. 200 00:09:58,280 --> 00:10:00,520 Speaker 7: I mean, back then, the labor markets are wrong. Real 201 00:10:00,559 --> 00:10:06,240 Speaker 7: incomes were rising today, that's not the case. Real incomes, 202 00:10:06,240 --> 00:10:09,600 Speaker 7: not of transfers, are running basically half of a percent 203 00:10:09,760 --> 00:10:12,600 Speaker 7: over the last year. And that was true even before 204 00:10:13,280 --> 00:10:16,800 Speaker 7: this latest inflation shot. Of course, back then, we had 205 00:10:16,800 --> 00:10:19,600 Speaker 7: a massive pile of excess savings that consumers were able 206 00:10:19,640 --> 00:10:22,880 Speaker 7: to draw down. Again, that's not the case today. The 207 00:10:22,920 --> 00:10:25,960 Speaker 7: savings rate, if anything, has already been drawn down. I mean, 208 00:10:25,960 --> 00:10:27,920 Speaker 7: that's one of the reasons why consumer spending has been 209 00:10:27,960 --> 00:10:31,320 Speaker 7: as strong as it has been over the last twelve 210 00:10:31,320 --> 00:10:36,120 Speaker 7: months or so. And even then, consumption has been slowing 211 00:10:36,200 --> 00:10:38,440 Speaker 7: despite that drawdown in savings. So I think that the 212 00:10:38,480 --> 00:10:41,280 Speaker 7: consumer here is on, you know, not as strong footing 213 00:10:41,360 --> 00:10:45,080 Speaker 7: as was the case a few years ago. And you know, 214 00:10:45,160 --> 00:10:51,400 Speaker 7: it's encouraging to see oil prices moderate somewhat today, but 215 00:10:51,520 --> 00:10:56,520 Speaker 7: ultimately we're on a glidepath nationally to four dollars a 216 00:10:56,559 --> 00:10:59,440 Speaker 7: gallon gasoline. I mean, that's that's likely to happen at 217 00:10:59,440 --> 00:11:03,800 Speaker 7: some point next week or two. So that provides some 218 00:11:03,920 --> 00:11:06,440 Speaker 7: sticker shock, I think to consumers. And you know, one 219 00:11:06,440 --> 00:11:09,400 Speaker 7: thing we're not talking about, we're not talking about tax 220 00:11:09,400 --> 00:11:13,680 Speaker 7: refunds anymore. So a lot of the enthusiasm that people 221 00:11:13,760 --> 00:11:16,320 Speaker 7: had going into the year, I think has been effectively 222 00:11:16,400 --> 00:11:18,040 Speaker 7: neutered as a result of this. 223 00:11:18,440 --> 00:11:21,840 Speaker 6: Well, Neil, in some states we're ready above four. In 224 00:11:22,040 --> 00:11:24,760 Speaker 6: the president's own Florida, we're at three ninety three when 225 00:11:24,760 --> 00:11:27,400 Speaker 6: it comes to a gallon of gasoline. You said going 226 00:11:27,400 --> 00:11:29,760 Speaker 6: into the weekend, the two core pillars of trumpnomics are 227 00:11:29,840 --> 00:11:33,880 Speaker 6: rising equity prices and low energy prices. Are we at 228 00:11:33,960 --> 00:11:36,040 Speaker 6: risk of losing both of these at this moment? 229 00:11:36,720 --> 00:11:38,319 Speaker 7: Well, I mean I think we're losing the f I 230 00:11:38,360 --> 00:11:39,239 Speaker 7: mean for households. 231 00:11:39,280 --> 00:11:39,600 Speaker 1: Of course. 232 00:11:39,640 --> 00:11:42,480 Speaker 7: The main issue is that, you know, even though America 233 00:11:42,640 --> 00:11:46,640 Speaker 7: is a large energy producer, now the money doesn't recycle 234 00:11:46,679 --> 00:11:51,199 Speaker 7: back into the economy quickly, so consumers will spend less 235 00:11:51,240 --> 00:11:53,360 Speaker 7: than oil producers will spend more, at least in the 236 00:11:53,400 --> 00:11:55,480 Speaker 7: short run. So I think that's something that people need 237 00:11:55,520 --> 00:11:59,400 Speaker 7: to think about here, is that, you know, the sort 238 00:11:59,400 --> 00:12:01,760 Speaker 7: of the els city of the spending. It's not like 239 00:12:01,840 --> 00:12:05,080 Speaker 7: oil producers are going to take their new found income 240 00:12:05,080 --> 00:12:08,199 Speaker 7: windfall and go out and spend it in a bunch 241 00:12:08,240 --> 00:12:09,160 Speaker 7: of mining rigs. 242 00:12:09,160 --> 00:12:09,880 Speaker 4: I mean, in fact, to. 243 00:12:09,840 --> 00:12:12,040 Speaker 7: The extent that people are saying this is going to 244 00:12:12,040 --> 00:12:14,880 Speaker 7: be transitory, they may be less inclined to do that. 245 00:12:14,920 --> 00:12:17,320 Speaker 7: So I think the growth shock is actually that much 246 00:12:17,320 --> 00:12:20,319 Speaker 7: more material, at least upfront. But with respect to equities, 247 00:12:22,160 --> 00:12:24,040 Speaker 7: you know, look, equities are hanging in there. I mean, 248 00:12:24,040 --> 00:12:29,280 Speaker 7: there's some there was probably some anxiety before all this. 249 00:12:30,559 --> 00:12:32,480 Speaker 7: So even if you get a quick resolution to this, 250 00:12:32,600 --> 00:12:34,440 Speaker 7: I mean, I don't think we're sort of like raging 251 00:12:34,480 --> 00:12:37,600 Speaker 7: back to new highs. But for now, I mean, the 252 00:12:37,600 --> 00:12:40,600 Speaker 7: stock market is you know, for lack of a better phrase, 253 00:12:40,640 --> 00:12:41,960 Speaker 7: trusting in Trump. 254 00:12:42,400 --> 00:12:45,920 Speaker 2: Stay with us. More Bloomberg surveillance coming up after this. 255 00:12:55,200 --> 00:12:58,440 Speaker 2: Here's the latest this morning, Israel claiming the elimination of 256 00:12:58,480 --> 00:13:01,400 Speaker 2: another top a round in a fish, the US ramping 257 00:13:01,440 --> 00:13:04,079 Speaker 2: up efforts to reopen the strata for most, dropping five 258 00:13:04,160 --> 00:13:08,120 Speaker 2: thousand pounds bunker busters on Iranian missile sites. Seth Jones 259 00:13:08,280 --> 00:13:11,599 Speaker 2: csis with this to say, writing, the brutal truth is 260 00:13:11,640 --> 00:13:15,160 Speaker 2: that while the US military may succeed in degrading Iranian capabilities, 261 00:13:15,320 --> 00:13:17,960 Speaker 2: it has dug itself a large hull in responding to 262 00:13:18,080 --> 00:13:20,719 Speaker 2: other global conflicts. Seth joints are now for more. 263 00:13:20,760 --> 00:13:22,040 Speaker 1: Seth, good morning, good morning. 264 00:13:22,160 --> 00:13:24,920 Speaker 2: Where and how is this making the US more vulnerable? 265 00:13:25,559 --> 00:13:25,679 Speaker 5: Well? 266 00:13:25,679 --> 00:13:28,640 Speaker 8: I think the reality as the US's own national defense 267 00:13:28,679 --> 00:13:32,640 Speaker 8: strategy and national security strategy. Note that the US priorities 268 00:13:32,960 --> 00:13:35,720 Speaker 8: are elsewhere in the world, China in particular, but also 269 00:13:36,240 --> 00:13:38,760 Speaker 8: the US notes Latin America is an ongoing war in 270 00:13:39,000 --> 00:13:41,760 Speaker 8: Ukraine with the Russians right now, and the US is 271 00:13:41,840 --> 00:13:44,880 Speaker 8: already running low. It was already low before this war started, 272 00:13:44,920 --> 00:13:48,439 Speaker 8: on key stock piles of both offensive long range munitions 273 00:13:48,920 --> 00:13:52,240 Speaker 8: like the JAZZM and the Tomahawk, and also on defensive 274 00:13:52,360 --> 00:13:56,640 Speaker 8: munitions for Patriot and THAD. So as those stockpiles run low, 275 00:13:57,040 --> 00:13:59,480 Speaker 8: there's a big question. With the Chinese pretty active in 276 00:13:59,520 --> 00:14:02,040 Speaker 8: the Taiwan Straits in the South China, see how much 277 00:14:02,080 --> 00:14:04,600 Speaker 8: the US is going to have left in its bins 278 00:14:04,679 --> 00:14:05,600 Speaker 8: for the future. 279 00:14:05,800 --> 00:14:07,960 Speaker 6: Lots of reporting too as well, that China is keenly 280 00:14:08,000 --> 00:14:10,680 Speaker 6: focused on this to understand how the US military works. 281 00:14:10,720 --> 00:14:13,439 Speaker 6: What are they learning from our offensive right now on the. 282 00:14:13,360 --> 00:14:16,959 Speaker 8: Gulf, Well, I think they are seeing, to be clear, 283 00:14:17,000 --> 00:14:20,240 Speaker 8: they are seeing a US and an Israeli military that 284 00:14:20,320 --> 00:14:22,960 Speaker 8: are superb but precisions strike. 285 00:14:23,720 --> 00:14:25,800 Speaker 1: They are also superb at air defense. 286 00:14:25,840 --> 00:14:28,600 Speaker 8: I mean we are shooting down a large number of 287 00:14:28,800 --> 00:14:30,520 Speaker 8: Iranian drones. 288 00:14:30,160 --> 00:14:31,800 Speaker 1: Cruise missiles, ballistic missiles. 289 00:14:31,920 --> 00:14:36,000 Speaker 8: We're also striking with precision the leadership command of control bases. 290 00:14:36,400 --> 00:14:40,600 Speaker 8: But you also see the limitations of the US military. 291 00:14:40,640 --> 00:14:44,400 Speaker 8: It's stockpiles of munitions, and you also see that asymmetric 292 00:14:44,480 --> 00:14:47,280 Speaker 8: challenges that the US faced in Iraq and Afghanistan. 293 00:14:47,520 --> 00:14:49,720 Speaker 1: We're seeing now in the Strait of Hormuz, which is 294 00:14:49,760 --> 00:14:50,640 Speaker 1: the threat of minds. 295 00:14:50,680 --> 00:14:53,800 Speaker 8: It's not a big conventional force that the Iranians have, 296 00:14:53,880 --> 00:14:57,360 Speaker 8: but it's those asymmetric challenges that do pose the throat. 297 00:14:57,400 --> 00:14:59,240 Speaker 6: You touched on it when you're talking about the Chinese 298 00:14:59,280 --> 00:15:01,560 Speaker 6: vessels that are in the Taiwan Strait. Would this be 299 00:15:01,600 --> 00:15:04,640 Speaker 6: an opportune time for Shijiping to do something when it 300 00:15:04,640 --> 00:15:05,800 Speaker 6: comes to Taiwan. 301 00:15:05,800 --> 00:15:07,840 Speaker 1: It's possible. Anything is possible. 302 00:15:07,880 --> 00:15:10,520 Speaker 8: The big challenge for the Chinese at this very moment 303 00:15:10,680 --> 00:15:15,200 Speaker 8: is they have obliterated their leadership within the last two 304 00:15:15,200 --> 00:15:18,280 Speaker 8: to three years. They've gotten rid of over one hundred 305 00:15:18,400 --> 00:15:24,080 Speaker 8: senior PLA People's Liberation Army officials, including of their top committee, 306 00:15:23,800 --> 00:15:28,200 Speaker 8: the CMC. So the Chinese are not really in a 307 00:15:28,240 --> 00:15:33,000 Speaker 8: position from all levels, the strategic down to the tactical 308 00:15:33,080 --> 00:15:36,160 Speaker 8: level operators to make a move at this point. 309 00:15:36,320 --> 00:15:39,560 Speaker 1: But we do see them. I was up in an aircraft. 310 00:15:39,400 --> 00:15:42,760 Speaker 8: US Navy P eight in the South China Sea last year. 311 00:15:43,240 --> 00:15:44,720 Speaker 1: The Chinese are everywhere. 312 00:15:44,720 --> 00:15:48,160 Speaker 8: They're conducting exercises on a regular basis around the Taiwan 313 00:15:48,160 --> 00:15:51,880 Speaker 8: Strait to simulate a blockade, so they're certainly thinking about 314 00:15:51,920 --> 00:15:54,520 Speaker 8: it that I don't think now was the ideal time 315 00:15:54,640 --> 00:15:56,320 Speaker 8: for them, just because of what they've done. 316 00:15:56,560 --> 00:15:59,760 Speaker 5: There's a question about just the munitions and what type 317 00:15:59,760 --> 00:16:02,160 Speaker 5: of re sources the United States has. There's also a 318 00:16:02,240 --> 00:16:05,440 Speaker 5: question of alliances and where they lie. How do you 319 00:16:05,440 --> 00:16:08,640 Speaker 5: see them really shifting in the wake of, and perhaps 320 00:16:08,680 --> 00:16:10,800 Speaker 5: accelerated by this war in Iran? 321 00:16:11,800 --> 00:16:13,480 Speaker 1: So I mean on the alliance structure. 322 00:16:13,640 --> 00:16:17,200 Speaker 8: I've talked to a couple of senior European defense officials, 323 00:16:17,240 --> 00:16:20,200 Speaker 8: including Minister of Defense the other day of one of 324 00:16:20,200 --> 00:16:23,680 Speaker 8: the US's NATO allies. I think the challenge they were 325 00:16:23,720 --> 00:16:26,000 Speaker 8: never briefed on this war to begin with. They were 326 00:16:26,040 --> 00:16:30,760 Speaker 8: asked once the US struggled along those lines to come in. 327 00:16:30,960 --> 00:16:33,560 Speaker 8: The same was true with the US allies in Japan, 328 00:16:33,880 --> 00:16:37,320 Speaker 8: South Korea, Australia, all of which have been hesitant to 329 00:16:37,440 --> 00:16:41,640 Speaker 8: jump into the war that the US in Israel started. 330 00:16:41,880 --> 00:16:44,920 Speaker 1: So I think the US position. 331 00:16:44,640 --> 00:16:47,600 Speaker 8: With some of these allies has been very transactional recently, 332 00:16:48,000 --> 00:16:49,920 Speaker 8: and I think at some point there has to be 333 00:16:49,960 --> 00:16:52,920 Speaker 8: an effort to bring them, bring them more closely together. 334 00:16:52,960 --> 00:16:55,840 Speaker 8: But they are very concerned, the ones in Asia about 335 00:16:55,840 --> 00:16:58,000 Speaker 8: the growth of the Chinese, and the ones in Europe 336 00:16:58,160 --> 00:16:59,800 Speaker 8: very concerned about the Russian military. 337 00:17:00,200 --> 00:17:02,640 Speaker 2: Just to finish on China, have we the US and 338 00:17:02,640 --> 00:17:06,320 Speaker 2: I think about Chinese capabilities in places like around in 339 00:17:06,400 --> 00:17:10,760 Speaker 2: places like Venezuela, and deficiency specifically, I. 340 00:17:10,680 --> 00:17:12,080 Speaker 1: Mean on the Chinese side. 341 00:17:12,400 --> 00:17:14,960 Speaker 8: The realities, the Chinese have not fought a war since 342 00:17:14,960 --> 00:17:18,919 Speaker 8: the nineteen seventies, and they weren't particularly effective. But what 343 00:17:18,960 --> 00:17:22,639 Speaker 8: they have done is they've provided components to the Russians 344 00:17:22,680 --> 00:17:27,480 Speaker 8: in the war in Ukraine. They've also provided components in 345 00:17:27,560 --> 00:17:31,119 Speaker 8: various types of assistance, including intelligence to the Iranians, not 346 00:17:31,280 --> 00:17:33,840 Speaker 8: just now what over the last several years, including to 347 00:17:34,040 --> 00:17:36,600 Speaker 8: some of Iran's partner forces, including the HOHO this in Yemen. 348 00:17:36,720 --> 00:17:42,000 Speaker 8: So they've also put contractors and intelligence officials on the 349 00:17:42,040 --> 00:17:44,880 Speaker 8: ground to learn how to conduct these kinds of war. 350 00:17:45,000 --> 00:17:46,439 Speaker 1: So they are taking notes. 351 00:17:46,680 --> 00:17:49,639 Speaker 2: How flawed is that experience though given how clean the 352 00:17:49,680 --> 00:17:52,119 Speaker 2: operation was in a place like Venezuela. We've had all 353 00:17:52,200 --> 00:17:54,800 Speaker 2: things like they've got the defense systems that were sell 354 00:17:54,880 --> 00:17:57,520 Speaker 2: to them by the Chinese, and ultimately none of it 355 00:17:57,520 --> 00:17:59,800 Speaker 2: stood up against US capability. 356 00:18:00,040 --> 00:18:03,040 Speaker 8: I mean, it really shows in some ways actually, and 357 00:18:03,240 --> 00:18:05,240 Speaker 8: I know there had been there have been some comments 358 00:18:05,320 --> 00:18:09,000 Speaker 8: last year about the expense of say the F thirty 359 00:18:09,040 --> 00:18:11,040 Speaker 8: five stealth aircraft, which is. 360 00:18:11,000 --> 00:18:12,240 Speaker 1: In the billions of dollars. 361 00:18:12,640 --> 00:18:15,639 Speaker 8: But the benefit of a fifth generation stealth aircraft that 362 00:18:15,760 --> 00:18:16,760 Speaker 8: Lockeed Martin. 363 00:18:16,440 --> 00:18:19,439 Speaker 1: Makes is that it's hard for radar to see it. 364 00:18:19,760 --> 00:18:22,639 Speaker 8: So one of the things I think that even those 365 00:18:22,960 --> 00:18:26,000 Speaker 8: Chinese and Russian air defense systems are finding out is 366 00:18:26,040 --> 00:18:28,240 Speaker 8: that a fifth generation and the US is now working 367 00:18:28,280 --> 00:18:30,960 Speaker 8: on a sixth generation aircraft, they are tough to see. 368 00:18:31,680 --> 00:18:35,240 Speaker 2: This is the Bloomberg Survandans podcast, bringing you the best 369 00:18:35,280 --> 00:18:38,560 Speaker 2: in markets, economics, antient politics. You can watch the show 370 00:18:38,640 --> 00:18:41,600 Speaker 2: live on Bloomberg TV weekday mornings from six am to 371 00:18:41,720 --> 00:18:45,480 Speaker 2: nine am Eastern. Subscribe to the podcast on Apple, Spotify 372 00:18:45,600 --> 00:18:47,840 Speaker 2: or anywhere else you listen, and as always on the 373 00:18:47,880 --> 00:18:50,359 Speaker 2: Bloomberg Terminal and the Bloomberg Business app.