WEBVTT - Bloomberg Surveillance TV: March 3rd, 2026 0:00:02.360 --> 0:00:06.720 Bloomberg Audio Studios, Podcasts, radio News. 0:00:11.640 --> 0:00:15.440 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.480 --> 0:00:18.680 with Lisa Bromwitz and Amrie Hordernt. Join us each day 0:00:18.720 --> 0:00:22.280 for insight from the best in markets, economics, and geopolitics 0:00:22.400 --> 0:00:24.880 from our global headquarters in New York City. We are 0:00:24.920 --> 0:00:27.680 live on Bloomberg Television weekday mornings from six to nine 0:00:27.720 --> 0:00:31.280 am Eastern. Subscribe to the podcast on Apple, Spotify or 0:00:31.320 --> 0:00:33.919 anywhere else you listen, and as always on the Bloomberg 0:00:34.000 --> 0:00:37.080 Terminal and the Bloomberg Business app. So here's the latest 0:00:37.120 --> 0:00:39.840 this morning. Global bonds seeing their biggest sell off since May, 0:00:39.960 --> 0:00:43.160 with the Middle East conflicts reigniting inflation fears, Thawson's Slock 0:00:43.200 --> 0:00:45.600 of Apollo, writing, the key issue is the duration of 0:00:45.600 --> 0:00:48.159 the shock. Markets may quickly get used to a situation 0:00:48.240 --> 0:00:51.080 that could last weeks or even months. Tawson joins us 0:00:51.120 --> 0:00:53.400 now for more. Torston, welcome to the program. Does this 0:00:53.479 --> 0:00:56.480 shock have the potential to become an economic issue in 0:00:56.520 --> 0:00:57.200 the months to come? 0:00:57.800 --> 0:01:00.920 Yeah, because this is steflationary imp So it's actually quite 0:01:00.920 --> 0:01:03.280 similar to what we saw with the trade war. Prices 0:01:03.320 --> 0:01:06.280 are going to go up and Ultimately, if it persists, 0:01:06.360 --> 0:01:08.920 GDP is going to go down. So this creates a 0:01:08.959 --> 0:01:11.760 huge headache for the Federal Reserve because the Federal Reserve. 0:01:11.520 --> 0:01:13.040 Now needs to assist the dual mandate. 0:01:13.319 --> 0:01:15.760 Where is the hit the hardest is to hit the 0:01:15.760 --> 0:01:18.520 hardest on inflation. Should they worry more about inflation going 0:01:18.600 --> 0:01:20.800 up or should they begin to worry about the downside 0:01:20.840 --> 0:01:23.480 impact on the label market. That's why this is a 0:01:23.560 --> 0:01:25.759 complicated shock, just like we saw with the trade wall, 0:01:26.040 --> 0:01:28.800 just like we saw with Ukraine Russia, and thus we're seeing. 0:01:28.640 --> 0:01:31.679 Today talstin relatively speaking? Is it a bigger problem for 0:01:31.760 --> 0:01:33.360 the Bank of England for the ECB? 0:01:34.280 --> 0:01:36.440 Well, the challenge for Europe is that they depend more 0:01:36.480 --> 0:01:39.040 on energy. The US produces, of course, a lot more 0:01:39.160 --> 0:01:41.760 energy than it consumes itself, whereas in Europe we do 0:01:41.880 --> 0:01:44.160 have a much bigger energy dependency. And that's exactly why 0:01:44.240 --> 0:01:46.240 markets are trading the way they are, where Europe is 0:01:46.240 --> 0:01:48.480 getting hard to hit because this simply is a bigger 0:01:48.600 --> 0:01:49.880 energy dependency in Europe. 0:01:50.080 --> 0:01:52.640 How important Touriston is it for a styflationary shock for 0:01:52.640 --> 0:01:57.280 there to be enough economic momentum in a country to. 0:01:56.680 --> 0:01:58.760 Withstand and prolong price. 0:01:58.560 --> 0:02:03.160 Hikes challenge, Lisa, is that this starting point is extremely important. 0:02:03.200 --> 0:02:05.760 Inflation and cod pc each to day is three point zero. 0:02:06.080 --> 0:02:08.480 So if inflations today had been one point zero, it 0:02:08.480 --> 0:02:10.840 would have been a completely different discussion. But now that 0:02:10.880 --> 0:02:13.280 we have inflation already at three and now we're adding 0:02:13.320 --> 0:02:16.000 on top of that more upward lift on inflation over 0:02:16.040 --> 0:02:19.160 the coming quarters, potentially that is certainly a risk that 0:02:19.200 --> 0:02:21.040 the fare of certain needs would take very seriously. 0:02:21.160 --> 0:02:22.800 Well, this is the reason why I was surprised towards 0:02:22.800 --> 0:02:24.799 starting the conversations that I've had with a number of 0:02:24.840 --> 0:02:28.320 different investors, even companies, they seem really excited actually about 0:02:28.320 --> 0:02:30.639 the opportunities ahead. They think the economy is chugging along, 0:02:30.800 --> 0:02:33.880 they're looking to invest. The sort of manufacturing boom feels 0:02:33.919 --> 0:02:37.160 like it's actually getting legs. How much could that amplify 0:02:37.200 --> 0:02:39.880 the risk of a stagflationary shock, because it could cause 0:02:39.919 --> 0:02:43.280 the price increases to be more significant in a way 0:02:43.400 --> 0:02:46.760 that isn't just necessarily a one off shock from commodities. 0:02:47.440 --> 0:02:49.040 No, you're right, and I mean if you just think 0:02:49.080 --> 0:02:51.800 about what has happened in the last few weeks, first 0:02:51.880 --> 0:02:54.040 we would talk about, Wow, the US economy is strong. 0:02:54.360 --> 0:02:56.000 Then we were talking about, oh my god, we're all 0:02:56.000 --> 0:02:59.079 getting unemployed because of AI. Now we're back to talking about, Wow, 0:02:59.120 --> 0:03:01.680 inflation is going up. I mean no wonder that the 0:03:01.680 --> 0:03:04.040 people inside the Federal Reserve are looking at this and 0:03:04.320 --> 0:03:06.240 probably scratching their heads and saying, well, now there's another 0:03:06.280 --> 0:03:09.080 shock that we need to take into account. But in combination, 0:03:09.520 --> 0:03:11.799 the issue is still that the US economy is doing 0:03:11.840 --> 0:03:14.919 really well. We have three very strong tailwinds from AI spending, 0:03:15.080 --> 0:03:17.120 we have a strong tailwind from in the dustal renaissance. 0:03:17.280 --> 0:03:19.799 And let's not forget that the Congressional Budget Office they 0:03:19.919 --> 0:03:21.480 estimate that the one big built of a bill will 0:03:21.480 --> 0:03:24.080 lift GDP growth this year by zero point nine percent. 0:03:24.360 --> 0:03:27.400 That's an enormous boost to GDP coming from fiscal policy. 0:03:27.600 --> 0:03:30.480 So taken together, it is a very strong economy. And 0:03:30.560 --> 0:03:32.800 it is an argument that has been made by many, 0:03:32.880 --> 0:03:35.320 including me, that we are at risk, of course, of 0:03:35.360 --> 0:03:37.880 seeing more upside pressure on inflation. And now you add 0:03:37.880 --> 0:03:39.600 here in the last few days on top of that, 0:03:39.880 --> 0:03:42.200 some more upside pressure because of oil prices. And finally, 0:03:42.280 --> 0:03:45.840 let's not forget also if this was just a few days, well, 0:03:45.840 --> 0:03:47.680 the risk is now that even today now we're getting 0:03:47.680 --> 0:03:51.080 headlines about new oil facilities potentially also getting hit. So 0:03:51.160 --> 0:03:53.640 the challenge here is that, well, what headlines you we 0:03:53.720 --> 0:03:56.000 then expect over the next several days. Again, so it 0:03:56.040 --> 0:03:59.800 really is a complex situation because of this incredible risk 0:04:00.040 --> 0:04:01.920 we might begin to see even more upside pressure on 0:04:01.920 --> 0:04:03.800 in fision from an already pretty bad starting point. 0:04:03.840 --> 0:04:05.800 Well, Toss, and let's unpack the bill case for the 0:04:05.840 --> 0:04:08.400 US economy and the tax component of it. Let's go 0:04:08.440 --> 0:04:11.360 with tax refunds. And you mentioned the labor anxiety connected 0:04:11.400 --> 0:04:13.600 to what's happening with AI developments. I think that's a 0:04:13.600 --> 0:04:16.440 feature of the conversation going forward. Does that hold back 0:04:16.800 --> 0:04:19.880 people when it comes to spending those tax refunds given 0:04:19.920 --> 0:04:22.240 that they're not going to see higher energy bills, potentially 0:04:22.279 --> 0:04:25.000 high utility bills potentially, does that make them more risk 0:04:25.000 --> 0:04:27.200 averse conservative in the months to comet? 0:04:27.680 --> 0:04:30.640 No, you're right, John, because last year, if you go 0:04:30.680 --> 0:04:33.280 and look at, of course, what tax refunds normally are, 0:04:33.320 --> 0:04:36.279 they were around three thousand dollars per family. And now 0:04:36.320 --> 0:04:38.320 this year, if you think about that, the one big 0:04:38.360 --> 0:04:41.160 built of a bill is done retroactively starting in January one, 0:04:41.320 --> 0:04:43.440 twenty twenty five. That means that we have all paid 0:04:43.480 --> 0:04:45.800 too much in taxes in twenty twenty five. That means 0:04:45.839 --> 0:04:48.239 that our tax refunds will be bigger this year. On average, 0:04:48.240 --> 0:04:50.040 they will go out from three thousand dollars last year 0:04:50.080 --> 0:04:52.479 per family, so now four thousand dollars. And there's one 0:04:52.520 --> 0:04:54.280 hundred and twenty nine million households in the US. So 0:04:54.320 --> 0:04:56.159 if you multiply these two numbers, that's a one hundred 0:04:56.160 --> 0:04:59.919 billion dollars more in consumer spending coming along here POTENTI 0:05:00.320 --> 0:05:02.320 in March and April and May. So over the next 0:05:02.360 --> 0:05:04.680 seven months we're going to get quite a lift in 0:05:04.760 --> 0:05:07.720 consumer spending. But you're right, if consumers are very worried, 0:05:07.880 --> 0:05:09.839 they could be saved more. But that's why the key 0:05:09.839 --> 0:05:11.760 indicators to look at on that is to look at 0:05:11.839 --> 0:05:14.520 consumer confidence. Consumer confidence has done a little bit better, 0:05:14.640 --> 0:05:17.600 but our consumer confidence indicators getting impacted by this or 0:05:17.640 --> 0:05:20.120 not that becomes very important over the next sevel readings. 0:05:20.120 --> 0:05:21.560 So to uston that feels like much more of a 0:05:21.600 --> 0:05:24.680 European story potentially than the US one. How do you 0:05:24.680 --> 0:05:26.839 expect central bank is to guide us through this moment? 0:05:26.880 --> 0:05:29.880 We had some guidance from the Australian Central Bank over 0:05:30.000 --> 0:05:32.560 nights saying every meeting is live. What do you think 0:05:32.600 --> 0:05:35.400 will the approach will be of saving Europeans of the 0:05:35.440 --> 0:05:36.640 Federal Reserve the ec Bank. 0:05:37.200 --> 0:05:39.040 Well, I think it's easier for the Fed because they 0:05:39.040 --> 0:05:41.359 will probably be more two handed and say, on the 0:05:41.400 --> 0:05:43.640 one hand, we have inflation going up. On the other hand, 0:05:43.640 --> 0:05:45.400 we're worried about what this means for the labor market. 0:05:45.440 --> 0:05:47.279 It's more challenging for the ECB and the Bank of 0:05:47.320 --> 0:05:49.560 England because they don't quote unquote. 0:05:49.200 --> 0:05:50.200 Care about the labor market. 0:05:50.200 --> 0:05:53.200 They really only target inflation, and if the only target inflation, 0:05:53.279 --> 0:05:56.080 they should begin to be more hawkish. So that's why 0:05:56.120 --> 0:05:58.760 it makes sense that and rates expectations and central bank 0:05:58.839 --> 0:06:01.479 expectations are moving more in Europe because the Europeans have 0:06:01.560 --> 0:06:04.159 simply a different mandate, namely only inflation. 0:06:04.480 --> 0:06:06.880 Twist and does this torpedo the bull case for Europe 0:06:06.920 --> 0:06:10.040 and frankly for a lot of the XUS discussion, because 0:06:10.080 --> 0:06:13.560 even though yes, the United States could face the stagflationary shock, 0:06:13.880 --> 0:06:16.520 other places could struggle with that even more at a 0:06:16.560 --> 0:06:19.440 time with the market seems to be overly positioned that way. 0:06:20.160 --> 0:06:22.600 Well, the challenge for Europe is that the main book 0:06:22.600 --> 0:06:24.640 case for Europe is really that Germany has said that 0:06:24.640 --> 0:06:27.240 they will spend five hundred billion euros in infrastructure and 0:06:27.279 --> 0:06:30.200 spend unlimited on defense. So the question that of course 0:06:30.320 --> 0:06:31.840 is immediate here is to ask, well, what are the 0:06:31.839 --> 0:06:34.560 Europeans going to do now in the form of defense spending. 0:06:34.680 --> 0:06:35.919 What are they going to do in the form of 0:06:35.920 --> 0:06:39.640 more government spending. So the policy reaction becomes very critical. 0:06:39.839 --> 0:06:42.000 How is Europe going to respond to this. Are they 0:06:42.040 --> 0:06:44.760 going to say, well, too bad, inflation is just going up, 0:06:45.040 --> 0:06:46.760 or are they going to say, well, wait a minute, 0:06:46.760 --> 0:06:48.560 maybe we do need to do more on the fiscal front, 0:06:48.560 --> 0:06:50.599 and there is not much room to maneuver on that front. 0:06:50.760 --> 0:06:53.400 But it becomes very critical that on the policy front 0:06:53.400 --> 0:06:55.960 the Europeans are likely going to at least say and 0:06:56.080 --> 0:06:59.120 indicate more action as a result, In particular, if this 0:06:59.200 --> 0:07:02.200 does become more of a niggative risk to the genp. 0:07:02.000 --> 0:07:03.560 Outbook, stay with us. 0:07:03.880 --> 0:07:16.320 More Bloomberg surveillance coming up after this. Let's justus stend 0:07:16.320 --> 0:07:19.840 the conversation with US Marine Corps veteran Major General Mastin 0:07:20.040 --> 0:07:23.240 Roberson of Academy Securities right in the following Aroun's current 0:07:23.280 --> 0:07:26.760 ability to make clear and rational decisions is likely disrupted, 0:07:27.000 --> 0:07:30.280 but proceeds are still a problem that it's not easily solved. 0:07:30.280 --> 0:07:32.120 The Major General joins us now for more. Major General, 0:07:32.160 --> 0:07:34.560 welcome to the program, sir I always appreciate your insight. 0:07:34.760 --> 0:07:37.640 Let's just start with your assessment of the operation so far. 0:07:39.880 --> 0:07:45.440 Thanks John Laser. So, I mean, it seemed to me 0:07:45.520 --> 0:07:48.280 that the number one objective was to try to ensure 0:07:48.320 --> 0:07:53.280 that the nuclear capability for Iran is off the table, 0:07:53.400 --> 0:07:56.080 and it does seem that that part of the operation 0:07:56.160 --> 0:08:01.360 has gone well. If the objective was to take mid 0:08:01.480 --> 0:08:04.000 range and short range are particularly long range and mid 0:08:04.120 --> 0:08:08.960 range missiles and destruction of the navy, that's gone well. 0:08:10.120 --> 0:08:13.640 The challenge is the side effects of those, the closing 0:08:13.640 --> 0:08:16.920 of the straits, the attacks on Middle Eastern countries and 0:08:16.960 --> 0:08:22.960 their capitals, which doesn't really surprise me, because you've got 0:08:23.000 --> 0:08:26.640 to believe that everything that's happened from the Iranian side 0:08:26.640 --> 0:08:29.600 of the house over the last four days was probably 0:08:29.640 --> 0:08:33.440 prescripted that if we get attacked, these are the target 0:08:33.480 --> 0:08:37.400 season things you do, which probably at hindsight, is not 0:08:37.920 --> 0:08:42.160 best for Iran to be attacking the other Middle East 0:08:42.160 --> 0:08:46.520 countries capitals because it certainly plays against their ability to 0:08:47.320 --> 0:08:52.520 have an emotional connection to the Muslim people in those 0:08:52.559 --> 0:08:56.160 countries and separate them from their governments. 0:08:56.440 --> 0:08:58.520 So major general, that last point I think is quite 0:08:58.559 --> 0:09:02.320 important that the response we've seen from forces in Iran 0:09:02.440 --> 0:09:05.000 so far has been scripted. As time goes on, how 0:09:05.040 --> 0:09:08.320 do you think ILGC forces are operating or will operate 0:09:08.600 --> 0:09:09.720 in a leadership vacuum? 0:09:11.559 --> 0:09:14.480 I mean that's the hard part to predict, because I 0:09:14.520 --> 0:09:16.920 do think they're operating in a vacuum. I don't think 0:09:16.920 --> 0:09:20.440 that there's a central government that is in essence making 0:09:20.600 --> 0:09:23.199 decisions to say this is what we're going to do next, 0:09:23.240 --> 0:09:25.880 These are our objectives, this is what we want to 0:09:25.960 --> 0:09:29.600 achieve in order to get the upper hand. So it 0:09:29.760 --> 0:09:32.600 is going to be interesting to watch. At what point 0:09:32.679 --> 0:09:36.440 do they have the ability to name a government, and 0:09:36.480 --> 0:09:39.000 then even if they name it, does it have any 0:09:39.040 --> 0:09:43.720 control Given the amount of destruction that's occurred to their network, 0:09:43.960 --> 0:09:48.520 Do they have the ability to control their military or 0:09:48.640 --> 0:09:52.959 is their military pretty much now in isolated bubbles doing 0:09:53.000 --> 0:09:56.959 what they think are best without any centralized control. And 0:09:57.360 --> 0:10:01.320 that has a danger all to itself, But it also 0:10:01.440 --> 0:10:05.960 means that they're not going to be unified in objectives 0:10:06.240 --> 0:10:10.760 to be able to try to disrupt what the coalition 0:10:10.880 --> 0:10:12.439 right now is trying to accomplish. 0:10:13.040 --> 0:10:15.600 Major General, I wonder what we're learning about the nature 0:10:15.760 --> 0:10:19.080 of modern warfare in terms of the way that drones 0:10:19.400 --> 0:10:23.200 are being used and deployed by Iran and the asymmetry 0:10:23.240 --> 0:10:26.160 and pricing. Right, these drones are cheap, they are multiple, 0:10:26.360 --> 0:10:28.720 and they are quick to produce, and at the same time, 0:10:28.840 --> 0:10:30.719 some of the missiles that we're using to shoot them 0:10:30.760 --> 0:10:33.680 down cost tens hundreds of thousands of dollars. 0:10:33.720 --> 0:10:37.240 I mean, how is that mismatch playing out? How could that. 0:10:37.200 --> 0:10:40.160 Be something that shapes the nature of war going forward. 0:10:41.080 --> 0:10:45.000 Yeah, you're absolutely right, Lisa, that we the US have 0:10:45.120 --> 0:10:47.880 to figure out a better way to do this. We've 0:10:47.880 --> 0:10:49.920 got to figure out a cheaper way to do this. 0:10:51.360 --> 0:10:55.199 It doesn't make economic sense to do what you've just. 0:10:55.200 --> 0:10:56.000 Described with. 0:10:57.600 --> 0:11:02.480 Million dollar missiles shooting down hundreds of dollars drones. So 0:11:03.240 --> 0:11:07.160 it was fascinating to me to see that President Zelensky 0:11:07.200 --> 0:11:11.320 had offered to help us figure that out better if 0:11:11.480 --> 0:11:14.839 and help the Israel figure out out better, if they 0:11:14.880 --> 0:11:17.240 could convince and the Middle East could convince Russia for 0:11:17.240 --> 0:11:22.640 a thirty day ceasefire, so who knows that may happen? 0:11:23.360 --> 0:11:25.360 Well, Major General, the way that war is being fought 0:11:25.520 --> 0:11:28.240 is so different. In this case, there's a concern that 0:11:28.280 --> 0:11:32.360 retaliation could come in the form of cyber attacks or other. 0:11:32.320 --> 0:11:33.520 Types of disruption. 0:11:34.360 --> 0:11:36.760 How are you monitoring that given the fact that it 0:11:36.760 --> 0:11:40.000 could be kind of one off events in different places. 0:11:40.480 --> 0:11:42.720 How well protected is not. 0:11:42.640 --> 0:11:45.520 Only the US but also other Middle Eastern countries against 0:11:45.559 --> 0:11:46.439 that type of attack. 0:11:48.000 --> 0:11:50.400 I think we're pretty well protected. I mean, there's no 0:11:50.520 --> 0:11:52.400 way that you're going to get one hundred cent protection. 0:11:54.080 --> 0:11:57.720 But I think let's remember that even though this is 0:11:57.720 --> 0:12:01.760 a four day war that's just been on now, cyber 0:12:01.800 --> 0:12:06.360 attacks and penetrations have been a serious threat for years 0:12:07.640 --> 0:12:12.359 and buy and large. Even though Iran has a capability, 0:12:13.200 --> 0:12:16.319 their capability pales in comparison to some of the other 0:12:16.800 --> 0:12:19.920 capability of nefarious actors that are out there in the world, 0:12:20.600 --> 0:12:26.280 who certainly could insert themselves into this in a disruption 0:12:27.040 --> 0:12:30.000 type style, but I'm not sure it's to their advantage. 0:12:30.040 --> 0:12:33.439 It appears at this point that the Chinas and the 0:12:33.520 --> 0:12:37.839 Russias and the North Koreans are content at this point 0:12:37.840 --> 0:12:40.040 to sit on the sideline and watch this play out, 0:12:40.679 --> 0:12:43.760 and that's our advantage. That happens if it broadens and 0:12:43.880 --> 0:12:48.440 they become part of what you're describing, you know, a 0:12:48.559 --> 0:12:53.640 cyber type offensive defensive war, then that does complicate things 0:12:54.000 --> 0:12:59.000 for everybody. But I think we have a better defensive architecture. 0:13:01.320 --> 0:13:04.560 They probably we're willing to advertise for obvious reasons. 0:13:05.320 --> 0:13:05.959 Stay with us. 0:13:06.280 --> 0:13:18.640 More Bloomberg surveillance coming up after this. Of course, the 0:13:18.679 --> 0:13:21.320 main focus this morning remains on the rising tensions in 0:13:21.360 --> 0:13:24.080 the Middle East. Shipments of oil and other goods passing 0:13:24.080 --> 0:13:26.880 through the Straight offorll meerc have come to a virtual standstill. 0:13:27.160 --> 0:13:30.760 The Flexports CEO Ryan Petterson, writing, what began as a 0:13:30.840 --> 0:13:34.600 regional security crisis has now become a direct disruption to 0:13:34.720 --> 0:13:37.680 global supply chains. Ryan joins us now for more. Ryan, 0:13:37.679 --> 0:13:39.600 welcome to the program, Thanks for making time for us. 0:13:39.640 --> 0:13:42.160 Just how much capacity have we just taken out? 0:13:43.120 --> 0:13:45.520 Well, on the container shipping side of things, you see, 0:13:45.600 --> 0:13:49.079 there's sixty seven ships that are inside the strait. 0:13:48.840 --> 0:13:50.720 Of our moves right now. A lot of those are 0:13:50.760 --> 0:13:51.280 smaller ships. 0:13:51.320 --> 0:13:53.200 So it looks like zero point six percent of all 0:13:53.240 --> 0:13:55.520 the container shipping capacity and the world has taken out. 0:13:55.960 --> 0:13:59.199 And that is the equivalent of the idle fleet today 0:13:59.360 --> 0:14:02.040 and is one of the main ways that capacity can 0:14:02.080 --> 0:14:04.240 be controlled to kind of keep prices in place is 0:14:04.280 --> 0:14:07.360 if there's too much capacity, you idol ship. So it's 0:14:07.360 --> 0:14:08.840 a bigger deal and it sounds and what's going to 0:14:08.880 --> 0:14:11.880 really play out here is that the major container shipping 0:14:11.920 --> 0:14:14.800 lines and I've spoken to three CEOs of the big 0:14:14.840 --> 0:14:17.680 ten ocean carriers in the last forty eight hours that 0:14:18.160 --> 0:14:21.200 most of them have either paused bookings to the region 0:14:22.000 --> 0:14:25.080 or really diverted. They've all stopped shipping inside the strait 0:14:25.080 --> 0:14:26.320 of form moves but many of them and said, hey, 0:14:26.320 --> 0:14:28.600 we're not going to take any bookings. And so what 0:14:28.680 --> 0:14:31.520 that means is these containers are going to sit at 0:14:31.560 --> 0:14:34.040 ports around the world, especially in East Asia, China and 0:14:34.080 --> 0:14:36.960 Southeast Asia and not move. And so you're going to 0:14:37.000 --> 0:14:39.600 start to get real congestion at those ports. And we've 0:14:39.600 --> 0:14:41.800 seen this movie before where that congestion can lead to 0:14:41.800 --> 0:14:43.600 spikes and prices and all kinds of problems. 0:14:43.720 --> 0:14:45.960 So around let's talk about that. Some people reflected on 0:14:45.960 --> 0:14:48.640 the Energy Shark of twenty two the conditions coming out 0:14:48.680 --> 0:14:49.320 of the pandemic. 0:14:49.360 --> 0:14:50.800 Are there parallels here? For you? 0:14:51.840 --> 0:14:54.400 I mean, you know, the history always seems to rhyme, 0:14:54.600 --> 0:14:57.720 and it is about that congestion and how it flows 0:14:57.760 --> 0:15:01.400 through the supply chain and builds up in unexpected places. 0:15:01.440 --> 0:15:03.120 And now it all depends on how long this lasts. 0:15:03.160 --> 0:15:05.120 If it lasts for a long time, you're going to 0:15:05.160 --> 0:15:06.320 see major reroutings. 0:15:06.360 --> 0:15:08.240 In fact, In fact, Flexport's. 0:15:07.720 --> 0:15:10.040 One of the largest providers of ocean freight in the world, 0:15:10.360 --> 0:15:14.040 and we built this new product called Atlas. It's Atlas 0:15:14.080 --> 0:15:15.880 dot flexport dot com where you can monitor all the 0:15:15.880 --> 0:15:18.040 ships in real time and see where they're sailing. And 0:15:18.080 --> 0:15:20.000 so it's actually going to be a big challenge for 0:15:20.040 --> 0:15:21.560 us to see can we keep this thing up today 0:15:21.600 --> 0:15:26.080 as the ships get diverted, as services are less reliable. 0:15:26.960 --> 0:15:29.120 We have seen that movie before, so yeah, I would 0:15:29.120 --> 0:15:31.440 expect to see it the services start to degrade and 0:15:31.480 --> 0:15:33.000 be more difficult to operate run. 0:15:33.000 --> 0:15:35.160 You've got great visibility on these things, so says Domino 0:15:35.240 --> 0:15:38.280 start to fall. Are you thinking about secondary bottlenecks that 0:15:38.360 --> 0:15:39.200 might emerge as well? 0:15:39.240 --> 0:15:40.560 And where might they emerge? 0:15:41.480 --> 0:15:44.200 Yes, I mentioned a few of those in unexpected places 0:15:44.200 --> 0:15:46.800 like congestion, but you can see pricing be a global 0:15:46.800 --> 0:15:47.520 phenomenon here. 0:15:47.640 --> 0:15:48.680 Ocean freight prices. 0:15:48.720 --> 0:15:51.800 We already we're right in the middle of contracting season. 0:15:51.840 --> 0:15:53.280 It's just starting to kicked off. 0:15:53.720 --> 0:15:56.240 And all the ocean carriers have told us this week, 0:15:56.560 --> 0:15:58.280 not all, but most of the ocean carriers and I 0:15:58.320 --> 0:16:00.520 think it'll be all pretty soon, have told us that 0:16:00.680 --> 0:16:03.720 all previous discussions on ocean freight contracts for this year 0:16:03.760 --> 0:16:07.200 out the window, that there's too much uncertainty, and they 0:16:07.200 --> 0:16:09.520 expect prices to go way up from where they are today. 0:16:09.920 --> 0:16:13.200 We're already hearing rumors of five thousand dollars a container 0:16:13.280 --> 0:16:16.480 from China to the US East Coast, which that's almost 0:16:16.560 --> 0:16:18.320 that's more than double where it's been for the last 0:16:18.360 --> 0:16:21.160 few months. So yeah, we're already seeing big spikes and 0:16:21.560 --> 0:16:23.400 that will lead to all kinds of secondary effects. 0:16:23.480 --> 0:16:24.760 Right, some of that, as you know, it might just 0:16:24.800 --> 0:16:27.480 be a reflection of extended transit times as well. Could 0:16:27.520 --> 0:16:29.560 you give us an idea as some of this traffic 0:16:29.640 --> 0:16:33.000 reroutes what the extension to transit times might be for say, 0:16:33.240 --> 0:16:35.280 traffic between Europe and Asia. 0:16:36.400 --> 0:16:38.640 Yeah, well, then in the ocean market, it's really just 0:16:38.680 --> 0:16:41.760 what which of these strings these services call in. 0:16:41.880 --> 0:16:43.880 Jebalali's the ninth largest port in the world. 0:16:43.960 --> 0:16:46.240 Abu Dhabi has a large poor there's several other important 0:16:46.280 --> 0:16:49.120 ports within the inside the Strait of Barmouth, So the 0:16:49.160 --> 0:16:51.320 first thing is okay, which services call there. Those are 0:16:51.360 --> 0:16:53.160 going to be heavily disrupted in because they're gonna have 0:16:53.200 --> 0:16:56.640 to stop and unload all of those containers. One of 0:16:56.640 --> 0:16:59.320 the Ocean CEOs I talked to you said they were 0:16:59.320 --> 0:17:01.760 going to unload it Oman. But of course the port 0:17:01.760 --> 0:17:04.200 of Oman got hit with a missal yesterday to a 0:17:04.240 --> 0:17:08.040 ship near Oman. So it's really difficult to say exactly 0:17:08.560 --> 0:17:10.560 how each carrier is going to reroute things, but that 0:17:11.040 --> 0:17:13.760 will for sure lead to service issues. 0:17:14.640 --> 0:17:16.200 Let's not forget the air freight market. 0:17:16.760 --> 0:17:19.200 Whereas the Middle East is a major hub for air freight, 0:17:19.480 --> 0:17:22.159 we estimate around eighteen percent of all the global cargo 0:17:22.240 --> 0:17:25.480 capacity for air freight has been taken offline just temporarily. 0:17:25.480 --> 0:17:27.040 We haven't seen planes get shot down. 0:17:26.920 --> 0:17:29.240 But temporarily, and a lot of you know, you have 0:17:29.320 --> 0:17:33.560 Emirates and Cuts are at the hot All of these 0:17:33.560 --> 0:17:36.840 are major cargo airlines that operate in that region, and 0:17:37.040 --> 0:17:40.879 Asia to Europe flights tend to go over either stop 0:17:40.920 --> 0:17:44.119 in the Middle East or fly directly over Iran, so 0:17:44.400 --> 0:17:46.960 just big disruptions to the air freight market as well, 0:17:46.960 --> 0:17:50.920 and there it's a relatively capacity constrained market. In general, 0:17:51.000 --> 0:17:54.159 you can see huge spikes in price from a small 0:17:54.280 --> 0:17:55.480 disruption and capacity. 0:17:56.359 --> 0:17:59.600 This is the bloomberg S Events podcast, bringing you the 0:17:59.640 --> 0:18:03.000 best markets, economics, a gio politics. You can watch the 0:18:03.040 --> 0:18:06.160 show live on Bloomberg TV weekday mornings from six am 0:18:06.200 --> 0:18:09.320 to nine am Eastern. Subscribe to the podcast on Apple, 0:18:09.600 --> 0:18:12.440 Spotify or anywhere else you listen, and as always on 0:18:12.480 --> 0:18:14.960 the Bloomberg Terminal and the Bloomberg Business app.