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Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

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Speaker 2: This is the Blueberg Day BAQ podcast. Good morning, It's Friday,

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Speaker 2: the thirteenth of March. I'm Caroline Hepgat in London.

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Speaker 1: And I'm Stephen Caroline Brussels. Coming up today, Bloomberg sources

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Speaker 1: reveal that Russian intelligence is providing information for Iran's deadly

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Speaker 1: retaliation strikes.

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Speaker 2: Investors hunt for safe havens is the war shatters decades

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Speaker 2: old strategies.

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Speaker 1: Plus counting the cost The price of oil remains high

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Speaker 1: as fears over the economic costs grow in Europe.

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Speaker 2: Let's start with the roundup of our top stories.

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Speaker 1: Sources have told Bloomberg that Russian intelligence is supporting Iran's

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Speaker 1: retaliation against the US, Israel, and Golf allies. According to

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Speaker 1: people familiar with US and Western intelligence assessments, Moscow is

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Speaker 1: providing Tehran with information including satellite imagery and drone targeting tactics.

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Speaker 1: It remains unclear how timely or operation the effective that

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Speaker 1: intelligence has been. Russia has denied involvement. Evelyn Farcas is

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Speaker 1: the former US Deputy Assistant Secretary of Defense for Russia,

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Speaker 1: Ukraine and Eurasia.

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Speaker 3: It underlines the fact that Russia is our adversary. Russia

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Speaker 3: is aligned with China, with Iran and North Korea, against

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Speaker 3: the United States and its allies, including the golf allies

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Speaker 3: in this case, so there's no question that we should

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Speaker 3: be putting the squeeze on Russia.

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Speaker 1: Farcas's comments come as the US gave the green light

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Speaker 1: for more sales of Russian oil. It widens a temporary

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Speaker 1: waiver given last week to India, allowing buyers to purchase

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Speaker 1: Russian oil that's already on tankers at sea. US Treasury

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Speaker 1: Secretary Scott bess And called it a narrowly tailored, short

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Speaker 1: term measure to stabilize oil prices. However, it offers a

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Speaker 1: crucial financial windfall for Putin as the country struggles to

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Speaker 1: contain the financial strain from its war with Ukraine.

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Speaker 2: President Trump and Iran's new supreme leader have both delivered

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Speaker 2: defiant messages in the past twenty four hours. In a

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Speaker 2: social media post in the past few hours, President Trump

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Speaker 2: warned Iran to watch what happens today. He added, we

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Speaker 2: have unparalleled firepower onlimited ammunition and plenty of time. That

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Speaker 2: follows the first public statement from Mushteburg Harmony since succeeding

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Speaker 2: his father. He said that the Islamic Republic would seek

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Speaker 2: to ensure that the Strait of hull Moos remains shut.

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Speaker 2: That comes after US Treasury Sectary's Gott best And spoke

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Speaker 2: to Sky News about plans to escort tankers through the strait.

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Speaker 4: I believe that as soon as it is militarily possible,

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Speaker 4: the US Navy, perhaps with an international coalition, will be

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Speaker 4: escorting a vessels through.

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Speaker 2: Scott Best speaking there as disruption in the Strait of

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Speaker 2: hull Moos continues to throttle global ore supplies, with the

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Speaker 2: price of Brent hovering around one hundred dollars a barrel

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Speaker 2: this morning.

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Speaker 1: After fourteen days of strikes, the US and Israel are

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Speaker 1: struggling to dent Around's missile launching capacity. Israeli military officials

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Speaker 1: say two thirds of Iran's missile launchers have been destroyed,

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Speaker 1: little change from the sixty percent they reported last week.

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Speaker 1: Prime Minister Benjamin Ettanniaho says their strikes are creating the

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Speaker 1: conditions for regime change in Iran.

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Speaker 5: Soft yard I added another objective, which is to create

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Speaker 5: the conditions for the Iranian people to truly remove themselves

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Speaker 5: from this terrible tyranny regime. Creating the conditions does not

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Speaker 5: guarantee that it will happen. And I told now the

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Speaker 5: things I said a short moment ago. I said, it's

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Speaker 5: up to you.

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Speaker 1: Depends on you, Netanyahu. They're saying via translator that regime

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Speaker 1: change depends on the Iranian people. The UK government meanwhile

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Speaker 1: says that it has mounting evidence that Iran is laying

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Speaker 1: mines in the Strait of Hormuz, in a sign that

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Speaker 1: Tehran is looking to extend the war.

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Speaker 2: A refueling plane that was part of the American military

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Speaker 2: campaign against Tevan has crashed over western Iraq. US Central

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Speaker 2: Command says the plane wasn't shot down, but was instead

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Speaker 2: involved in an incident with another aircraft, which landed safely.

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Speaker 2: The statement gave no information about the crew or the

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Speaker 2: number of people on board.

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Speaker 1: The war in Iran has left investors trying to pinpoint

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Speaker 1: pockets of safety. That's as the situation forces investors to

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Speaker 1: look beyond traditional playbooks. Blinmbrooks t at a Bio has

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Speaker 1: the story.

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Speaker 6: The basic assumptions that have underpinned hedging strategies for decades

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Speaker 6: are being undone by the escalating war in Iran. Government bonds,

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Speaker 6: which typically rise during periods of market stress, and now

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Speaker 6: moving in the same direction of stocks, whilst oil markets

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Speaker 6: are going through unprecedented turmoil. The result, fund managers forced

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Speaker 6: to find new strategies, from selected equities to commodities like

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Speaker 6: aluminium and soybean oil. All of them are trying to

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Speaker 6: insulate against the stagflationary shock expected in the event of

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Speaker 6: lasting oil price increases. In London, Tiwa at a Baio

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Speaker 6: Bloomberg Radio.

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Speaker 2: Costs of war are driving up yields on longer dated

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Speaker 2: government bonds as worries about budget deficits grow. The thirty

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Speaker 2: year US treasury yield is close to four point nine percent,

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Speaker 2: the highest in a month. Former IMF Deputy Managing Director

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Speaker 2: Geita Gopinath, now a professor of economics at Harvard, says

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Speaker 2: the war may have further economic consequences if this continues.

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Speaker 7: Well passed a few weeks and we're looking at now

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Speaker 7: average for the year hitting eighty five. Now that's beginning

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Speaker 7: to shaw off like point three percentage point to global

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Speaker 7: growth point four percentage point, and global inflation starts going

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Speaker 7: up by fifty basis points sixty basis points.

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Speaker 2: Gita Gopinathur was speaking as global bonds have surrendered their

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Speaker 2: year to date gains, with yield spiking from the UK

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Speaker 2: to Germany, to Australia and Japan. Now economists see the

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Speaker 2: European Central Bank keeping interest rates unchanged through twenty twenty seven,

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Speaker 2: even as inflation threats resurface. A bloom Dug survey conducted

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Speaker 2: last week shows only seven percent of respondents expect a

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Speaker 2: move by December, and less than a third see any

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Speaker 2: tightening by the end of next year for the ECB.

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Speaker 1: In the United States, a man has been killed after

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Speaker 1: ramming his vehicle into the front doors of a synagogue

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Speaker 1: in Detroit, Michigan. Authorities say the crash set off an

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Speaker 1: exchange of gunfire with security officers. A fire ignited in

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Speaker 1: the vehicle, but nobody inside the building was hurt. Here's

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Speaker 1: Oakland County Sheriff Michael Bouchard.

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Speaker 8: No kids or no staff was injured whatsoever. Okay, So

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Speaker 8: we have no victims other than one of the lead

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Speaker 8: security people was hit by the car and was taken

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Speaker 8: to the hospital for treatment. That individual should be okay.

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Speaker 1: That's Oakland County Sheriff Michael Bouchard. Temple Israel describes itself

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Speaker 1: as the largest reform synagogue in the United States.

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Speaker 2: Those are our top stories for you this morning. Look

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Speaker 2: at the markets. All country Weld index is down two

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Speaker 2: tens and one percent, masci Asia Pacific Index down one percent,

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Speaker 2: the cos B is dropping one point nine percent. The

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Speaker 2: US and European stop futures though just a little bit

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Speaker 2: in the green. The worries around the escalation the warries

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Speaker 2: ahead of the weekend because the war in Iran are

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Speaker 2: very evident. Japanese yen falling to its weakest level since

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Speaker 2: July twenty twenty four. You've also got the dollar this

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Speaker 2: morning stronger a tenth of one percent. Inflation worries really

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Speaker 2: weighing on bond's tenuere Treasury yields this morning training at

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Speaker 2: four point eight nine percent. This is gold is up

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Speaker 2: by half of one percent this morning. And we have

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Speaker 2: major central bank decisions all to come next week, the FED,

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Speaker 2: the ECB, the Bank of Japan.

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Speaker 1: In a moment, we'll bring you more on Russia's links

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Speaker 1: to the Iran war, plus what the surge and energy

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Speaker 1: prices means for European economies. What another story that we've

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Speaker 1: been reading this morning on the use of AI in warfare.

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Speaker 1: Katrina Manson gives us an expert from her book Project Maven,

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Speaker 1: which is a behind the scenes look into how the

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Speaker 1: US military has been pursuing AI powered tools of war

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Speaker 1: for a decade. Now they are being used in the

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Speaker 1: Iran warr and allowing the US to attack one thousand

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Speaker 1: targets in the first twenty four hours. That's about twice

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Speaker 1: the scale of the Shock and Dog campaign in Iraq

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Speaker 1: in two thousand and three. But Katrina writes that the

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Speaker 1: military is hoping that the Maven smart system can reach

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Speaker 1: the point where it can identify and select one thousand

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Speaker 1: targets in a single hour. That's according to one source

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Speaker 1: that she spoke to. The military is also looking at

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Speaker 1: putting AI into one way attack drones that can locate

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Speaker 1: targets and carry out attacks even when communications have been severed.

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Speaker 1: This is a really interesting behind the scenes look at

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Speaker 1: how the technology is being implemented and has been worked

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Speaker 1: on for such a long period of time in the

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Speaker 1: US Defense Department. Of course, something that we've been talking

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Speaker 1: about in the context of the anthropic case against the

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Speaker 1: Department of Defense, who wanted guardrails put on the use

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Speaker 1: of their technology. But I mean it's pretty frightening.

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Speaker 2: Yeah, it is, frankly, but it is a hugely well researched.

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Speaker 2: There are lots of different companies that Katrina, you know

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Speaker 2: names that are involved in this space. I mean it

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Speaker 2: is the dawn of ai warfare. I mean to me,

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Speaker 2: as you say, it sounds a bit like the Manhattan

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Speaker 2: Project on steroids and what about oversight. What also struck

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Speaker 2: me is maybe that Iran perhaps is a bit of

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Speaker 2: a testing ground here and that Katrina has also been

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Speaker 2: reporting that US officials have been focused on twenty twenty

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Speaker 2: seven as the year that China's plans to have the

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Speaker 2: capability to take Taiwan. So yes, it's you know, we

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Speaker 2: are in a new era in the world.

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Speaker 1: Yeah, and a really interesting read. We'll put a link

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Speaker 1: to us in our podcast show notes for you. Let's

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Speaker 1: bring you more in no though. In our top story

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Speaker 1: in Russia's connections to the Iran War, the US Treasury

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Speaker 1: is allowing for more sales of Russian oil, while Bloomberg

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Speaker 1: has learned how Russian intelligence is supporting around. Tony Harpino

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Speaker 1: leads our team covering Russia and Ukraine. Joins US now

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Speaker 1: from more Tony firstly, on the oil moves. How significant

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Speaker 1: is this easing of restrictions on buying Russian oil after

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Speaker 1: what we heard around India just a couple of days ago.

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Speaker 9: It's a fairly limited waiver. It lasts for about a month,

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Speaker 9: and it's limited to Russian oil that's already on tankers

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Speaker 9: and at sea, So it's a fairly limited amount, maybe

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Speaker 9: a couple of days, two or three days worth of

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Speaker 9: golf supply that's been missing. But of course, as you've noted,

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Speaker 9: it's the second one after the waiver for India, and

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Speaker 9: the longer the conflictely in the Middle East goes on,

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Speaker 9: the more the pressure will grow. I think for sanctions

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Speaker 9: on Russian oil and energy in general to be lifted,

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Speaker 9: of course, that'll be a huge boon to the present pussion.

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Speaker 2: And yet what have we learned about the intelligence support

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Speaker 2: the Moscow is providing to Tehran?

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Speaker 9: Yes, I mean Russia and Iran. I've had close links

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Speaker 9: four years. Iran was an early supplier of drones that

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Speaker 9: Russia used when it first invaded Ukraine because it simply

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Speaker 9: didn't have its own. It's now copied those Iranian drones

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Speaker 9: and it's helping Iran with intelligence like satellite data to

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Speaker 9: spot targeting, and also giving some information about how they

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Speaker 9: use drones, these Iranian style drones to evade Western and

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Speaker 9: particularly American air defenses that have been used by Ukraine

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Speaker 9: to defend against them. So it's a kind of two

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Speaker 9: way channel. Really, they're giving the information and tactics that

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Speaker 9: they've developed in Ukraine, which they used initially Iranian drones

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Speaker 9: in order to develop those tactics, so Iran is now

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Speaker 9: reaping the benefit from that.

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Speaker 1: How is all of this affecting the war in Ukraine

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Speaker 1: and any hopes of ending that conflict.

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Speaker 9: Well, I think that there are not many prospects in

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Speaker 9: the near future for any big breakthrough. Ukraine is in

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Speaker 9: a slightly difficult position, of course, because it's concerned about

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Speaker 9: potential future weapons supplies if the US is distracted by

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Speaker 9: an ongoing war in the Middle East. But also I

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Speaker 9: think Ukraine is trying to capitalize on the moment by

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Speaker 9: supplying Golf nations with their expertise for anti drone technology,

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Speaker 9: so they're trying to win diplomatic support for whenever the

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Speaker 9: attention focuses again on finding some kind of diplomatic resolution

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Speaker 9: to this war.

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Speaker 2: Tony, thank you for being with us and for yes

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Speaker 2: explaining that situation. Tony Halpin leads our team covering Russia

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Speaker 2: and Ukraine. Stay with us. More from Bloomberg daybaqube coming

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Speaker 2: up after this.

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Speaker 1: Almost two weeks since this war started, fears of another

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Speaker 1: energy crisis are rippling through Europe. Oil and gas features

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Speaker 1: have jumped sharply, and government bond yields have also surged.

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Speaker 1: But a new Bloomberg survey of economist shows that they're

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Speaker 1: not expecting the ECB to raise interest rates until twenty

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Speaker 1: twenty eight. Our chief Euro Area economist, Simona Delahai, joins

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Speaker 1: us now for more. Simona, good morning. Broadly speaking, how

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Speaker 1: is this war affecting economies across Europe so far?

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Speaker 10: The most immediate economic consequences, of course, has been the

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Speaker 10: disruption to global energy flows and the surge and energy prices.

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Speaker 10: And as you know, Europe is particularly vulnerable. Even though

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Speaker 10: we diversified away from Russia gas after the Ukraine invasion,

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Speaker 10: it still relies heavily on imported oil and gas, and

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Speaker 10: gas remains crucial a crucial part of the energy mix,

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Speaker 10: especially in countries like Germany and Italy. On top of that,

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Speaker 10: electricity costs are already elevated across much of the region.

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Speaker 10: I think it's still too early to full assess the

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Speaker 10: microeconomic impact, but households are already likely see some effect,

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Speaker 10: particularly bump or the energy builds in March.

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Speaker 2: How differently do you think it is to twenty twenty two.

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Speaker 10: Well, of course, the combination of rising oil and gas

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Speaker 10: prices together with the supply distructions is understandably steering and

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Speaker 10: comfortable memories across Europe. But I think there are reasons

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Speaker 10: to believe this episode looks different from the inflection and shock

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Speaker 10: of twenty twenty two. There are military reasons. First, europe

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Speaker 10: direct exposure Tokutari is far more limited than its exposure

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Speaker 10: to Russia was three years ago. Back then, Europe depended

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Speaker 10: heavily on a single domino suppliers for papeline gas, and

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Speaker 10: today supplies much more diversified and LNG infrastructure is expanded

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Speaker 10: as well. But most importantly is the broader mic economic

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Speaker 10: background that is a very different. Russian invasion of Ukraine

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Speaker 10: hit energy market at the time of very constrained global supply,

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Speaker 10: pent up demand and monetary policy in fiscal policy where

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Speaker 10: high expensionary, a combination that amplify inflationary pressure. So if

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Speaker 10: you think about today, those exceptional conditions are no longer

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Speaker 10: in place, Monetary policy in the Uter Area is likely

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Speaker 10: close to neutral. Fiscal policy if Germany is no longer expansionary,

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Speaker 10: and very importantly, the liberal market is no longer tied.

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Speaker 10: Actually we see sign of coolie. So I think the

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Speaker 10: new energy shockle headline in fission in the short term,

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Speaker 10: but the risk of broad based and persistent searge appears

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Speaker 10: more limited at least for now.

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Speaker 1: Markets are worried about inflation, and we've seen this big

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Speaker 1: jump in government bond deals that increases borrowing costs for

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Speaker 1: governments across Europe. How much of a strain does that

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Speaker 1: put on budgets in places like France.

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Speaker 10: Yeah, of course this is a worrying sign of higher

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Speaker 10: heels to increase depth servicing cost especially for high in

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Speaker 10: debted countries like France. As bond major government has to

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Speaker 10: refinance at higher rates and the gradually fits into their budget,

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Speaker 10: So dep servicing costs already projected to remain elevated and

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Speaker 10: increasing in the coming years. As a country like France

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Speaker 10: and Italy. I would say also that the fiscal space

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Speaker 10: for policy support now remain limited that there was another

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Speaker 10: important factor in two thousand and two that pushed that higher,

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Speaker 10: so elevated that level. So country like Frants now now

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Speaker 10: pressure to consult the public. Famini fantasies and the European

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Speaker 10: rules restrict large scale support. So I think some sudd

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Speaker 10: impact on deb on public app. It will depend how

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Speaker 10: long this shock will last.

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Speaker 1: This is Bloomberg Daybreak Europe, your morning brief on the

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