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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg

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Speaker 1: Dabat podcast, available every morning on Apple, Spotify or wherever

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Speaker 1: you listen. It's Monday, the fifteenth of April in London.

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Speaker 1: I'm Caroline Hepka and.

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Speaker 2: I'm Stephen Carroll. Coming up today, Israel grapples with how

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Speaker 2: to respond to Iran after the weekend's unprecedented miss island

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Speaker 2: drone attack as world leaders urge restraint.

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Speaker 1: Oil prices hold steady on speculation that the conflict can

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Speaker 1: be contained, but gold continues to rise.

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Speaker 2: And in other news, Apple's iPhone shipments drop by ten

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Speaker 2: percent as sales of android rivals rise.

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Speaker 1: Let's start with a round up of our top stories.

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Speaker 1: A global diplomatic effort is underway to try to avoid

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Speaker 1: a full blown regional war in the Middle East. Iran

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Speaker 1: fired more than three hundred drones and missiles against Israel

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Speaker 1: on Saturday evening. Almost all were intercepted before they reached

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Speaker 1: it airspace, and there were no fatalities reported Israel As

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Speaker 1: President it' zach Herzog says his country is still considering

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Speaker 1: its response, but there will be one.

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Speaker 3: This is a declaration of that because we are restrained

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Speaker 3: and because we know the repercussions, and because we have

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Speaker 3: deliberations with our partners, we are considering all options. We

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Speaker 3: are not war.

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Speaker 1: Secret Herzog's comments came as Tehran sought to draw a

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Speaker 1: line under the attack, which it says was retaliation for

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Speaker 1: the strike on its diplomatic compound in Damascus earlier this month.

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Speaker 1: It said that there would be no furthest attacks as

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Speaker 1: long as Israel didn't respond aggressively. At an emergency meeting

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Speaker 1: of the United Nations Security Council, UN Secretary General Antonio

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Speaker 1: Guteris called on all sides to de escalate tensions.

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Speaker 4: Middle East is on the brink. The people of the

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Speaker 4: region are confronting a real danger of a devastating, full

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Speaker 4: scale Now is the time to defuse and the escalate.

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Speaker 4: Now is the time for maximum restraints.

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Speaker 1: Guterres's call was echoed by G seven leaders in a statement.

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Speaker 1: They condemned what they described as Iram's direct and unprecedented

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Speaker 1: attack against Israel and said that they will now work

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Speaker 1: to stabilize the situation and avoid further escalation.

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Speaker 2: The United States has ruled out involvement in any retaliation

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Speaker 2: against Iran for the miss Island drone attack. However, there

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Speaker 2: is now growing political momentum in Washington to provide Israel

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Speaker 2: with significant additional military aid. Speaking to Fox News, Republican

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Speaker 2: House Speaker Mike Johnson said he expects there will be

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Speaker 2: a vote this week.

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Speaker 5: The House Republicans and the Republican Party understand the necessity

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Speaker 5: of standing with Israel. We're going to try again this week,

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Speaker 5: and the details of that package are being put together

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Speaker 5: right now. We're looking at the options and all these

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Speaker 5: supplemental issues.

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Speaker 2: In that interview with Fox News, Johnson also indicated that

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Speaker 2: funds for Ukraine could be part of the package. Earlier

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Speaker 2: this year, the setup pasay ninety five billion dollar package

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Speaker 2: that included support for both Israel and Ukraine.

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Speaker 1: The reaction on oil markets to the weekends events has

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Speaker 1: so far been muted, with many analysts seeing the conflict

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Speaker 1: as remaining contained for now, but an escalation could push

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Speaker 1: prices past one hundred dollars a bowl. Aaron David Miller,

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Speaker 1: who is a senior fellow at the Carnegie Endowment for

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Speaker 1: International Peace, sums up the consensus view, We're going.

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Speaker 6: To get through this without what I would describe to

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Speaker 6: as a major regional war. Something the Middle East has

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Speaker 6: never seen before, something that would create spiking oil prices,

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Speaker 6: plunging financial markets, and a degree of instability across the region.

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Speaker 1: Miller also highlights the risks of a wider conflict as

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Speaker 1: the Middle East produces about a third of the world's

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Speaker 1: crude oil. Brentfrude is already up almost twenty percent this

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Speaker 1: year as OPEC plus has tightened supply. There are also

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Speaker 1: fears of disruption to the key shipping route through the

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Speaker 1: Red Sea after Iran sees the container vessel traveling through

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Speaker 1: the Strait of Hormuz on Saturday.

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Speaker 2: To other news, the iPhone is falling behind its Android

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Speaker 2: rivals in the race for the global smartphone market. That's

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Speaker 2: despite the sexual recording some of its best growth in years.

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Speaker 2: Bloomberoks teaa at a Bio has the details.

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Speaker 7: The worldwide mobile market is rebounding, enjoying its best growth

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Speaker 7: in years. That will be little consolation to Apple, though,

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Speaker 7: after it saw iPhone shipments for by ten percent in

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Speaker 7: the first three months of the year. It's a drop

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Speaker 7: that puts the company behind analyst expectations by more than

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Speaker 7: a million units. Muted sales in China after a ban

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Speaker 7: on foreign devices could be behind the decline, which saw

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Speaker 7: Apple outpaced by rival Samsung. As home to the company's

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Speaker 7: biggest retail network outside the US, Apple will need to

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Speaker 7: do more to recapture its Chinese fans. In London, tiwa

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Speaker 7: at a Bio Bloomberg.

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Speaker 1: Radio, Aluminium and Nicolas spiking on the London Metal Exchange

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Speaker 1: after sanctions against the US and UK imposed a ban

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Speaker 1: on deliveries of any Russian supplies after midnight last Friday

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Speaker 1: in a bid to inhibit the funding for Vladimir Putin's

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Speaker 1: war in Ukraine. Aluminium jumped as much as nine point

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Speaker 1: four percent and Nicol was not far behind, suggesting that

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Speaker 1: traders are bracing for major disruption. Russian metal accounted for

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Speaker 1: ninety one percent of LME stockpiles at the end of March.

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Speaker 1: The escalation of hostilities in the Middle East could also

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Speaker 1: stoke volatility across the sector.

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Speaker 2: Germany, as Olave Schultz has arrived in China with a

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Speaker 2: difficult message act soon or face EU tariffs. Europe's increasingly

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Speaker 2: wary of China's use of massive public support and critical sectors,

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Speaker 2: and has been toughening its stance in recent months. A

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Speaker 2: chief in the North Asia correspondent Stephen Engel explains how

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Speaker 2: that puts Germany in a tough position. As China's largest

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Speaker 2: global trading partner.

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Speaker 8: He has to listen to the concerns of the German businesses,

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Speaker 8: two out of three in a German Chamber of Commerce

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Speaker 8: of China a survey saying, look, they're facing unfair competition

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Speaker 8: in the China market. So there are these concerns. And

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Speaker 8: this is at a time as well where other EU

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Speaker 8: leaders are discussing and really threatening the potential for tariffs

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Speaker 8: on evs and the like. So he's going to have

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Speaker 8: to really walk a very tricky balancing act.

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Speaker 2: Angel notes that a few weeks after Schultz's visit, France's

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Speaker 2: Emmanuel Macron is also set to travel to Beijing.

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Speaker 1: And those are our top stories. In terms of the

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Speaker 1: markets this morning, stock futures for Europe are actually higher,

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Speaker 1: up four tenths of one percent through a stocks fifty futures.

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Speaker 1: The MSCI Asia Pacific Index is down by eight tenths

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Speaker 1: of one percent, and tenure US treasury yield this morning

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Speaker 1: trading a four point five six percent, up by full

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Speaker 1: basis points.

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Speaker 2: There's coverage across Bloomberg this morning of the continued reaction

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Speaker 2: to the weekend's attack on Israel. There is a live

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Speaker 2: blog tliv is the function on the terminal. It's also

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Speaker 2: on the Bloomberg website as well, looking at all of

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Speaker 2: the various aspects of this already. Just one piece I've

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Speaker 2: noted out from one of our reporters in Iran, Arsan Shallow,

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Speaker 2: reporting this morning that Iran has lifted a suspension on

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Speaker 2: domestic and international flights from its capital. Early this morning.

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Speaker 2: It had imposed restrictions on flights in the airspace over

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Speaker 2: the weekend due to fears of the Israel and Israeli

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Speaker 2: reprisal for the missile drone barrage. Of course, there has

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Speaker 2: been a significant disruption two flight paths since the weekend

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Speaker 2: events as well.

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Speaker 1: Yeah. Absolutely, Look, this is the first direct attack by

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Speaker 1: Iran against Israel ever, and so we should dive into

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Speaker 1: what the Israeli response to the attack over the weekend

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Speaker 1: from Tehran might be. The UN Security Council met on

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Speaker 1: Sunday in New York, where the US said that it

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Speaker 1: would explore ways to hold Iran accountable for its actions

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Speaker 1: at the UN. Bloomberg's Israel Bureau chief Ethan Baruna joins

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Speaker 1: US now from Tel Aviv. Good morning, Ethan. Israel's defenses

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Speaker 1: held up against the barrage on Saturday night by Iran.

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Speaker 1: How are we expecting Israel to respond to this?

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Speaker 9: Well, it's, as you can imagine, still under a very

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Speaker 9: intense debate. There was a three hour war cabinet meeting

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Speaker 9: last night that ended inconclusively as far as we can tell.

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Speaker 9: I think that probably we will not see and the

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Speaker 9: Iran seems to understand that by having opened its airspace,

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Speaker 9: we will not see an immediate major response. And Israel,

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Speaker 9: by the way, announced that it's opening its schools this

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Speaker 9: morning after having closed them yesterday out of fear. So

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Speaker 9: it's clear that the American desire for the Israelis not

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Speaker 9: to jump is being listened to. I think the Israelis

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Speaker 9: have felt the warm embrace of the United States again

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Speaker 9: after many weeks of cold relations, and that's in playing

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Speaker 9: a role. And I think also that they like the

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Speaker 9: idea of able to choose what to do next rather

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Speaker 9: than jumping.

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Speaker 2: You mentioned some with the international pressure there on his

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Speaker 2: But how much domestic pressure is there on Prime Minister

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Speaker 2: in Nesena, who too act to respond.

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Speaker 9: I think it's pretty limited. That kind of pressure is

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Speaker 9: coming from the far right, which is not negligible in

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Speaker 9: this country, but it is not the majority. I think

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Speaker 9: that the fact that there was not any death here.

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Speaker 9: There was a seven year old girl who's fighting for

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Speaker 9: her life who was hit by shrapnel, but other than that,

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Speaker 9: no casualties and no genuine damage to its military facilities

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Speaker 9: that were attacked. That has given Israel as sense of

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Speaker 9: accomplishment and relief and not a need for instantly responding.

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Speaker 9: And then those other factors were playing a role, which

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Speaker 9: is there's some fatigue and there's some desire to not

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Speaker 9: alienate the United States, and I think the general idea

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Speaker 9: that you know, you pick your response, you don't jump

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Speaker 9: makes sense. And also trying to figure out what exactly

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Speaker 9: this means. The fact that Iran has chosen the first

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Speaker 9: time in the forty plus year history of the Shadow

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Speaker 9: War to act openly, I think is requiring people to

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Speaker 9: analyze what this means.

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Speaker 1: There is though, concern that even if it is slow,

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Speaker 1: that for tat the escalations are building potentially into a

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Speaker 1: regional conflict. How much influence do you think the United

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Speaker 1: States has to prevent further escalation and the fear of

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Speaker 1: an out and out war in the Middle East.

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Speaker 9: Well some, but I mean those fears are legitimate and real.

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Speaker 9: There's be ridiculous to say that they are not important.

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Speaker 9: And you know, many conflagrations occur because of people sort

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Speaker 9: of backing into them rather than going and willingly, so

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Speaker 9: I think it's a very legitimate concern. You know, one

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Speaker 9: of the things about Saturday night is that one hundred

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Speaker 9: and twenty ballistic missiles came flying at Israel and they

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Speaker 9: were able to stop them. But imagine if one had

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Speaker 9: gotten through and killed people. We'd be having a very

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Speaker 9: different conversation. So it's not there's no question that this

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Speaker 9: is a very very volatile situation.

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Speaker 2: What does all of this mean Ethan for the war

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Speaker 2: in Gaza Israe, As you mentioned, it had been attracting

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Speaker 2: increased criticism for its conduct there before the events of

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Speaker 2: this weekend.

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Speaker 9: I think that's a great question, and it's something we

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Speaker 9: need to be watching very closely in the coming days.

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Speaker 9: My instinct, without yet enough evidence, is that the hardliners

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Speaker 9: here who are demanding gratification to go after Iran, they

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Speaker 9: will be answered by being told that, well, Israel is

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Speaker 9: not going to do that, but it's going to redouble

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Speaker 9: his efforts in Gaza. Now, of course, by doing that,

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Speaker 9: and there's this question of going into Rafa, they could

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Speaker 9: alienate the United States again. But I'm guessing that they'll

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Speaker 9: be able to cut a deal with the US. But

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Speaker 9: we shall see. I think that is the big question.

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Speaker 9: Two reserve divisions have been called up in the last

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Speaker 9: twenty four hours. One has to assume it's related to Gaza.

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Speaker 9: But I think these decisions are just being made now,

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Speaker 9: and I think that we should keep our eyes on Gaza.

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Speaker 8: You're quite right.

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Speaker 1: Also, the border with Lebanon hasbaline in Lebanon. I mean

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Speaker 1: the attack by Iran was not followed out by other

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Speaker 1: proxies in other on other borders into Israel. What do

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Speaker 1: we know about the risk of escalation there and the

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Speaker 1: situation with these other Iran backed groups.

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Speaker 9: Well, I mean there were right, so there were missiles

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Speaker 9: that came into Israel on Saturday night from other parts

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Speaker 9: of the Middle East, from Syria and Iraq and from Yemen.

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Speaker 9: These are all malicias that are proxies of Iran. But

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Speaker 9: you're right then, in terms of his beloved there was

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Speaker 9: a summer strength there. But on the other hand, of course,

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Speaker 9: that's the other big issue for Israel is that it

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Speaker 9: has seventy or eighty thousand people who can't live in

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Speaker 9: their homes in the north because of this sort of

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Speaker 9: middle level war going on between Israel and his Bolah

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Speaker 9: and I and you know again, it's sort of we

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Speaker 9: need to go back to Gaza because Hisbola claims that

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Speaker 9: it's going to do what it has to do only

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Speaker 9: after there is it will negotiate only after there is

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Speaker 9: a piece deal in Gaza, which does not seem imminent.

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Speaker 9: So all of these pieces of a puzzle are related.

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Speaker 9: And you and indeed Hisbola and Northern Israel southern Lebanon

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Speaker 9: are another very volatile battleground.

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Speaker 2: Definitely, Okay, Ethan bron Our Israel bi Riti, thank you

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Speaker 2: very much for joining us this morning. And of course

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Speaker 2: there's plenty to read on Bloomberg dot com and on

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Speaker 2: the terminal from Ethan and our colleagues in Israel, including

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Speaker 2: that race to avert a full blown war. Today is

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Speaker 2: a big take report from Bloomberg.

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Speaker 1: Now turning our attention to what the implications of this

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Speaker 1: perilous situation might be for macroeconomics, for oil prices in

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Speaker 1: particular and inflation around the world. Many analysts are trying

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Speaker 1: to understand this. Joining us now is our senior energy

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Speaker 1: report to Stephen Stepchinski. Good morning, Stephen. All has been

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Speaker 1: one of the strongest performers in copulities this year. The

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Speaker 1: reaction though more muted now to Iran's attack. But what

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Speaker 1: are the concerns for oil markets?

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Speaker 10: I mean, I think the real concern. You know, you've

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Speaker 10: heard how how everyone is kind of trying to get

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Speaker 10: Israel to to have a restraint approach or response to

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Speaker 10: the attack over the weekend. I think it's really the

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Speaker 10: response from Israel's government to Iran will determine whether, you know,

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Speaker 10: this leads to a wider conflict. And that's what the

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Speaker 10: oil market is looking at right now. They're really looking

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Speaker 10: and closely watching risks of escalation, and right now oil

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Speaker 10: prices are are pretty steady. They're quite a muted response

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Speaker 10: for historic strike on Israel because they're they're the market

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Speaker 10: is essentially pricing that there won't be any larger escalation now. Nothing,

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Speaker 10: of course, is sentenced, and it's very hard to predict

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Speaker 10: what can happen from here, but analysts are essentially saying

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Speaker 10: that the oil market is breathing a sigh of relief,

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Speaker 10: especially on Friday. I think a lot of traders were

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Speaker 10: exiting their short positions. They weren't sure what was going

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Speaker 10: to happen, and the worst case scenario did not play out.

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Speaker 10: But of course risk still exists in the Middle East

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Speaker 10: and the conflict is ongoing. So now it's sort of

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Speaker 10: the balls in Israel's court to see how the oil

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Speaker 10: market will react.

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Speaker 2: What does this mean in terms of supply, Stephen, So.

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Speaker 10: So far supply is unaffected. Iranian crew production has had

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Speaker 10: a tumultuous decade. Of course it's already been hit by

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Speaker 10: US sanctions, but their production has risen more than twenty

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Speaker 10: percent over the last two years. They produce about three

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Speaker 10: point four million barrels a day, which makes up about

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Speaker 10: three point three percent of global supply, which is not nothing,

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Speaker 10: and a lot of the oil still because despite the sanctions,

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Speaker 10: make its way into the market to China and other places.

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Speaker 10: So the Iranian oil is still flowing. But if there

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Speaker 10: is a larger conflict, then perhaps out at risk.

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