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

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Speaker 2: This is the Bloomberg Day Bake You At podcast. Good morning,

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Speaker 2: It's Tuesday, the third of March. I'm Caroline Hepkeat in

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Speaker 2: London and.

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Speaker 1: I'm Stephen Carolin Brussels. Coming up today. US President Donald

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Speaker 1: Trump vows to do whatever it takes on Iran as

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Speaker 1: the conflict reverberates across the Middle East.

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Speaker 2: Mark its way a possible energy crisis as strikes on

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Speaker 2: all in gas facilities revive inflation fears.

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Speaker 1: Plus a flight to safety. Gulf airlines resume limited flights

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Speaker 1: as the widening conflict triggers an unprecedented airspace shutdown.

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Speaker 2: Let's start with a round up of our top stories.

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Speaker 1: Strikes are continuing across the Middle East this morning, as

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Speaker 1: the Iran war enters its fourth day. More blasts have

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Speaker 1: been heard in Israel, Lebanon, Qatar, the UAE, and in

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Speaker 1: Saudi Arabia, where two drones that struck near the US

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Speaker 1: embassy in read President Trump insists there is no fixed

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Speaker 1: timeline for US military action against Iran.

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Speaker 3: We have the strongest and most powerful, by far military

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Speaker 3: in the world, and we will easily prevail. We're already

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Speaker 3: substantially ahead of our time projections. But whatever the time is,

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Speaker 3: it's okay, whatever it takes.

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Speaker 1: President Trump and his team have refused to rule out

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Speaker 1: putting American boots on the ground. He sold right leaning

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Speaker 1: news outlet News Nation that he believes it's unlikely to

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Speaker 1: be necessary. Secretary of State Mark Rubio says the US

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Speaker 1: military will now be stepping up its attacks against Iran.

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Speaker 4: The next phase will be even more punishing on Iran

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Speaker 4: than it is right now. Someone was streaming, how long

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Speaker 4: will it take? I don't know how long it'll take.

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Speaker 4: We have objectives. We will do this as long as

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Speaker 4: it takes to achieve those objectives, and we will achieve

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Speaker 4: those objectives. The world will be a safer place when

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Speaker 4: we're done with this operation.

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Speaker 1: Marco Rubio was speaking as US Defense Secretary Pete Hagseth

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Speaker 1: rejected the idea that the conflict could turn into an

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Speaker 1: endless war, saying this is not Iraq, and our generation

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Speaker 1: knows better, and so does this President.

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Speaker 2: The US military now says that it has a superiority

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Speaker 2: over Iran and that its strikes have destroyed Iranian facilities,

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Speaker 2: including command and control sites and missile launch locations. Israel

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Speaker 2: has announced a new wave of strikes targeting the command

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Speaker 2: centers of Iran's Interior Security and Ministry of Intelligence. Iran

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Speaker 2: continued to fire projectiles across the Middle East in response

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Speaker 2: to the US Israelia tag. Ala Reza Arafi, a member

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Speaker 2: of Iran's Interim Leadership Council, is defant. His words here

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Speaker 2: are spoken through a translators Shirina piro Zira.

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Speaker 5: The Iranian nation will undoubtedly taste the sweet honey of victory.

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Speaker 5: We are now in a fate for situation from which

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Speaker 5: we can successfully emerge with the help of the.

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Speaker 2: People, Alireza Arafi speaking there as waves of drone at

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Speaker 2: tags by the Islamic Republic put pressure on the defenses

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Speaker 2: of the United States and its partners from Bahrain to

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Speaker 2: the UAE. US made Patriot air defense missiles have been

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Speaker 2: largely successful in stopping the Iranian drones, but the sustained

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Speaker 2: use of costly four million dollar missiles to destroy twenty

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Speaker 2: thousand dollar drones risks depleting weapons stockpiles in the coming days.

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Speaker 2: The US State Department has urged Americans to leave countries

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Speaker 2: across the Middle East, citing serious safety risks. Amidst the

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Speaker 2: escalating conflict.

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Speaker 1: The United Arab Emirates and Qatar are privately lobbying allies

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Speaker 1: to help persuade President Trump to find a way out

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Speaker 1: of the conflict with Iran. The two countries want to

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Speaker 1: prevent a regional escalation and a prolonged energy price shock.

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Speaker 1: Ua and Katar are trying to build a wide coalition

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Speaker 1: to press for the US military operation they're against Iran

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Speaker 1: to be short and to find a diplomatic end to

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Speaker 1: the conflict. Uees President Muhammad bin Zayed al Nahin and

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Speaker 1: the Katari Emir tamm Bim Madaltani have spoken with a

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Speaker 1: number of European leaders in recent days, including the UK's

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Speaker 1: Kirs Starmer, Francis Emanuel Marconn and Germany's Friedrich Meritz.

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Speaker 2: Now the UK Prime Minister Kiss Starmer implied that the

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Speaker 2: US war in Iran is unlawful and poorly planned. In

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Speaker 2: a clear sign of the growing rift between the two countries,

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Speaker 2: he told the Parliament that the government would not be

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Speaker 2: involved in any offensive on Iran.

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Speaker 6: We all remember the mistakes of Iraq and we have

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Speaker 6: learned those lessons. Any UK actions must always have a

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Speaker 6: lawful basis and a viable thought through.

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Speaker 2: Flat Starma has allowed UK military basis to be involved

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Speaker 2: in limited strikes to take out Iranian missile launchers. But

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Speaker 2: the comments are in a line in the sand from

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Speaker 2: one of Europe's leaders who has tried the hardest to

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Speaker 2: stay close to the US President. However, US Defense Secretary

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Speaker 2: Pete Hegseith yesterday hit out at America's traditional allies.

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Speaker 7: Capable partners are good partners, unlike so many of our

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Speaker 7: traditional allies who wring their hands and clutch their pearls,

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Speaker 7: hemming and hawing about the use of force. America, regardless

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Speaker 7: of what so called international institutions say, is unleashing the

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Speaker 7: most lethal and precise air power campaign in history.

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Speaker 2: Heg Seth added in the press briefing that there would

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Speaker 2: be quote no stupid rules of engagement and no democracy

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Speaker 2: building exercise when it comes to Iran. But the UK

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Speaker 2: government's view is the latest sign that America's closest allies

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Speaker 2: in Europe are deeply wary of its approach to the

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Speaker 2: Middle East.

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Speaker 1: Global oil benchmark brand Crude is rising further today, close

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Speaker 1: to eighty dollars a barrel, as Bloomberg intelligence as warrant

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Speaker 1: prices could top one hundred dollars a barrel in a

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Speaker 1: worst case scenario of shipping disruption and strikes on energy facility. Meanwhile,

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Speaker 1: European natural gas prices have surged as much as fifty

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Speaker 1: four percent after cut our shot production at the world's

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Speaker 1: largest LNG export facility. The situation leaves global energy supplies

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Speaker 1: facing a worst case scenario as a crisis looms closer

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Speaker 1: the longer that the conflict continues. Anna Paglia, executive vice

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Speaker 1: president at the State Streets, as investors are trying to

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Speaker 1: make sense of the moves, I.

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Speaker 8: Don't think it's only fear. I think it's a fear

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Speaker 8: and the opportunity investors look at the short term gains

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Speaker 8: and the long term a ways to mitigate volatility. And

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Speaker 8: this is why you see this is almost a neutral

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Speaker 8: trades in spy spies like might bet on the US market.

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Speaker 1: State Streets Anapaglia, speaking yesterday, as oil supertanker rates for

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Speaker 1: transit between the Middle East and China swart to the

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Speaker 1: highest level on record.

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Speaker 2: The eround war is rekindling inflation concerns across markets, darkening

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Speaker 2: the outlook for global despite a record year. Traders have

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Speaker 2: been offloading government dead as they consider how the conflict

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Speaker 2: could ramp up oil prices and cost pressures. According to

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Speaker 2: JP Morgan's CEO Jamie Diamond, it's a major threat.

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Speaker 1: We look at risk, we.

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Speaker 9: Look at the broad range of outcomes and there are

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Speaker 9: negative outcomes, but one of them would be you know,

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Speaker 9: inflation called that's the skunk at the party. So it's

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Speaker 9: been coming down, but it seems to maybe leveled off

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Speaker 9: around three percent. If things make it go up, and

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Speaker 9: this is only one thing. Now, you can look at

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Speaker 9: medical prices, construction prices, insurance prices, wages for certain things,

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Speaker 9: other things.

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Speaker 1: You know, inflation is a big thing.

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Speaker 9: It's not just oil.

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Speaker 2: JP Morgan's Jamie Darmond speaking to Bloomberg then, as the

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Speaker 2: former US Treasury Secretary Janet Yellen predicted an increase in

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Speaker 2: inflation pressures depending on the length of the Iran conflict,

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Speaker 2: a Bloomberg gage of global bonds slid zero point eight

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Speaker 2: percent on Monday, the biggest one day loss since.

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Speaker 1: May, and against an uncertain global backdrop. The UK's Chancellor,

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Speaker 1: Rachel Reeves will deliver her spring statement at twelve thirty

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Speaker 1: today London time. Bloomberg Tewan Parts has more.

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Speaker 10: The Chancellor had long planned this has nothing to see

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Speaker 10: here statement after her pledge to deliver only one major

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Speaker 10: tax and spend package each year. But events in the

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Speaker 10: Middle East have thrown economic forecasts and the government's spending

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Speaker 10: plans back into the limelight, which old Rachel Reeves will

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Speaker 10: say that the world has become yet more uncertain. Soaring

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Speaker 10: global oil and gas prices have the potential to upset

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Speaker 10: forecasts for inflation and therefore the nitom outlook for interest

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Speaker 10: rates and recent good news on tax receipts is already

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Speaker 10: starting to look like yesterday's story in London. I'm youwing

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Speaker 10: pots Bloomberg Radio and.

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Speaker 1: We'll have live coverage of Rachel Reeves a spring statement

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Speaker 1: on Bloomberg Radio and television for our audiences in the UK.

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Speaker 2: Now, let's look at the markets. Those were our top stories.

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Speaker 2: So stock losses are deepening and bonds selling off as

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Speaker 2: the conflict in Iran escalade. So European stock six hundred

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Speaker 2: yesterday fell by one point six percent. Automotive, travel and

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Speaker 2: leisure shares hit hard. Energy stocks were up, though US

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Speaker 2: and European stock futures are deeply in the red. This morning.

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Speaker 2: MSCI ASH Pacific index is down two point eight percent,

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Speaker 2: but look at the costb dropping six point eight percent

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Speaker 2: this morning. One of the best performing stock markets seeing

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Speaker 2: a huge decline. Brent is now just shive eighty dollars

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Speaker 2: a bottle after spiking seven percent on Monday. Markets pricing

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Speaker 2: in fewer US rate carts because of those inflation fears.

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Speaker 2: You had US treasury yield surging on Monday up on

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Speaker 2: other two basis points today. Gold on Monday was up

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Speaker 2: seven tenths but actually were slightly softer on bullion this morning.

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Speaker 2: The next few weeks are going to be very crucial

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Speaker 2: really also for the whole health of the European economy.

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Speaker 2: Those are the markets.

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Speaker 1: Well, in a moment, we'll bring you the latest on

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Speaker 1: the growing conflicts between around the US and Israel, as

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Speaker 1: well as the ongoing disruption to flights across the Gulf

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Speaker 1: region and how that's impacting global flight patterns as well.

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Speaker 1: But another story that we've been reading this morning about

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Speaker 1: how prediction markets are seeing a record surge in bets

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Speaker 1: over the war in the Middle East. So Emily Nicole

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Speaker 1: reports on how conflict related bets on Polymarket, one of

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Speaker 1: the key platforms in this area, hit over four hundred

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Speaker 1: and twenty five million dollars last week. Now that was

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Speaker 1: more than double the previous week. This growth is coming

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Speaker 1: as critics question the legality and the ethics of betting

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Speaker 1: on military conflict. And this is as of course, regulators

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Speaker 1: are adapting to this rapidly developing platform and technology as well.

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Speaker 1: US regulations are broadly understood to prohibit financial contracts tied

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Speaker 1: to war, but Polymarkets main exchange operates offshore and outside

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Speaker 1: the oversight of US regulators. Different challenges being faced by

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Speaker 1: the platform Calshi. It says it doesn't offer markets that

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Speaker 1: settle on death, but it had to reimburse all fees

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Speaker 1: and losses on bets over whether come and I would

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Speaker 1: still be Supreme Leader of Iran. This is something that

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Speaker 1: is drawing a lot of criticism for these platforms as

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Speaker 1: well and asking more questions about regulation too.

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Speaker 9: Yeah.

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Speaker 2: Absolutely, this has had a lot of attention over recent

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Speaker 2: weeks and the kind of concerns about this growing business

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Speaker 2: that has the backing of some very large players. It's

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Speaker 2: got to be said, you know, is confronting a set

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Speaker 2: of ethics that, to be honest, is old, but is

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Speaker 2: coming back to the fore for this new industry of

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Speaker 2: online betting effectively on political and other global events and

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Speaker 2: the risks around that.

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Speaker 1: Yeah, it's certainly really interesting reporting from our colleagues on

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Speaker 1: that front as well. But a link to Emily story

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Speaker 1: in our podcast show notes.

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Speaker 2: Now, let's bring you the latest and an updata on

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Speaker 2: the developments in the Middle East this morning. Our Middle

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Speaker 2: East Breaking News editor Patrick's Sykes joins us. Now, Patrick,

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Speaker 2: what is the latest this morning in terms of the strikes.

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Speaker 11: Either, Yeah, we know that Iran has been targeting US

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Speaker 11: based in Bahrain this morning. We also saw in the

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Speaker 11: past couple of hours those reports of drone strikes on

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Speaker 11: US embassy in Riard in Saudi The US is saying

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Speaker 11: it's destroyed some IOGC command and control facilities, so it's

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Speaker 11: not exactly clear aware and the extent of that. I

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Speaker 11: think now attention is turning to the stockpiles right both

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Speaker 11: on the Iranian side, how many missiles they have available

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Speaker 11: to fire, and on the Israeli and the Gulf Arab

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Speaker 11: country side, how many interceptors they have to potentially defend

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Speaker 11: against those attacks. Trump interestingly said that the US is

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Speaker 11: not where we want to be in some weapons stockpiles.

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Speaker 11: But I think that the mass of that is going

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Speaker 11: to be a really key determinant of how things proceed.

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Speaker 1: And Marko Rubia, the Secretary of Stay, saying that the

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Speaker 1: hardest hits yet to come. What does the timeline for

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Speaker 1: this US military action look like now?

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Speaker 11: Yeah, the US saying four to five weeks, but also

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Speaker 11: very clear to specify that that could move and that

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Speaker 11: it's they're not looking for an endless war. Israel this

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Speaker 11: morning was saying that it will be a quick and

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Speaker 11: decisive operation. I think for the moment, it doesn't look

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Speaker 11: to be moving in that direction. And Iran is definitely

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Speaker 11: keen to say that it's prepared for the long haul,

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Speaker 11: that this is a fight in its size for its existence,

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Speaker 11: and that in its size is in contrast with the

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Speaker 11: US right for whom it says this is a kind

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Speaker 11: of opportunistic war. And the Iran is really betting that

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Speaker 11: it can by dragging out the duration, that it can

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Speaker 11: increase the costs to the US in Israel and deter them,

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Speaker 11: perhaps bring them back to the negotiating table by inflicting

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Speaker 11: things like those casualties we saw on the US serviceman.

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Speaker 2: Yeah, indeed, and we heard for about the actually of

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Speaker 2: Iran only yesterday. Meanwhile, the other Gulf states you know,

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Speaker 2: surrounding Iran saying that Iran it isn't Iran, saying that

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Speaker 2: it's not targeting them cut on a UAE, are calling

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Speaker 2: on allies to push for a US off ramp. You know,

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Speaker 2: they they are concerned.

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Speaker 11: Yeah, the Iranian position officially is that it's not targeting

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Speaker 11: those countries, it's targeting US assets in them. I think

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Speaker 11: ultimately for those countries that's a slightly false dichotomy, and

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Speaker 11: we've seen, for example, some hotels being here, a refinery

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Speaker 11: being here. Iran has also said that, you know, the

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Speaker 11: commanders on the ground, they're often acting in this decentralized

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Speaker 11: way based on orders that were given in advance of

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Speaker 11: the war, in anticipation of assassinations of top military commanders,

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Speaker 11: like exactly like what we've seen. So the golf countries,

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Speaker 11: it's a really difficult position because on the one hand,

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Speaker 11: they can't tolerate these kinds of attacks from a neighbor.

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Speaker 11: On the other hand, joining the US and Israeli strikes

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Speaker 11: against the run put some of a difficult position because

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Speaker 11: it then makes them a hostile party in the conflict.

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Speaker 11: Not to mention it allies them with Israel, for whom

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Speaker 11: you know, among their populations, that would still be a

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Speaker 11: very controversial thing to do.

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Speaker 1: Okay, Patrick, thank you very much for bringing us the

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Speaker 1: latest this morning our Middle East breaking these editor, Patrick Sykes,

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Speaker 1: stay with us. More from Bloomberg Daybreak Europe coming up

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Speaker 1: after this.

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Speaker 2: The military conflict continues to disrupt air travel across the

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Speaker 2: Middle East, and it sent airlines stocks tumbling on Monday.

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Speaker 2: Bloomberg's Benedict Cammell, who leads our global aviation coverage, joins

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Speaker 2: us now for more. Benedicet's Emirates and Etta had did

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Speaker 2: add or conduct limited flights yesterday. How many planes took

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Speaker 2: off and how much airspace is still closed?

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Speaker 5: Yes, good morning. So this is really just a very

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Speaker 5: limited number of flights that are taking off from places

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Speaker 5: like Dubai or from Abu Dhabi where Etihad is based.

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Speaker 5: The airspace generally remains closed. So what you're seeing is

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Speaker 5: some sort of repositioning flights and evacuation flights essentially to

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Speaker 5: clear out some of the people that are stuck in Dubai.

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Speaker 5: And we're talking many thousands, tens of thousands of people

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Speaker 5: really that are stuck there, and that from an economic

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Speaker 5: point of view, are weighing on the resources locally. A

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Speaker 5: lot of hotels have put up people, the airlines have

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Speaker 5: agreed to pay for the accommodation and so on. So

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Speaker 5: it's sort of in the naked interest of the airlines

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Speaker 5: to help move some of these people out of the region,

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Speaker 5: and that's what we saw yesterday. However, there is no

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Speaker 5: normal commercial flight service happening in the region. We just

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Speaker 5: heard from cut Our Airways based in Doha saying that

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Speaker 5: the airspace will remain closed and there will be an

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Speaker 5: update tomorrow morning at local time. So that gives you

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Speaker 5: a sense of just how disruptive it is. If you

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Speaker 5: look at some of the companies that are tracking this,

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Speaker 5: they say that more than eleven thousand flights have been

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Speaker 5: canceled inbound and outbound to the Middle East since Saturday

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Speaker 5: when the conflict began. I were talking, you know, more

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Speaker 5: than a million seats really that are affected here, So

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Speaker 5: a really huge disruption on the region.

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Speaker 1: Indeed, and of course not gone effects because of the

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Speaker 1: hub status of some of those airlines as well. I

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Speaker 1: mean I've seen on social media people's journeys from Australia

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Speaker 1: back to Europe being rearranged from these things as well.

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Speaker 1: We have also the United States State Department now urging

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Speaker 1: Americans to leave countries across the mid least. What sort

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Speaker 1: of further pressure is that going to put on the

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Speaker 1: travel I suppose backlog that now exists.

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Speaker 5: Well, you're right, I mean, the Middle East has really created,

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Speaker 5: or has built itself into the sort of international omnidirectional

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Speaker 5: transfer hub, so you can fly to Dubai and then

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Speaker 5: connect to any other place in the world. That's always

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Speaker 5: been sort of the logic between behind having these massive

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Speaker 5: hubs in the region, and that obviously is now being

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Speaker 5: massively disrupted, and so smaller airports as well. Kuwait will

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Speaker 5: actually hit Jordan has closed down at night. But really

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Speaker 5: where the pressure is felt most acutely is in places

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Speaker 5: like Dubai, like Doha, like Abu Dhabi, and that will

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Speaker 5: have a massive knock on effect longer term. It's about

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Speaker 5: the cost of travel. Airlines will have to circle navigate

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Speaker 5: that region, It's about the cost of fuel, and it's

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Speaker 5: really about sort of is there still a viable option

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Speaker 5: to have such a massive hub in a very sort

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Speaker 5: of conflictual part of the world. The longer this goes on,

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Speaker 5: for the more people will start wandering about this. I

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Speaker 5: think it's too soon to put into questions sort of

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Speaker 5: the status of Dubai. It's taken so long to build

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Speaker 5: itself into what it is today. But if this escalates,

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Speaker 5: or if this drags on much longer, then people might

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Speaker 5: start thinking, well, maybe I should connect through Helsinki, maybe

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Speaker 5: I should connect through Fangfuk, maybe I should you look

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Speaker 5: at other means. So this is really potentially a tipping

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Speaker 5: point for the region, and it's a very dangerous one.

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Speaker 2: Yeah, indeed, I mean, and then the Foreign Office has

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Speaker 2: been trying to gather the details of people who are

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Speaker 2: in the Middle East, British systems who are in the

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Speaker 2: Middle East, and I've seen numbers ranging between one thousand,

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Speaker 2: three hundred thousand Brits in those various countries, and the

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Speaker 2: question mark about what to do. Shares of airlines, crews, operators,

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Speaker 2: hotels have also fallen dramatically. How significant could the jump

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Speaker 2: in fuel costs also be to this whole industry?

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Speaker 6: Absolutely?

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Speaker 5: I mean, remember that we are heading into the crucial

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Speaker 5: summer period for airlines. This is where they make most

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Speaker 5: of their money, and getting on an airplane is always

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Speaker 5: particularly on the leisure side is always sort of also

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Speaker 5: sort of how you feel about travel, and a lot

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Speaker 5: of people might have second thoughts right now whether they

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Speaker 5: want to do this long haul trip, whether they want

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Speaker 5: to go on this far away holidays, So that will

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Speaker 5: weigh on travel demand. And as you said, we saw

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Speaker 5: it with some of the shares yesterday of airlines that

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Speaker 5: aren't that directly impacted. Are the likes of lufthands, are

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Speaker 5: the likes of KLM in the US, a lot of

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Speaker 5: carrier so it shows that this is really a global phenomenon.

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Speaker 5: And as you said, part of it is the cost.

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Speaker 5: We've seen oil prices go up. Fuel cost is the

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Speaker 5: single biggest expense for airlines, so that will have an effect.

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Speaker 5: It's the cost of flying longer routes. We've seen this

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Speaker 5: already over the years that a lot of airlines are

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Speaker 5: flying around Russia that adds several hours to a journey

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Speaker 5: in therefore cost, so you might see something similar here.

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Speaker 5: It's a smaller region in the Middle East, but nevertheless

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Speaker 5: Iran Iraq those were typically very popular transfer routes for

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Speaker 5: a lot of global airlines. They will no longer be

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Speaker 5: able to take these, So this massively complicates the entire

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Speaker 5: sort of calculation of flying on these long haul routes.

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