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- [00:00]
Duke Energy Announcer
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- [00:18]
Bloomberg Podcast Host
Bloomberg Audio Studios Podcasts Radio news. You're listening to the Bloomberg Balance of Power podcast. Catch us live weekdays at noon and 5pm Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts or watch us live on YouTube.
- [00:41]
Joe Matthew
Something that may help gas prices or at least is helping lower oil prices right now as we're seeing stocks shoot higher. We're now up about 1% on the S&P 500 as the President posts on True Social that he's canceled the scheduled strikes against Iran. Of course, we've seen this movie before, but the President writes on True Social based on the fact that discussions with the Islamic Republic of Iran have been brought to the highest level of Iranian leadership and approved. I have, as the President of the United States of America, canceled the scheduled strikes and bombings against Iran this evening. Discussions and final points have been in both concept and great detail approved by all parties involved, including the United States, Israel, Saudi Arabia, uae, Qatar, Turkey, Pakistan, Bahrain, Kuwait, Jordan, Egypt and others. But he says, Joe, the naval blockade will remain in full force and effect until the transaction is finalized.
- [01:29]
Kailey Lyons
WTI now down 3% below $88 a barrel. S&P 500 up 1% or 85 points. The Dow's up over 700 points. Now we're just going to keep doing
- [01:41]
Patrick McHenry
what was the old newspaper adage important if true?
- [01:45]
Kailey Lyons
Okay, right.
- [01:45]
Patrick McHenry
I mean the major announcement. But we see significant announcements. We want to see that there's really beef between these patties and we haven't really seen that yet. So substantial news. This could have a market impact on the economy and would be sufficient time where you could see relief at the pumps by the fall. According to all the forecasters that you interview him we watch here on Bloomberg. This, this could be a favorable impact for, for where we sit in in October before the midterm.
- [02:16]
Kailey Lyons
Wow.
- [02:17]
Joe Matthew
Well, I'm sure that's happy news for a lot of Republican lawmakers as they consider their own reelections. Does this nullify further war powers attempts on Capitol Hill?
- [02:28]
Patrick McHenry
No, because, you know, the Congress don't
- [02:30]
Joe Matthew
know if it's true.
- [02:31]
Patrick McHenry
Yes. And Congress still wants to have a say here. We've yet to see a supplemental take shape. We see those those talks are continuing with the administration and The President has a significant request for Department of Defense funding. So each day has an impact on the legislative impact and the funding impact for our war making capacity.
- [02:52]
Kailey Lyons
We're going even further here with the President saying the time and place of the signing to be announced shortly. So we've got a deal.
- [03:00]
Joe Matthew
Well, remember Annmarie Hordern when traveling back from New York a few days ago that he actually did think a deal could be signed in two to three days. Maybe. Maybe he's meeting in the timeline here.
- [03:09]
Kailey Lyons
We've heard that a lot of times though. And Iran typically makes it seem like he's having his own conversation. This would be remarkable if true to your point. If it's not, and we go back to the standoff, at what point does the President lose credibility in calling the ball here over and over again?
- [03:29]
Patrick McHenry
No, the President still has a massive control over, over the narrative here. Yeah, and the fact that the President's listed all those countries, all these important countries for a deal with IR on quite meaningful, the price of oil. The list of countries here have the disproportionate say over that. This is a, this is a major piece of, of news and I think it can be quickly verified once we see, you know, international reporting from these other, other countries.
- [03:59]
Joe Matthew
Yeah, I guess we'll have to wait and see if that does indeed materialize as we consider the notion of even when the conflict is over, the US is obviously going to have to do a pretty major replenishment effort of our munitions stockpiles. How quickly would you expect the Pentagon to be able to turn over a figure for a supplemental request in terms of the funding they want for this conflict to be over?
- [04:23]
Patrick McHenry
If this news is true? This is the next most important question, which is where do we stand with our munitions and our capacity to replenish? We saw the announcements today that Patriot missiles, our allies are asking what when they will receive deliveries and they don't yet know. And I think that is because we still have active action and use of these really complex weapons systems. I think we will see that within weeks. I think Congress will have to, I think you'll have to have a supplemental request to Congress by the month of July. I mean, we're weeks away, not months away from having an answer here. And then the question is whether or not they have account flexibility or whether or not that really needs to be done on an urgent basis like through
- [05:07]
Joe Matthew
reconciliation 3.0 as the President suggested.
- [05:10]
Patrick McHenry
Well, that would be the hope. But you know, if we're talking about replenishing these supplies. You might have the opportunity for a bipartisan cooperation there. Maybe if there's an end to hostilities. But that's the reason why this reconciliation 3.0 conversation is really strategically important for our weapons systems, strategically important for our allies as well, on whether or not we can quickly get these accounts flush again so they can start making these orders at the Department of Defense.
- [05:40]
Kailey Lyons
President says no games, no delays, no weak compromises. Do this ASAP, what he calls recon 3.1. We're going to shorten this now. The only path to the full one and a half trillion dollar military budget our warriors need. He also says at the request of our great Department of War, it will include the Save America act as well. Did he just kill that effort by attaching Save America once again?
- [06:03]
Patrick McHenry
Well, it failed before because of Senate rules that it cannot be included.
- [06:08]
Kailey Lyons
That's right.
- [06:09]
Patrick McHenry
This would be to step back on that. The Democratic Party tried to end the filibuster to nationalize our election laws during the Biden administration. They tried on two attempts. Now we see a Republican effort on Capitol Hill to do the same thing to nationalize our election laws. They're skepticism now in the Democratic Party. And so both parties have flipped positions on using reconciliation and nationalizing election laws just in a very quick period of time. Life in the majority life of our modern politics. Right. The the ability to flip on a switch just based off of the whims or really Trump is colored the whole era. So that's why both parties have flipped and done these contortions.
- [06:56]
Kailey Lyons
Yeah.
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Joe Matthew
All right, Mr. Chairman, always good to
- [06:58]
Patrick McHenry
have you with you.
- [06:58]
Joe Matthew
Former congressman from North Carolina, Patrick McHenry and of course, a Bloomberg Politics contributor. Very lucky to have him with us as we deal with breaking news again. President Trump has canceled the planned strikes on Iran tonight and says that final points on a deal with Iran have been approved by all parties as a result, oil right now, session lows stay
- [07:16]
Kailey Lyons
with us on balance of power. We'll have much more coming up after this.
- [07:23]
Duke Energy Announcer
At Duke Energy, we deliver reliable energy that powers lives, grows businesses and transforms communities. That's why we're making smart investments to add up to 14 gigawatts of new capacity over the next five years. That's enough to power 10.5 million more homes. Putting customers first, advancing American progress, powering the next generation. Learn more at duke-energy.com poweringamerica.
- [07:53]
Bloomberg Podcast Host
You're listening to the Bloomberg Balance of Power podcast. Catch us live weekdays at noon and 5pm Eastern on Apple CarPlay and Android Auto with the Bloomb business app. You can also listen live on Amazon Alexa from our flagship New York station. Just say Alexa. Play Bloomberg 11:30.
- [08:12]
Joe Matthew
The market clearly reacting fast and furious to the true social post from President Trump. The cancellation of strikes tonight, the assertion that final points have been approved by all parties on a deal with Iran. But Joe, I'm running through the list here of the countries named by President Trump. The United States, Israel, Saudi Arabia, uae, Qatar, Turkey, Pakistan, Bahrain, Kuwait, Jordan, Egypt and others. Iran is not on that list. Does it fall into the others bucket?
- [08:40]
Kailey Lyons
I'm not sure. That's a great question. Maybe he thought that was implied or understood. But time and place of the signing to be announced shortly makes us feel like this is all but done, despite the cross currents that we've been hearing with regard to the rhetoric from the administration. Tyler Kendall covers the White House for us. Our Washington correspondent is with us right now in our Washington bureau. Tyler, what do we make of this and could we in fact get news on a signing at some point here as the president says?
- [09:11]
Tyler Kendall
Well, according to the President, it does appear that maybe this is imminent. Though of course, as you guys have been reporting, there's caution here until we actually see a finalized agreement. But Bloomberg News had reported earlier today that the diplomatic negotiations were ongoing and that we were seeing Qatar actually take a more meaningful role in those negotiations. We also had reporting that there was the first, first face to face meeting between senior national security officials from the UAE and Iran in a bid to calm ties there since we know that the UAE has really been the target of a lot of retaliation. We still have big questions though, on what this could entail. Before we saw this flare up in fighting, when it came to the cease fire, we had been tracking that the US Was looking at agreeing to a memorandum of understanding that would seek to extend the cease fire by 60 days, prioritize reopening the Strait of Hormuz and lifting the US Navy naval blockade, which according to this post, President Trump says isn't going anywhere until everybody signs on the dotted line. And then it's our understanding that this would take a phased approach where we would see curbs on Iran's nuclear program. So we are trying to glean any sort of details on what that may actually look like in practice.
- [10:20]
Joe Matthew
It's just striking, Tyler, that the president suggests that we've now reached this point where a deal could be imminent hours after suggesting in an interview on Fox News that the US could very short and on true social, go in and seize the carg island.
- [10:33]
Tyler Kendall
So our own Analysts have, Bloomberg Economics have suggested that perhaps this has been escalation in a bid to de escalate the conflict, maybe some negotiating leverage that we've seen the White House use before because really this past week has marked the largest uptick in fighting since the cease fire began. Started with the tit for tat strikes between Iran and Israel. President Trump getting personally involved in that diplomacy to get a ceasefire there. But then we saw the US Respond further, first in the wake of that American military helicopter being shot down earlier this week and then overnight hitting dozens of Iranian military targets and Iran retaliating again, hitting or trying to hit US Bases throughout the region. President Trump's threats that were different this time was because he, he had extended it to energy infrastructure, which we all know would be a major escalation.
- [11:26]
Kailey Lyons
Yeah, Kayleigh mentions the countries that are not listed are. The one, there's a country that is listed here right after the US and that's Israel. Should we assume that this would apply as well to Israel and Hezbollah, which of course was a deal breaker for Iran with the cease fire just days ago.
- [11:42]
Joe Matthew
Right.
- [11:43]
Tyler Kendall
That was dominating the conversation just days ago because Iran repeatedly maintained that a cease fire had to extend to Israel's front against the Iranian backed militant group Hezbollah. But Israel and the US Both have repeatedly said that this is a separate front. But we got indications that the White House was really eyeing as a potential roadblock considering that President Trump got on the phone directly with the Israeli Prime Minister Benjamin Netanyahu. A lot of reporting came out of how tense that call was. But even publicly, President Trump had said in that interview over the weekend with NBC News that he wants Israel to take a more, quote, surgical approach to how it is trying to achieve its military objectives related to Hezbollah. So perhaps it's rolled in. But we should also mention that while Iran wants to see this in the deal, before the conflict began, the US Was demanding that Iran support for proxy militia groups needed to be in an agreement. We'll see if there's any sort of movement there because we heard from the Houthi rebels earlier this week that they could take action in the Red Sea. So it's all connected.
- [12:43]
Joe Matthew
All right, Bloomberg's Tyler Kendall, our Washington correspondent, running into the studio for us on this breaking news. Thank you so much. And for a bit more analysis now we turn to Jonathan Pannikoff, Atlantic Council Director of the Scowcroft Middle East Security Initiative. Jonathan, welcome back to Bloomberg TV and Radio. It's great to have you. And I wonder if you take this post from the President at face value, do you really believe we could see a deal between the US And Iran signed soon?
- [13:11]
Jonathan Panikoff
Well, great to be with you. Look, I certainly hope so. I think we've had a little bit of whiplash here, all of us, frankly. The reality is we've seen posts that are similar to this before. I think the way that it's framed, I think is giving reason for optimism. That probably is a bit more than most of us have had in the past. The fact that he called out the countries, the fact that he said it'll be very soon. There's some details and specificity here that we haven't seen. So look, do I think it's possible? I absolutely do. I also think, look, there is a not insignificant chance that the President is pushing for something that maybe the Iranians haven't even fully signed off on, or that he's trying to push them or coerce them into a corner in hopes that they will go along with it in the end. So I'm not ready to say it's quite done yet, but it's certainly reason for optimism.
- [14:02]
Kailey Lyons
Interesting. Jonathan, we think of you as an expert on the proxies. How important will it be for Hezbollah and for the Houthis to accept this? They're obviously not going to be at the negotiating table.
- [14:14]
Jonathan Panikoff
Yeah, that's right. Look, on the Houthi side, this entire war, I think one of the big questions has been why have the Houthis not gotten more involved. There's been significant conversations about the fact that they really have their own political agenda in Yemen and this would have undermined it in some ways. The fact that the Saudis and the Houthis may some agreements behind the scenes. I think the Houthis will be a little easier here, frankly, at least in the near term. Hezbollah is the really big question and frankly from that perspective, therefore, so is Israel. We know the Israelis have been unhappy with the deal of this contour simply because it was always supposed to seemingly relate to a ceasefire and the opening of the strait and then maybe dealing with the nuclear program in a 60 day window which almost have to be elongated. But if the ballistic missiles aren't dealt with and Israel feel like it's going to be under threat because it's still a threat from Hezbollah for ballistic missiles where it feels like the Hezbollah's activities and especially if Iran starts to resupply Hezbollah in the future. Hezbollah, constant attacks on the Israeli border. We already have seen that Israel is not always willing to listen when it comes to attacks on its border about president from President Trump trying to stop them. Israel went forward last week with a strike. Obviously that had repercussions. I think it's going to be an open question. I think it's a real question about where the proxies play into all of this.
- [15:43]
Joe Matthew
Well, yeah, that certainly is one of the many questions that come to mind at this moment, Jonathan, but another one is, is did the US Going back to the military option actually work if it just unlocked potentially all parties agreeing to a deal? Was that Apache helicopter going down in the subsequent retaliatory strikes that the US conducted proof that the US Wasn't necessarily bluffing?
- [16:10]
Jonathan Panikoff
I think it certainly demonstrated that the US Wasn't bluffing. I do think that part is true. I think there's still a quite open question though of whether or not Iran actually cares all that much. The one thing we know is that Iran is willing to sacrifice an awful lot, its economy, its people, its tolerance for pain and its threshold for pain is significantly higher than traditionally we've had in the US and that I think the US Is willing to support at this point, given if you look at where polling is, for example, on support of President Trump and this war at the same time, clearly even the threats today were about being coercive, coercive military strikes, not intended to bring us back potentially if they had happened to a full scale war or what we saw through the march, but really about being strategic to try and keep upping the ante. I think clearly they've had some effect. I want to be clear that it's unlikely that it was the sole decision reason for Iran's decision to engage. Now, we know negotiations have been going on behind the scenes for quite a while and I think it's probably a little bit of combination of both, frankly.
- [17:22]
Kailey Lyons
What do you think has happened since we all got up today here, Jonathan? We started the morning with great concern that we were about to go attack Iran and hit him even harder. As the President said, seize Kharg island. Of course, by lunchtime we're talking about a place and time to sign a peace deal. How did this come together? If you take the president at his words in five hours when it, it didn't seem to work over the course of five weeks.
- [17:51]
Jonathan Panikoff
Yeah, my guess is I wouldn't look at it in a five hour time period. I think actually the weeks is more important. I think this is really a reflection of the fact that the negotiations were going on even as you had US Strikes, even as you had Iranian retaliation over the last week. Or so you still had the negotiation.
- [18:10]
Kailey Lyons
I guess the question though is was there a phone call this morning? Was there an exchange of messages or is the President projecting.
- [18:17]
Jonathan Panikoff
No, I've got no doubt that there was some sort of engagement and exchange. I don't know that whether it was direct or indirect, the Qataris have been playing an additional role. Obviously the Pakistanis were still trying. I've got no doubt that there was a flurry of messages that have gone back and forth. But I also think those messages would have fallen, frankly on deaf ears if the preparatory work hadn't been done over the last week or two weeks. And so I think you got to combine both of those to really understand how we probably got here today. But I've got no doubt Bloomberg will soon have a tick tock on it. From your great reporting.
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Joe Matthew
Oh yeah, you can bet that our reporters are already hard at work trying to unearth what exactly happened here also who exactly this deal was struck with. It's one thing for the two sides to be understood to be talking, but does it not matter who is actually doing the negotiating? On the Iranian side, the President, Jonathan Said, says that this has been brought to the highest level of Iranian leadership and approved. Should we understand that to mean much about Khamenei or is that IRGC leadership? How do we know that the leadership that approved this is one that's going to stand by it?
- [19:28]
Jonathan Panikoff
Yeah, it's a reflection of the fact that there is a bit of a void in a black hole when it comes to understanding how Iranian leadership decisions are being made fundamentally right now in Tehran. Look, the highest level would seem to indicate that that includes most of us and the Supreme Leader. But really what you're talking about right now, from everything I've heard and from people I've talked to, is that you really have a group of between kind of six and eight people who are really leading in Tehran and who are coalescing and coordinating together to make decisions. It includes people like General, the head of the guards. It includes people like Koliboff, speaker Koloba from the Majlis, a couple of others, the new national security advisers in that group. And so you would hope that it means all of them have come together and agreed. And this is the problem. If it turns out it's only one of them or two of them, you know, Koloba has been the key interlocutor and negotiator between the US and with the Pakistanis, then that will become a challenge. From the wording of the President's post, look it would assume that it means most of our and that means the rest of them would have gotten together to sign off on it as well. I think time will tell, but it'll be pretty quick that we have a sense of whether this is real or not.
- [20:47]
Kailey Lyons
Okay, so let's say best case scenario it is real. They meet somewhere, there's a signing ceremony. Iran knows though, that it has leverage now that it may not have ever known before. How do you maintain an agreement like this, particularly when it comes to keeping the strait open?
- [21:04]
Jonathan Panikoff
I think one question is what is the actual agreement? So the fundamental problem is, look, if this really is just the MOU to open the street and then in the blockade, which is what seems to be implied, then you got a long way to go on all of the other key issues. Right. The street and the closure of the street was not a problem that existed, frankly, before the conflict. There's two opportunities or possibilities, I should say. One is, look, the Europeans, the French, the Brits have been leading a maritime effort to get together a group of like minded countries to have some sort of force along the strait. There's questions about whether or not the Iranians will accept that, but that could be one way in the most immediate term that I know, having just been in Paris and speaking to French officials, can be deployed almost immediately once there's a cease fire. The second part of this though is look, you're probably going have to keep a US Carrier group in the Gulf for some time and this is going to be about a long term threat proposition that if Iran threatens to close the strait again, or if they actually do use drones, for instance, to try to close the strait again and attack ships, then the US Is also in position, even independent of this broader force to actually take action. And so you're going to need to maintain that sort of presence, which frankly is something I think President Trump has really not wanted to do. If you look at the course of his rhetoric earlier in the term.
- [22:34]
Joe Matthew
Well, and that's also why he's called on other allies of the United States who are more reliant on the energy flowing out of the Strait of Hormuz to step up. Europe has has seemed to suggest that once there was a resolution to the conflict, then they'd be willing to get together this coalition of the willing to help keep the strait open. But you're suggesting the US Is still going to have to be involved, Jonathan?
- [22:58]
Jonathan Panikoff
Yeah, look, I think the coalition of the willing absolutely can come in and it can come in quite quickly. I'm confident of that. But I think that it's going to be very, very hard for the US to say that point, but we're just going to fully withdraw from the region. It's going to be delicate. And there's also a coercive nature here. Look, the nuclear program is still going to be unresolved. Issues related to ballistic missiles are still unresolved. Questions related to Iranian proxy networks are still going to be unresolved. In other words, if we're going to continue the negotiation, I think you'd want to keep that leverage and you'd want to have it to ensure that European allies weren't alone in case something does go wrong.
- [23:37]
Kailey Lyons
Really glad you could join us, Jonathan. Welcome back. Atlanta Council director of the Scowcroft Middle East Security Initiative, Jonathan Panikoff with us live on Bloomberg TV and Radio. I'm Joe Matthew alongside Kailey Lyons. And we've watched this story evolve dramatically over the course of the program and the markets follow. Really something to see. The dow up over 700 points. We were up over 800 Klee. The S&P 500 up 87. The NASDAQ is now up 400 points. It's a one and a half percent gain, gain for the Dow and the Nasdaq. Interest rates are lower and oil prices are too.
- [24:07]
Joe Matthew
Yeah, substantially so for oil. We're down more than 3% on both Brent and WTI. WTI right now about $87 a barrel. Clearly a market that is looking forward to hopefully an opening of the Strait of Hormuz. But interestingly, as we see these oil prices going down and as you mentioned, rates going lower, we've actually seen the market price out a full Fed hike.
- [24:27]
Kailey Lyons
How about that?
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Joe Matthew
They this year there was this notion that the Fed might have to do what the ECB did earlier today and actually tighten policy in the face of energy driven inflationary risks. But perhaps if this deal is indeed finalized, that may not ultimately be the case, but it is still an if at this hour. Joe, right now we're only hearing from President Trump on this. We have yet to hear from Iran.
- [24:48]
Kailey Lyons
You got a 10 year below 4 and a half, a 30 year below 5 now and a 2 year 4.07. All all three are trending lower on this news. Thanks for listening to the Balance of Power podcast. Make sure to subscribe if you haven't already at Apple, Spotify or wherever you get your podcasts. And you can find us live every weekday from Washington, D.C. at noontime eastern@bloomberg.com
- [25:14]
The Hartford Announcer
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