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This is Riley Wilson and Keon Miller from OK Storytime.
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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
- [00:59]
D
checking on the markets for us, including movers that matter. Who knew that doordash was going to get a White House sh on today? That actually seems to be happening a lot. It was Palantir.
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B
That's right.
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D
Shout out just a few days ago. Yeah, with the ticker included in the true social post and everything, we're seeing the intersection of Wall street and politics in a whole new way. And that's of course, what we focus on here. On Balance of Power, which of course has largely been dominated by geopolitics in the intersection with the economy and financial markets specifically centered around the Strait of Hormuz, where all the activity is, or perhaps Joe more specifically, is not. As the President said, the blockade is in place. Of course. It's been about three hours now. Effective Tech Am Eastern time. No vessels carrying Iranian energy products are going to be allowed through by the US Navy.
- [01:42]
B
34 ships, he writes, went through the Strait of Hormuz yesterday, which is by far the highest number since this foolish closure began. That was right before the President invited reporters down the Colonnade to speak outside the Oval Office. And you heard Kaylee already reflect what he was saying. And we want to get to Tyler on this. She's at the White House right now. It's all about nuclear and the President says that Iran called this morning to reiterate its desire to make a deal, knowing that JD Vance got on that airplane and he did not look very happy following 21 hours of talks that led to nothing. Kelly so let's bring in Tyler Kendall Live from the North Lawn of the White House. I don't know if you get any McDonald's over there, Tyler, but the president clearly was just as interested in talking about his tax policy as he was Iran. The markets are higher. Now, there does seem to be a sense of that we might be back at the negotiating table soon. Is that how we should read this?
- [02:32]
E
Well, according to President Trump and as you both mentioned, the main headline here is that he claims that Iran called this morning and wants to make a deal. But again, it does still seem, at least publicly, that the sides are very far apart when it comes to the core of the U.S. s demands. Of course, that Iran cannot be able to obtain a nuclear weapon. And then also what happens to the already enriched nuclear material. Before we can even talk about a longer term agreement though, we have to talk about this two week sequence cease fire, which of course includes the reopening of the Strait of Hormuz. President Trump said in these remarks that the timetable has not changed, that there will not be additional fighting. But of course we've heard an escalation of threats on both sides today as we broke last hour, President Trump threatening that any Iranian attack ships that come near the US Blockade could be eliminated entirely, in his words. And then you have Iran now threatening to hit Gulf state ports as well as that IRGC statement that we got overnight that says that if any US Military vessel goes into the Strait of Hormuz, that would be considered a violation of the cease fire. But as you guys wrapped up nicely, it does appear from President Trump that these negotiations are ongoing in a sense after what we had seen from over the weekend, which was a direct talks that that didn't have that resolution that we know that this White House has been hoping for.
- [03:54]
D
Well, and Tyler, obviously we know whatever happens in the Strait of Hormuz has wider ramifications beyond just the Middle east, including if you are China and buying a of that Iranian energy product that the President wants to make sure cannot get through. This is a question that has been percolating since this blockade was initially announced. What impact will it have on Beijing, especially as we're now what, just over a month out from President Trump's scheduled trip there to meet with Xi Jinping.
- [04:19]
E
And President Trump said clearly that he knows that Chinese President Xi Jinping would like to see this conflict resolved, considering that we know nearly 80% of the barrels that go through the Strait of Hormuz ultimately end up going to Beijing. So it's going to be something to watch here when you pair Compare that with the president's previous threats last week that he could impose a 50% tariff on any countries that are supplying weapons to China. Though question still on exactly how the administration would invoke the IEFA authority as suggested by the NEC director Kevin Hassett, though that's the same authority that the Supreme Court has previously struck down. But that appeared to be a message to China perhaps to gain some leverage as they head in to these trade talks next week. But it also goes to the broader issue that this White House wants to make clear that other countries need to get invol here, including as the president said in these recent remarks, that we could perhaps expect some additional details tomorrow about which other countries may be assisting the US when it comes to this
- [05:17]
D
blockade, but no details on that as of today. Bloomberg's Tyler Kendall live on the North Lawn of the White House. Thank you so much. And as Tyler was walking us through some of what the president said, let's hear from him in his own words just moments ago about the Strait of Hormuz and Iran's attempt to control it.
- [05:34]
F
We can't let a country blackmail or extort the world because that's what they're doing. They're really blackmailing the world. We're not going to let that happen. And you know, the amazing thing is we don't can you believe this? We don't use this trade. We don't need this trade. We have our own oil and gas, much more than we need.
- [05:56]
D
So let's get more into this now as we turn to Heather Conley, non resident Senior Fellow at the American Enterprise Institute, former Deputy Assistant Secretary of State for the Bureau of Europe and Eurasian affairs in the George W. Bush administration. She's here with us in our Washington, D.C. studio. Heather, welcome back to Bloomberg TV and Radio. He says Iran is blackmailing, blackmailing the world by closing off the Strait of Hormuz. Therefore, we are attempting to close off the Strait of Hormuz at least for the use of Iran. What do you think about this blockade strategically? Is it actually something that can be tactically successful?
- [06:28]
G
Well, the president is right. I mean, the Iranians have used this leverage for the last six weeks quite effectively. And what the US Administration is trying to do is rest that leverage away from Iran. And what we're trying to do now is in effect blockading the entire strait to try to wrestle that, that leverage back. So it's understandable. Now will it work? And that's really your question. And we just saw about an hour before the blockade went into Effect, a Chinese tanker did do a U turn, but in fact, it's just sort of closing off all trade, all traffic because people honestly don't know how this is going to work. And I think we just have to watch the brave first ship that tries traverse the strait and see how successful they will be.
- [07:12]
B
Well, this is quite a moment that we're in here. The markets are in a great mood. Interestingly, crude oil is back below $100 a barrel. Since the President came out and talked to reporters, Heather, he said, we've been called this morning by the right people, the appropriate people, and they want to work a deal. They would like to work out a deal. Of course. We just got back from the negotiating table In a failed 21 hour session with JD Vance, Jared Kushner, Steve Witkoff, does the US blockade change the dynamic enough to change the conversation at the negotiating table?
- [07:46]
G
So, Joe, if I can interpret, I think what's happening is the Pakistani mediators are continuing to pass some messages. They're trying to keep some of these talks alive. And I think that's important. We need, we need those open channels of communication. But quite frankly, we really need to understand now how Tehran is going to, to react to this blockade. And I said, honestly, we're waiting to see the first vessel that tries to, you know, move and what happens. But as I said, I think this is just a, it's just going to bottle everything up. And I can explain to you why the markets are so positive right now, just because we are now starting to see really the last tanker that Left, you know, February 28th is reaching port. You're going to now start to see some material impact in Asia as well from products and things like that. So I don't see a horizon right now for resolution. I see a pause. I, and now we just have to wait and see how Tehran responds to this blockade.
- [08:50]
D
I have to wonder if at least some of the market reaction is that the idea that this is not as escalatory a step as the President could have chosen after talks failed this week. And as he was previously, of course, saying that the entire Iranian civilization was going to be killed, that he was going to take, take out critical civilian infrastructure, he went with a blockade and said, is that instead, is that to say, though, Heather, that this can't ultimately result in more escalation, especially as we don't know what Iran's reaction function is going to be?
- [09:18]
G
Yeah, I mean, as I said, I think we are just in a pause right now. The cease fire still held. Now when the two destroyers went through the strait, the US Destroyers. Iran didn't react. The negotiations were still ongoing. I think that was an interpretation of we wanted to, to see if this can go, but really we have to see whether this happens or not. And again, a blockade is not doing the convoy support and escorting ships. That's 15 vessels blocking things. So it is, it's again the muscularity that it would take to really do those, those, those convoy escorts. And look, the President admitted we didn't finish all the small boats. We know that the Iranians do have underwater drone capability. We not entirely clear what the mining situation looks like. So this is absolutely right. I mean, the least, I think risk taking for the US Military, for the navy, but it's a stopgap measure. We'll have to see what happens next.
- [10:17]
B
So what did you make of that post from the President? This came around 10:30 this morning. He talks about Iran's navy at the bottom of the sea, which he says a lot. But he said what we have not hit are their small number of what they call fast attack ships because we did not consider them to be much of a threat. I'm not sure why, but he says warning, if any of these ships come anywhere close to our blockade, they will be immediately eliminated. Referring to the drug boats coming out of Venezuela. If in fact we start seeing this type of activity, does the US Board a vessel like that or simply blow it up?
- [10:51]
G
Again, great questions and I certainly the military has been concerned about the Iranian Revolutionary Guard Corps, these small boats, because they are again, they come in fast, they're hard to detect right off the bat. Well, I think there was a lot of attacks on the Iranian coast softening those targets. Some of them could be in hardened bunkers. There's multiple threats. There's mines, there's the small boats, there's underwater drones. There's also again, missile capability. You need a huge package of military support to escort those vessels. And I think again, we've done this in 1987. We conducted an operation. It just takes an awful lot of material, equipment, and again, the military can do this, but at what cost? And I think this is exactly huge question marks. And again, the brave first vessel that decides to test this proposition one way or the other is, will be the biggest guinea pig we will see. And the stakes are enormously high for both sides because if Iran gives up its leverage, it's going to be much more susceptible. And of course, as the President correctly said, this is really extorting the, the entire global economy. So something's going to have to give here.
- [12:02]
D
Just quickly Heather, on the thing that needs to give. It seems for both sides it's the nuclear program that Iran does or does not want to be able to develop in terms of enriching uranium. Axios had reporting that the US was asking for a 20 year moratorium. Iran wanted single digits. I just wonder if you really think that this is a gap that can be bridged in weeks, weeks, not months of negotiation.
- [12:26]
G
You're absolutely right. This is the hardest issue because the Iranians are not going to give the nuclear component up. Now for the last 20 plus years their civilian nuclear enrichment was, they were as a right to, as part of the non proliferation treaty. But we have no trust and confidence in that. But for the United States to completely eradicate it would mean regime change, it would mean ground invasion. And again, both are in maximalist positions right now. I thought it was interesting, the President was very clear, you know, no nuclear, no Luke here. We were giving them a 20 year, you know, bridge. And again, if you don't have full transparency though, how can you trust that? So the verification would require such an intrusive regime and the Iranians will never agree to the intrusive regime. So that's why we have not resolved this really challenging problem.
- [13:20]
B
Well, this is being framed as a very not good weekend for JD Vance who of course flew all the way over there and did not meet even with a counterpart only to find out that there was not a deal to bring home. He certainly didn't seem very happy when he was taking reporters questions. And then we learned that Viktor Orban is packing up his desk after 16 years in power, which is remarkable to think that JD Vance went all the way over there. He lost this election despite an attempted false flag operation and the support of the Trump administration. What does that tell you about the geopolitics involved here with Hungary and the
- [13:54]
G
U.S. yeah, I mean this election was huge turnout, massive. And the Hungarian people chose a very different path towards Europe. Viktor Orban had taken them away from Europe, towards Russia, towards China. Massive. Again, I think this is just illustrating why we should not pick winners to secure US Interests with any foreign government, you need to have great relationships with whoever comes into power because you are trying to advance your, your strategic interests. And you're right, such a senior person spending two days, multiple rallies. That's why we shouldn't do those things. And we again, any American you would ask, would you want a foreign leader to come into the United States and say this is the leader you should pick you'd be get out of here. And I think that was again rejected. They were pursuing a different path and and the Hungarian people. This was about an economy that has been stagnating for three years and a crony capitalism that had so transformed a positive Hungarian economy into the ground. So this was the people saying, no, it's the economy. It's how I where I want to position myself. And it was a massive defeat because many in the new right look to Viktor Orban as the playbook for politics and that playbook method, economic hardship and corruption that the Hungarian people absolutely rejected.
- [15:26]
B
I guess he'll still be available for CPAC or maybe more.
- [15:29]
G
So we'll see if he stays in Hungary. There's going to be some investigations into those corruption charges for sure.
- [15:35]
B
A lot to talk about with Heather Connelly.
- [15:36]
G
So much. So good to be with you.
- [15:38]
B
So glad that you're it's only Monday. Exactly. AEI nonresident Senior Fellow Heather, thank you for all of your insights here on Balance of Power. I'm Joe Matthew alongside Kailey Leinz and we'll assemble our political panel next. We've got a lot to talk about as well with Jeannie, Shan Zaino and Rick Davis, just moments after hearing from President Trump in the Rose Garden about a blockade that is now almost three and a half hours old. Stay with us on Balance of Power. We'll have much more coming up after this.
- [16:06]
A
Support for the show comes from Public. Lately it feels like there are two types of investing platforms. Some are traditional brokerages that haven't changed much in decades and others feel less like investing and more like a game. Public is positioned differently. It's an investing platform for people who are serious about building their wealth on public. You can build a portfolio of stocks, options, bonds, crypto without all the bugs or the confetti. Retirement accounts. Yep. High Yield Cash? Yes again. They even have direct indexing. Public has modern design, powerful tools and customer support that actually helps go to public.com market and earn an uncapped 1% bonus when you transfer your portfolio. That's public.com market and paid for by Public Holdings Brokerage Services by Public Investing Member FINRA, SIPC Advisory Services by Public Advisors SEC Registered Advisor Crypto Services by ZeroHash. All investing involves risk of loss. See complete disclosures@public.com disclosures.
- [17:06]
C
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. You can also listen live on Amazon. Alexa, Alexa, from our flagship New York station, just say Alexa, play Bloomberg 1130.
- [17:25]
D
Oil back below $100 a barrel today, even in spite of the fact that there is a blockade of the Strait of Hormuz enforced by the United States Navy effective as of about three and a half hours ago. Market seems to be looking through that largely perhaps as it is looking to be encouraged by the idea that this couldn't could have been more escalatory in nature after talks between the US And Iran failed in Pakistan over the weekend. The question, of course, is whether talks are continuing or need to resume. And the president when Speaking at reporters, McDonald's bag in hand delivered from a doordash delivery Grandma earlier said that Iran actually called this morning, that they're planning to continue talking, including over what was the sticking point in talks this weekend. The nuclear program.
- [18:10]
F
Iran will not have a nuclear weapon and we agreed to a lot of things but they didn't agree to that. And I think they will agree to it. I'm almost sure of it. In fact, I am sure of it. If they don't agree, there's no deal. They'll never be a deal. Iran will not have a nuclear weapon and we're going to get the dust back.
- [18:29]
B
The dust, of course, referring to the highly enriched uranium that sits in canisters purportedly deep below the surface of the earth. Now we're watching the markets here and it's remarkable. Kelly, as you mentioned, crude oil back below $100 a barrel and the markets have shaken early losses. It was all doom and gloom in the pre market market. Even Goldman Sachs up said everybody with a disappointing earnings report. We're chugging higher now. And we want to assemble our panel for their take on how they are interpreting all of this. Bloomberg Politics contributors Rick Davis and Jeannie Shan Zaino are with us. Jeannie is our Democratic Analyst Democracy Visiting Fellow at Harvard Kennedy School's Ash Center. Rick is our Republican strategist and partner at Stone Court Capital. What do you make of the this, Jeannie? This is a buying opportunity. Now we're three and a half hours or so into a blockade with no clear direction toward a deal in sight. The president is talking about this casually with doordash grandma at his side and a bag of McDonald's and investors decide it's time to buy. What do you make of it?
- [19:37]
H
That's right. And did I hear correctly, Joe, her husband's name is Leo and he has a book on humility. And this is coming. Well, that's right, 20 at 24 hours after Donald Trump's dust up with the Pope, Leo, and talking about humility, it's all too much for my brain to handle.
- [19:55]
B
Make this stuff up.
- [19:56]
H
You can't make it up. I think perhaps the market is responding, like so many of us, with a sigh of relief that the president has chosen this route in a blockade. And of course, the goal, there is economic pressure on Iran. That is where Iran is most vulnerable. That's where they were most vulnerable before the war, and they continue to be. Because if you think about what he could have done, right, he could have gone into the island, he could have started bombing all of the escalatory steps he could have taken. This is perhaps, I think, one of the best of the worst options, and they're all bad options that he had. You know, on the other side, when you think about it, it, the United States, since our founding, has long been a proponent of free navigation of the seas, of moving commerce freely, not charging tolls. And of course, it's just stunning to stop and think that we've got a president who just in the last few days has been talking about potentially striking a deal with Iran to split tolls on the Strait of Hormuz. So I think it's a little bit of a mixed bag, but I do think the blockade makes more sense than what could have happened after these talks. Talks failed over the weekend.
- [21:14]
D
Well, and when we consider the blockade, strategically, tactically, Rick, clearly the president's trying to make sure that Iran has less leverage for future talks. And he says, you know, those talks continued this morning. Iran called. They do want to make a deal over the nuclear program. That wasn't the case, though. For 21 hours in Pakistan, they didn't seem to be getting much closer to a deal. At least that was what we were led to believe by the vice president. J.D. vance, does a blockade really materially change anything?
- [21:41]
I
Yeah, it really must have irritated Donald Trump to wake up to the news on Friday that looked like Tehran had all the leverage and that they disrupted the oil trade globally in such a fashion that looked like they'd actually won out of this massive attack exercise that the president and the military did, frankly, incredibly well. So I think you see a whole weekend and today an effort by this administration to try and, one, get back the leverage. But two, to cast a different point of view in the world community to show that they're still in charge and so the leverage, they can exist, you know, put forth in the Gulf, is to do exactly what the President has decided to do. He's blockading Iranian assets, not other assets, not GCC assets, assets, but Iranian assets, ships that are moving Iranian crude and, and some evidence that some of that is starting to work with over 30 tankers coming through the strait today. And, and, and more to go. So I can understand the optimism. There wasn't a rain of missiles descending upon Iran today, no ground troops trying to dig up uranium duct. And, and so as Jeannie said, this was probably the least kinetic and the most productive commercially of the options that the President had to sustain a negotiating position. Because remember, this is all just about a negotiation now. This is not a war plan. It's not about winners and losers. It's about getting a deal.
- [23:18]
B
I had to chuckle listening to Ron Johnson on Sunday morning television refer to Baghdad Bob. You can remember that far back, Rick. Baghdad Bob was speaking at that point for Saddam Huss and talked about the infidels dying at the gates even as we were rolling through and of course taking whatever we wanted at the time, Iraqi soldiers were retreating into the horizon. I'm just wondering if you read these remarks from the Islamic Revolutionary Guard the same way. There was a statement that came following J.D. vance's news conference. Any military vessels attempting to approach the strait under any pretext will be considered a violation of the cease fire, the region, the security of ports, either for everyone or for no one. Do you take the Iranians at their word or are these two different conversations?
- [24:10]
I
I think you have to assume everyone's positioning themselves to the best degree they can. Right. And, and we see the, the, the sausage making process of a negotiation really playing out in incredible detail. I mean, the President loves to talk about the plan to get a deal done in addition to getting a deal done. And that complicates things a lot because if you're the counterparty and you're sitting in Tehran and you're hearing the President say things attributed to you that you may not have said yourself. Yeah, you've got to get in the game yourself in order to position it. And so this very well could be an effort by the Iranians to just try to get back into a negotiating posture that, that, that didn't result in any positive outcomes publicly in Pakistan this weekend. So look, it's pretty clear this is not going to be something that's going to be, you know, fixed in a couple of weeks like the President thought when he entered into these negotiations. But everyone's hope is they ultimately will result in some stability in the Gulf to allow commerce to flow unfettered, not to get taxed. By the Iranians. Iranians. And to actually say goodbye to a nuclear program that the Iranians had going on for quite some time. So there is an inkling of hope that you could get across the goal line, the finish line on a deal with Iran at some point. But it won't be a short term outcome, it looks like.
- [25:36]
D
Well, so I just have to wonder if they're keep going to shuttling, be shuttling the Vice President of the United States back and forth to Pakistan. Jeannie, was JD Vance, who was given the assignment to lead this charge. And I wonder if we should view it knowing that the first 21 hours of talks were unsuccessful as him being named the point person and if successful, something that could raise his political Stock ahead of 2028 or potentially him ending up the fall guy if this doesn't end the way President Trump wants it to.
- [26:04]
H
Yeah, I'm sure he has visions of Kamala Harris being appointed to deal with the southern border. That didn't turn out so well. And you know, it is the stuff that vice presidents have to deal with. That said, it was an impossible task to imagine that in a weekend they could negotiate this. This was the first high level talks between Iran and the United states in almost 50 years. It took what, two and a half years to get the JCPOA ironed out. There is enormous, enormous number of issues to discuss. These two are so far apart at this point. So, you know, I don't think it's a big surprise. Not to mention, let's just remember the two times Iran went to the negotiating table with the United States. President Trump said, we were negotiating and then bombed them. So there's not a lot of trust between these two sides. And I think another thing we have to watch out for is does Iran retaliate? And I assume they will, and if so, how? You know, people have talked about how do you retaliate against a blockade. You smuggle, you try to put more mines in those waters. But another big thing they have going for them is their ability to, with China and or Russia to engage in cyber threats and cyber attacks. And I think all of those things in this asymmetric war are on the table and a real threat to the United States as DHS remains partially shut down.
- [27:28]
B
Jeannie, I need to ask about the Jesus post. The president was asked about it. We only have about a minute here. You saw this. He posted an AI image of himself as Jesus Christ the healer. He was asked about it just now. He said, I did post it and I thought it was me. As a doctor had to do with the Red Cross. It's supposed to be me as a doctor, he says, making people better. And I do make people better. If you're with us on Bloomberg TV or on YouTube, there's the post, Washington Post out with a story on this saying Trump Post appearing to depict him as Jesus removed amid backlash Less than a minute. Jeannie, what do you make of this choice?
- [28:05]
H
You know, Joe, often it's very common for us to confuse Jesus Christ with people from the Red Cross. So I feel the president's pain. You know, I think, yes, it's a first step to remove it, but he should also apologize to Pope Leo. It's a heck of a time for him to be taking on the pope, given that a quarter of his voters in 2024 were Catholics and they are going to play a big role in these swing states and districts. The 26 election. That's why he took it down, but still refused to apologize for this back and forth with Pope Leo that he
- [28:38]
D
should do, reiterating when he spoke with reporters just a short time ago that the pope hope is weak on crime, in the president's words. Jeannie Shan Zaino and Rick Davis, Bloomberg Politics contributors. The both of them here with us on Balance of Power and we have more ahead as we look at oil, perhaps not reacting like you would think to a blockade. The strait of hormones.
- [28:56]
B
Stay with us on Balance of Power. We'll have much more coming up after this.
- [29:03]
A
Support for the show comes from Public. Lately it feels like there are two types of investing platforms. Some are traditional brokerages that haven't changed much in decades, and others feel less like investing and more like a game. Public is positioned differently. It's an investing platform for people who are serious about building their wealth on public. You can build a portfolio of stocks, options, bonds, crypto without all the bugs or the confetti. Retirement accounts? Yep, High Yield cash? Yes again. They even have direct indexing. Public has modern design, powerful tools and customer support that actually helps go to public.com market and earn an uncapped 1% bonus when you transfer your portfolio. That's public.com market ad paid for by Public Holdings Brokerage Services by Public Investing Member FINRA SIPC Advisory Services by Public Advisors SEC Registered Advisor Crypto Services by ZeroHash all investing involves risk of loss. See complete disclosures@public.com disclosures.
- [30:04]
C
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.
- [30:20]
B
It's been an interesting day here in Washington at the White house today. A McDonald's delivery and new hope for a deal with Iran. We watched all of this unfold live as the President of the United States States in fact took delivery of McDonald's food at the Oval Office. Even he made a joke that this might appear staged. DoorDash Grandma brought two bags of McDonald's to give the President an opportunity to talk about tax. Well, no tax on tips and his tax policies from the big beautiful bill that are colliding with tax day this week, April 15th. Of course, the real conversation with reporters who had been summoned for this off schedule moment was really about Iran, knowing of course, that J.D. vance had come back empty handed following talks that also included Jared Kushner and Steve Witkoff with the Iranians. No deal with, of course, the idea of a nuclear free Iran being pushed back by Tehran. The President was asked about those talks and the future of a possible deal as he received the McDonald's. Here's what he said.
- [31:28]
F
Well, he's done a good job at Steve and Jared. They've all done a very good job. And I can tell you that we've been called by the other side. They'd like to make a deal very badly. We've been called this morning by the right people, the appropriate people, and they want to work a deal. They would like to work a deal.
- [31:49]
D
So for more on the prospects of this phone call and of a deal being reached at some point, we turn to Bloomberg's Tyler Kendall, who is back live on the White House North Lawn for us. Tyler, do we have any more information as to who exactly the right people are who called this morning? Is it direct contact between those who were present negotiating in Pakistan?
- [32:09]
E
We're still waiting on additional details from President Trump's comments. Kelly, though the president certainly made it seem as such as we've gotten more headlines over the Bloomberg terminal throughout the day that other regional mediators have been trying to keep these talks going, including Oman and of course, most notably Pakistan, where the direct talks were held just this weekend. These comments from President Trump seem to give us our strongest signal yet that there is an opening for negotiations after the delegations departed Pakistan this weekend without getting to a resolution. And President Trump himself reiterated that the main point of contention, that sticking point remains the future of Iran's nuclear ambitions as well as what is going to happen to the already highly enriched nuclear material. Now the president is saying that he feels that there could be some path forward on this. But we should also keep in mind that at least publicly, Iran has still said and taken that more hard line stance. Though last night Kelly, the foreign minister for Iran did say that it's natural not to expect that an agreement could be reached after a single session and that it takes times to hammer out these more complicated issues. I will point out that President Trump said as of now the timetable remains the same. The timeline I believe is the word that he used referring to this two week cease fire that is still in place and the idea that both sides for now are restraining on table attacks on each other despite the threats just today from both parties that we could see that escalation if a cease fire does not hold.
- [33:41]
B
Tyler, the president was asked whether other countries would assist in enforcing the blockade. He said we don't need other countries but yeah, they will. And when asked which countries he said they've offered their services, will let it be known probably tomorrow. Do we have any insight into which countries these may be or any of them in Europe for instance?
- [34:02]
E
Well, this has been a back and forth conversation as you know Joe, as President Trump has been heaping on the pressure, particularly for those European allies, those in the NATO alliance to help secure the Strait of Hormuz. Now the United Kingdom came out earlier today, said that they weren't going to be assisting in this effort. But we also heard from the French President Macron, who indicated that we're going to see a coalition a meeting take place later this week where they in partner countries will talk more of the specifics. But the over the underlying theme appears to be that allies aren't going to commit those military assets unless there is a cease fire in place. The French president calling whatever mission does appear a strictly defensive mission, that they are not a party to the conflict between the US Israel and iron Iran. And that's going to be really critical because we know that President Trump has ramped up his threats that we could see attacks on Iranian attack boats if they come near the US Blockade. So how this is all going to fit together with the White House's broader plan to ensure that there is freedom of navigation with our allies, of course, remains to be seen.
- [35:08]
D
Tyler, we should also note as you speak to us from the White House that on the other end of Pennsylvania lawmakers are heading back into town today after a two week recess. Congress will be back. We understand war powers resolutions could be coming up in both chambers this week. Obviously we know President Trump has the ability to veto those. So should he so choose if they were to pass at all, which isn't necessarily a given. But how should we be watching whether or not more pressure is going to be added to this entire situation by the return of lawmakers who have been spending time in their districts or Disneyland or wherever else?
- [35:40]
E
Right. Quite the two weeks to be out of Washington and not faced with questions by reporters on Capitol Hill. Kelly. Now as you alluded to, a war powers vote would largely be symbolic. If it ultimately did pass both chambers, President Trump would veto it and it wouldn't have that two thirds majority to overrule that veto. What I would actually point you to is another potential vote that could happen once we reach the 60 day mark of the war. Under the War Powers Act, President Trump needed to notify Congress about potential military action. But that same law does mandate that after 60 days Congress would have to weigh in in a more formal way to authorize an ongoing operation. And we had heard last week from some Republicans, including John Curtis in Utah, who said that if this war does drag on beyond a longer period, then maybe he would like to weigh in and get Congress involved in a more form, formal way to the future of the war. Under the law it says 60 days. Congress has to get involved. The president could ask for an additional 30 day extension to bring it to 90 days if that's what's required to get US troops safely out of the region. But that's really what I have my on because after that this two weeks is up. We are then going to be at the one week mark until we hit 60 days. And then of course, as you both know, we're watching the funding fight and how perhaps appropriators could withhold fundings if they don't get additional expenses information from the administration about how this war is going.
- [37:02]
B
Tyler, thank you so much. Bloomberg's Tyler Kendall live at the White House, setting us up perfectly for our conversation with Rebecca Babin, the senior equity trader Managing Director, CIBC Private wealth with our eyes on the oil market. Rebecca, welcome back to Bloomberg TV and Radio. You've been talking about living on borrowed barrels and it's true there's been a lot of oil floating around that we've been using here. Crude, you see, say, is not in a market that avoided disruption. We're in a market that delayed fully feeling it. So how can we justify, or maybe you cannot, crude oil back below $100 today, even if there is a deal, it looks like it's going to be some time before it's codified what do you make of this reaction?
- [37:44]
J
Well, you know, I think it's really interesting and I think the paper market that we're seeing right now sell off a little bit is trading and looking through the conflict to the resolution and barrels being back on the market and available for sale in a fairly short order. The reality of that scenario is probably a much longer timeline. Even if we get those barrels moving tomorrow, we are looking at shut ins that have taken place across the Middle East. That will take weeks for the best case scenario and for some countries like Iraq and Kuwait will take months to get back up and running fully. Then we have the shipping scenario. A lot of the ships that have been transiting or were transiting through the Strait of Hormuz have redirected themselves. They're looking at the Atlantic Basin, they're looking to the US to go to China. They have to make their way all the way back around to the Gulf and then most importantly decide to move through it. And I think that's the key, that maybe the paper market's missing, that the physical market is getting. It's not just about the ships leaving the Strait, which have potentially upticked as we saw from a headline today, but who's coming back in to reload. And there has to be confidence that you can, can come back in, reload and get back out. And I think that's where the disconnect is, is can we get those ships back to normalization and what does normalization look like? The physical market where Brent dated, Brent's trading at 134 tells you that's a little bit different than where the paper market's trading right now.
- [39:11]
D
Well, and to your point about the production shut ins we've seen, not even to talk about any infrastructure that has been damaged in the case of some LNG facilities in Qatar. Rebecca, what is your base case as to how quickly we could get back to the full production capacity we were at coming from the Middle east and these producers pre war, assuming that there is eventually a reopening of the Strait.
- [39:34]
J
So that's a great question. And there's a lot of estimates floating around out there. The very optimistic estimates have about one month.
- [39:41]
E
Right.
- [39:41]
J
And that's kind of the Saudi Arabia of the world who have great engineering ability, resources to put towards doing that, this the worst case scenario. And we even saw some of the energy ministers at Saraweek implied this when they were there a couple of weeks ago saying this is like two to four months for us. That was Kuwait. Right. And then we look At a place like Iraq, where the resources and the infrastructure is more dated, and that could be several, six months potentially. Now, all of this is a continuum, right? You get some barrels back from Saudi Arabia and then it kind of filters through. But the bottom line is normalization, and we need to really consider what is normal if we have a strait that is still compromised or there's uncertainty. If we were getting 20 million barrels through before, maybe that's a lower number now as the freight rates across the globe have increased, and maybe ship owners are like, you know, it's not worth that risk. I'm going to keep this other route going. That I know is a sure thing. So you got to think about what's the new normal. But I would say, on average, I think the number the market's using for production coming back online is two months. I think it's optimistic, but I think that's where it is.
- [40:54]
B
Rebecca. The President was talking to reporters a short time ago, and he referred to many ships, he said, are heading to our country right now as we speak to load up with oil, with US Oil. They're coming to our country. He said, right now there are many boats coming. It could be well that this is settled before they arrive. The market liked that last line, apparently, the idea of an imminent settlement or, or, or peace deal. But what do you make of what the President is saying here? This is an international market. To what extent could the United States be selling oil to more international partners out of this?
- [41:34]
J
So that's a great question. Right now, U.S. exports are around 4 million barrels a day. We have the capacity to get up to 5 million barrels a day. We produce over 13 million million barrels a day in this country. But we can't export everything because you have docking constraints, you have vessel constraints. So five to five and a half million barrels a day of exports is kind of where the market sees our kind of capacity at. That does give us some room off of where we are at 4 million barrels a day of exports to increase. And I expect we see that we are going to see inventory draws in the US Starting this week, and it's going to accelerate over coming weeks. And our exports are probably going to go from 4 to 5 million barrels a day. To realize that, again, we're talking about an increase of 1 million barrels a day. It's a lot. But in the context of what we're losing through the strait, it's just not enough to fill a gap right of that size. And this just comes down to the broader picture. We are using all of these different buffers, floating storage, spr, inventory, increase in exports to fill in a gap that's just. We're using a shovel to fill in a hole that's being dug by an excavator. Right. So it's just really hard to fill that in. Are we pulling every lever we have? Are we talking the market lower? Yes. But if you look at the physical market again, I come back to this and you look at where it's trading in the Middle east and in Asia and where you're seeing demand destruction based on the scarcity of supply, you just know that you're not filling that gap fast enough in the short term.
- [43:07]
D
Rebecca, we just have 30 seconds left here, but there's a question as to whether Iran, in the face of a blockade of the Strait of Hormuz, will then ask the Houthis to resume activity disrupting the Red Sea. How much worse would that get for the energy market if we were to see that disrupted as well?
- [43:23]
J
I think that would be very significant. Significant for the energy market. We have 5 million barrels a day being rerouted through the Red Sea out of Yambu. It's been a huge release valve for the market. It's kept us from feeling that 150 in crude. And I think if we lose that, we're really, really, really different picture and it's going to be ugly.
- [43:44]
D
All right, Rebecca Babin, we'll leave it there. Senior equity trader and Managing Director at cibc.
- [43:48]
B
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
- [44:02]
C
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G
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D
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