Trump Fans Iran Quagmire Fears With Debate on Seizing Kharg

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1:31Find an agent at c-i-n-f-i-n dot com. Bloomberg Audio Studios. Podcasts. Radio. News. This is Bloomberg Business Week Daily. Reporting from the magazine that helps global leaders stay ahead. With insight on the people, companies and trends shaping today's complex economy. plus global business, finance, and tech news as it happens. The Bloomberg Business Week Daily Podcast with Carol Masser and Tim Stenevek on Bloomberg Radio. Let's head to the North Lawn of the White House, try to get an understanding of the plan, the consensus. Is there any timeline, any end to this war? With us is, of course, Bloomberg News, Washington and White House correspondent, Jeff Mason.

2:19Jeff, good to be checking in with you. You know, here we are getting ready to enter our fourth week when it comes to the U.S. war in Iran. Is the president looking for an off-ramp? Like, what is kind of our way forward here? Do we have any clear idea? Well, I heard the questions that you were just mentioning that you were going to ask. And the truth is, a lot of those questions are questions that only the president knows the answers to. Is he looking for an off-ramp? Possibly. Has he given mixed messages about that? Absolutely. He has said that he thinks that the U.S. is ahead of schedule with its operation.

2:54He has said before that he thinks that the war could end soon. But then, of course, the United States continues to attack and continues to be in a position really to continue this war for some time. And the reports from The Wall Street Journal and some other media organizations about troops being sent to the region would only underscore that. What do we know about those troops? Again, The Wall Street Journal reporting that the U.S. is sending more Marines and warships to the Middle East. Does that indicate that the operation changes in some way? It moves from strikes from air to perhaps a different type of operation?

3:29What I would say is one shouldn't necessarily assume that forces being sent or additional forces being sent to the Middle East equates with boots on the ground. Boots on the ground, I think most people would assume, means actual soldiers, actual American troops in Iran or on Karg Island, for example. And that is not the same as reinforcing the multitude of bases and troops slash forces that are already in the region. So I don't have the answer about what the president is eventually planning on doing. I did, however, have an opportunity to ask him about this yesterday in the Oval Office. And when I asked if he was planning to put boots on the ground or send more forces to the region, he said no.

4:12So, again, mixed signals. But I don't think you can necessarily conclude from the reporting that we've seen by some of our colleagues that that means boots on the ground is what is coming next. Yeah, you know, when it comes to, Jeff, mixed signals, I think about the director of national intelligence, Tulsi Gabbard, who was up there before a Senate committee answering questions about Iran and national intelligence leading up to the president, his decision to take the action against Iran. contradictory statements by her and whether or not Iran was really a threat. I don't know if it really matters at this point because we're in a war.

4:52But I guess what I'm wondering is, you know, we have another story out on the Bloomberg about the president losing control of this war. Is he like, is he in control to find an off ramp? Is there negotiating going on that, you know, keeps the U.S. still in some kind of control of this situation? Or is it kind of gone beyond that? Well, I mean, we're getting a little bit into semantics there. What does it mean to be in control? Certainly the president of the United States is in control of what the U.S. forces do. And he's calling the shots about what happens next. And he gets to make the decision about an off-ramp and whether or not he's looking for one or whether he wants to stick around for a little bit longer.

5:32In terms of is he losing control broadly of the ramifications of the decision that he made to go to launch the strike, these strikes against Iran? I mean, maybe if you look at the oil prices, which, of course, we've been talking about a lot, it doesn't seem like the White House was expecting that ramification. It doesn't seem like they were ready for the impact on the Strait of Hormuz. That said, the president also addressed that in the Oval Office yesterday and indicated he thought that oil prices would go even higher. But listen, we all know in the world of politics that spin is part of the gig.

6:09And I think it's probably fair to assume that there was a little bit of spin involved in that. Hey, Jeff, before we let you go, the politics of this, especially ahead of the midterms in just a few short months, you're at the White House, you're in Washington. Republican lawmakers who may be up for reelection or maybe in vulnerable areas. To what extent do these higher prices do a move of focus from affordability, which is, we know, a very important issue for voters going into these midterms. To what extent does that possibly hurt Republicans in the midterms? Oh, I mean, it could hurt them in a massive way.

6:45I mean, you're absolutely right to mention affordability. That was the buzzword three or four weeks ago before this war started. That was exactly what the White House wanted President Trump to be focusing on as he was at that time beginning or was supposed to be beginning a regular set of stops across the United States to talk about his economic agenda. You're not seeing him do that right now because he's running a war. And the affordability message will be a much harder one for this White House to to get behind because of the prices that you're talking about. Energy prices, the prices at the pump, that's something that hits people in the pocketbook right away every day.

7:23And I think to your broader question, will that hurt Republicans in November, it really depends on how long this war lasts. And it depends on how quickly oil prices recover once the war concludes. And we just don't know the answers to those questions. But we certainly know that that's something that they're thinking about here and within the Republican Party. Is there anything, just before we go, sorry, I'm going to add on a question. 40 seconds here, Jeff. What are we talking about as we are focused so much on the war? I know we always ask this because we know we have a president who often can move us around in terms of what we focus on.

7:56The weave. The weave. So I'm just wondering, what aren't we watching that's also going on in Washington right now or at the White House? Well, the Department of Homeland Security is still closed. I mean, there's still a partial government shutdown here. Immigration policy has been shifted a little bit out of the headlines because of this war. But the impact of that on airports, on TSA, and also just the continued ramifications of the killings of two U.S. citizens this year. I mean, that wasn't last year. Those are still big stories that are getting less attention because of this conflict. All right.

8:29Well, great as always to check in with you. Jeff Mason, of course, there on the North Lawn of the White House. He's Bloomberg News Washington and White House correspondent. Stay with us. More from Bloomberg Business Week Daily coming up after this.

8:44They told us to expect change. They warned us about the transition. But honestly, they forgot the best part. This is the chapter where we finally focus on us. LifeMD delivers expert menopause and midlife care right from your home. From hormone health to holistic wellness, LifeMD helps you feel your best for the best years of your life. LifeMD, it's just getting good. Visit LifeMD.com slash goodlife. The thing about AI for business, it may not automatically fit the way your business works. At IBM, we've seen this firsthand. But by embedding AI across HR, IT, and procurement processes, we've reduced costs by millions, slash repetitive tasks and freed thousands of hours for strategic work.

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10:51All investing involves risk of loss. See complete disclosures at public.com slash disclosures. You're listening to the Bloomberg Business Week Daily podcast. Catch us live weekday afternoons from 2 to 5 p.m. Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business app or watch us live on YouTube. Hey, we're going to stay on the U.S. war in Iran and really what it may mean if President Trump loses control of the war. We asked Jeff about it, but it's also top line headline of a story that's on the Bloomberg terminal. Trump reportedly considering options to escalate U.S. pressure on Iran, including deploying troops or striking oil infrastructure, which would be highly escalatory moves with steep political risks.

11:31Bloomberg Economics Senior Geoeconomics Analyst for Asia Pacific Adam Farah joins us from our Washington, D.C. bureau. What does it mean to you and the team for the president to potentially be losing control? How do you use that word? So I think this all flows directly from this question of what the actual objectives are for the war and how the president sees success. You know, when we look out right now at the war and the current situation, it's unclear how the United States and the president can declare victory without laying out for the American people what it is he sought to achieve. We've seen varying forms of him laying that out, whether it be from detailing blowing up and destroying the ballistic missile force in the Navy, which we've seen a lot of effort to do and it sounds like has been rather successful.

12:15But then also looking for the Iranian regime to capitulate and or fall directly. And with that question looming over all of this, we have now a shifting narrative. If we think back just a couple days or a week, Iran seemed to be fully on their back foot, lashing out, but having suffered a massive hit from the U.S. and Israel. But here, after further increases in oil prices and clarity that the United States cannot quickly reopen the strait, it seems to be shifting significantly. And the statements from Iran's leader today seem to imply that they certainly seem to see it that way. And so that raises questions as to how the president can move forward here and whether he still feels it's possible to declare victory in the short term or he has to escalate with the hope of forcing the Iranians to de-escalate, which has not been successful so far.

13:02Two very different options. I mean, does one say to you that if he continues to move forward, which it seems to be the case at this point, although we're talking about boots on the ground and whether or not that will happen ultimately, but does that to you then say, or you and the team, that potentially the president is losing control of this war if he continues to move forward? So I think the problem we're seeing here is, again, not about the president, as we just heard before, losing control of the actions that are happening, but really the unanticipated or in some cases very anticipated consequences of the war continuing.

13:36The longer this goes, the greater the impact on the global economy and the greater the impact on U.S. forces, right? On that front, we had a U.S. aircraft that was apparently hit by Iranian fire, make an emergency landing yesterday. Things like that are going to increase and keep happening. Accidents will happen and the Iranians will get lucky. And that raises the political and the cost of lives in this conflict. And on the economic side, we're seeing it day to day. The rise in oil prices are putting pressure on everything around the globe, with inflation being the key word right now. That's starting heavily to impact economies in East Asia and Asia writ large that are most reliant on the Strait of Hormuz.

14:14But that will spread to the United States as well, impacting what is already seen as an affordability crisis. So I think those are the factors that stand to kind of increase without movement towards de-escalation in the short term. You know, Adam, I'm glad you brought up other countries here because, as Carol often reminds us, what happens there is not a vacuum. And we have to look at Iran. We have to not just look at Iran in the Middle East, but we have to look at China. We have to look at Russia. We have to look at Ukraine. And we got a headline earlier today about how the Kremlin would potentially stop sharing intel with Iran if the U.S.

14:52cut off aid to Ukraine. What are you watching in that region and sort of the dynamics that Putin is playing with with regard to Iran? Yeah, the offer from the Kremlin certainly seemed too cute by half. this effort to try and equate the two wars together and highlight that its support of Iran is no different than the U.S. support of Ukraine. And there's no doubt that Moscow is likely relishing in that moment. And as you said, though, there are clear consequences of this war already and what happens if it continues on other conflicts or potential conflicts. In Ukraine, the biggest clear problem is this question of U.S.

15:30hardware and particularly interceptor missiles and how many may be available to provide to Ukraine so they can continue to defend their cities and their territory writ large from the onslaught of Russian ballistic missiles and drones. And when we look to the Indo-Pacific, you know, every day the United States is using exquisite weaponry that would be needed in a conflict if something were to occur in the South China Sea or over Taiwan with China. And there's no doubt that Beijing has taken note of that. And, you know, as you've heard from countless experts, the timeline to produce and rearm for the United States is not a question of weeks or months, but likely years.

16:07And that will change how the United States can conduct its operations anywhere in the world, but particularly in the Indo-Pacific. And that Putin headline offers to help to stop sharing intel with Iran, that came from Politico. And Politico also reported that the U.S. Carol rejected the Putin offer for Iran-Ukraine quid pro quo. Yeah, you know, there's just, you know, it's like this giant chessboard. And I just think about risk. Yeah. But I feel like I need more than just two people playing because it just feels like there's so many pieces. And this is what you guys do, Adam. You think about the geoeconomic implications of all of this.

16:43I, you know, you guys, we do. We keep thinking about what all of this is doing to the global economy. And it does feel like we're going to be a different world going forward. I can't tell whether that's a better world and more collaborative, or are we going to be more divided after this? How are you guys continuing to report that out and think about it? So we're certainly trying to keep our eyes outside of the region. And, you know, for example, focusing on the things that are happening that are still very consequential for the global economy and for the United States, like Prime Minister Takayuchi of Japan's visit yesterday to the White House.

17:17You know, that visit was originally all about China. It was all about framing Japan's interests and keeping, as Japan has hoped, the United States in line as it negotiates with Beijing in what was supposed to be a meeting just a couple of days from now, but has now been delayed between President Trump and President Xi. But even there, we saw the direct impacts of the war. We saw pressure on her and Japan to live up to the president's expectations. But also this move now for Japan to buy more oil from the United States and decrease its reliance on the Middle East, given this type of conflict. And I think we're going to see lots of changes spiraling out from the war, some anticipated and some not.

17:54All right. So glad we could check in with you once again. Adam Fair, he's Bloomberg Economics, Senior Geo Economics Analyst for Asia Pacific. This is the Bloomberg Business Week Daily Podcast. Listen live each weekday starting at 2 p.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. You can also listen live on Amazon Alexa from our flagship New York station. Just say Alexa. Play Bloomberg 1130. I want to bring in David Wu. He's Bank of America's former head of global interest rates, currencies, and emerging market, fixed income, and economic research. Now, he's the founder of the macro intelligence firm David Wu Unbound.

18:31He's the co-author of a new book, Merry-Go-Round Broke Down, a novel of guilt, greed, and globalization. He joins us from Jerusalem. David, first, you are a relatively new citizen of Israel. You told us that last time you were on the program when you were here in New York. You got your citizenship there. You're on the ground in Jerusalem. What is it like in Israel right now? I would say, you know what, Tim? I think the last 24 hours has been probably crazier than the previous couple of weeks. Because after Netanyahu's speech yesterday, you know, we've seen massive, literally, like, you know, missile attack by the hour.

19:09So I think I must have been in a shelter at least five or six times today. And, you know, I think, you know, things are OK, but, you know, I'm tired just going in and out of the shelter. Well, I look, I mean, we're thinking of everybody who's affected by this and all the wars everywhere right now. And the questions we have are really about the escalation or potential escalation here. And the recent reports that we've gotten from CBS that the U.S. is making preparations for potential ground troops in Iran. The White House has pushed back on that. But I'm curious how, and we're going to talk about the macro environment, but how would that change the war in your view?

19:48I think it changes everything. But by the way, that's been my central scenario for the past week. In fact, you know, I mean, my advice to my clients has to be sell stocks and buy oil on the view that actually troops on the ground is actually not only inevitable, but it's probably the only options left. I think what we need to realize that at this point, you know, Trump, it's very difficult for Trump to tackle without getting ahead. You know, I think, you know, it's always, you know, clear in the hindsight. But I think, you know, at this point, I would argue that the only way he can actually regain the momentum is by essentially taking over the Strait of Hormuz.

20:24This is why an amphibious assault on the Iranian coastline around Bandar Abbas really probably is the only option left. By the way, for what it is worth over the last 24 hours, a lot of Israeli commentators have been saying the same. because in a way, you know, and you could argue that this, especially given the fact, as you probably know, the U.S. has been getting no response from the IRGC when it comes to reopening the Strait of Hormuz. In fact, actually, the IRGC, the last answer, the response to the U.S. request for ceasefire negotiation was that we will only talk once you drop all sanctions on Iran.

21:02So I think from that point of view, I think Iran feels like is in a pretty strong position. So it is actually trying to force Trump to pay through his nose. And this is why I think at this point. Now, I don't think anything has been decided yet. I think that's correct. I think the Marines, I think the second deployment of the Marines probably will take another week for them to actually get into the region. Which means that over the next week, we will probably see heavy bombardment of the entire coastline. OK, and then we've seen them using the U.S. and Israel using bunker buster bombs in the last 48 hours to soften the firepower of the Iranians in order to prepare the ground for the Marines.

21:41But I do think that by next weekend, you know, I mean, assuming the situation hasn't changed. I think that's when probably we are going to have to see deployment of of round troops, especially with respect to a potential amphibious assault on the coastline. David, I guess what we all are thinking, and I guess because we're hoping this ends sooner rather than later, but I mean, what's the world like afterwards? What's the region like afterward? What's the U.S. relationship like afterward? What is afterward? word. Well, yeah, I think that's the question to ask. And I'm going to bring it home to what we are so often about.

22:20Yes, there's loss of human lives and we need to keep that front and center. But I mean, I also do think about, you know, what's our relationship? What does it mean for financial markets? What does it mean for global growth? Like, how does this kind of, what's your investing thesis off of all of that? I think, you know, there's a sort of a short term versus a long time. I mean, to be honest, I've been incredibly surprised by the resilience of the U.S. stock market because everybody I talk to, even among clients of mine, as some of the smartest and biggest, best investors in the world, you know, I think a lot of people simply are simply assuming that Trump's going to tackle.

22:57And I've been saying for a while now, tackle is simply no longer an option. And the main reason why I think the tackle thesis is not a viable thesis is that what most people don't understand is that this war really is the first proxy war between the united states and guess what china let me tell you this the only explain that explain that so let me explain that okay i mean you know iran has done pretty well i would argue over the last three weeks against you know the combined military might of the u.s and israel I mean, I don't have to tell you just yesterday, you know, USS Lincoln has repositioned further away from Iran following missile attacks.

23:40OK, I don't have to tell you early in the week you have USS, whatever, Gerald Ford, you know, mysteriously having caught fire now is on its way to Greece. I don't have to tell you that even the Wall Street Journal reported, you know, earlier this week that, you know, Iranians destroy or at least damage five U.S. refueling planes in Saudi Arabia. You might have heard about the destruction of U.S. advanced radars in the region by Iranian drones. Now, how do you think that was even possible? To me, this is the clearest evidence that Iran has obviously access to not only Chinese intelligence, but the most transformational aspect of Iran's fighting capabilities in this war compared to last June was the fact that they had migrated from civilians' GPS system to now the Chinese satellite navigation system.

24:30And that has basically improved the accuracy of their drones and missiles, as well as making it more difficult for them to be jammed. This has been the decisive difference. This is the reason why, you know, you probably heard yesterday, an F-35, almost taken down by the Iranians. So what I'm saying to you... So are you saying that the U.S. is essentially at war with China? I think there's no doubt that China does not want to see a regime change in Iran. Now, I don't think China will send troops into Iran, but there is no doubt both China and Russia will want to see this regime stay on. I mean, you know, because for many reasons, because not least of all, what we need to understand is that Iran is a strategic hub for China in the entire, you know, Belt and Road Initiative.

25:20By the way, I don't know if you know, but, you know, the China-Iran Railroad, which has been under construction for the last 10 years, which runs 10 ,000 kilometers long, is almost fully operational. Once it becomes actually fully operational, guess what? The land bridge that China has been trying to build directly to the Middle East onto Africa will be actually a done thing. You don't think there's no connection between that and the U.S. decision to go after Iran? I mean, I think China, let me put it this way. I think until very recently, the Chinese attitude towards Iran was actually very mixed.