New Front In Iran War; Big Tech Earnings Falter

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0:32Bloomberg Audio Studios. Podcasts. Radio. News. Good morning. I'm Nathan Hager. And I'm Karen Moscow. Here are the stories we're following today. Karen, we begin with a widening war in the Middle East. Iran-backed Houthi militants have claimed their first attack on commercial shipping in months, targeting two Saudi Arabian oil tankers in the Red Sea. It comes after the U.S. carried out a 12th straight night of attacks on Iran's military sites. President Trump is not indicating he's ready to go back to the negotiating table. They're not ready to make a deal. Because every time they make a deal, they want to change it and everything.

1:13They're not ready. They'll be ready very soon. President Trump spoke at a rally in Marietta, Georgia. We get more from Bloomberg Middle East Managing Editor Paul Wallace in Dubai. Effectively, the Houthis have now opened a new front in the U.S.-Iran war. and this comes about three days after the houthis said effectively that they were going to attack ships calling at saudi arabian ports and this is extremely worrying for for not just the saudi arabians but for the u.s and its allies and the global oil market bloomberg's paul wallace reports the red sea had emerged as a key workaround for oil exports particularly for saudi arabia with the Strait of Hormuz effectively shut down.

1:57Well, Nathan, as the conflict appears to be escalating, the House has passed a$95 billion budget plan to keep the war going. It's part of a two-step process that would let Republicans fast-track$73 billion for the war without Democratic votes and billions more in aid to farmers hit by tariff retaliation and war-related price increases. House Speaker Mike Johnson was able to unite Republicans behind the bill. We continue to deliver for the people, and we're going to continue that streak all the way through the end of this year and into the next Congress. House Speaker Mike Johnson spoke on Capitol Hill.

2:30No Democrats voted for the measure. Party leaders say they plan to make the vote a centerpiece of their campaign to retake the House in November. Well, in the Senate, Karen, President Trump's top trade negotiator, Jameson Greer, says the U.S. will remain intent on tariffs as the Trump administration prepares to replace the duties that the Supreme Court struck down. Bloomberg's Amy Morris reports from Washington. U.S. Trade Representative Jamison Greer told lawmakers that tariffs are here to stay even after the Supreme Court ruling because they'll find a way. Since the ruling, the president has already signed orders to impose a 50 percent tariff on Canadian goods.

3:06Plus, the administration has proposed 10 percent tariffs on more than 80 countries. U.S. Trade Representative Jamison Greer. The specific authorities this administration is using have changed, but the trade strategy has not. We are committed to continuing to use tariffs and to negotiate deals to support the reindustrialization of our economy, protect American workers, and increase their wages. Lawmakers also grilled Greer on reimbursement of those tariffs for small businesses and American consumers. In Washington, Amy Morris, Bloomberg Radio. All right, Amy, thank you. We turn to the markets now where futures are lower following a couple of high-profile tech earnings.

3:42And we begin with Alphabet. Shares of the Google parent. They are down 3.5 % in early trading. The company is raising its capital spending forecast to as much as$205 billion this year. And that's reigniting concerns about a lack of fiscal discipline in the race to dominate artificial intelligence. Tom Giles is Bloomberg's executive editor for technology. We thought they were spending a lot before. And this quarter they came out and said, hold my beer. We're spending even more than we said. These are unprecedented numbers. hundreds of billions of dollars. They raised it to as much as$205 billion.

4:18It really speaks to the urgency of obtaining the chips and the infrastructure, the data centers that are needed to fulfill their AI ambitions. That is the Google parent alphabet. As far as earnings in the quarter, Bloomberg's Tom Giles says Google's cloud revenue totaled a better than expected $24.75 billion. That was up 82 % from a year earlier. And Karen, shares of Tesla are going in reverse as well this morning. They're down more than 5%. Profit tumbled despite a strong quarter for the automotive business. Spending on ambitious initiatives like robots and AI surged to$5.8 billion, and that resulted in Tesla's first cash burn in two years.

4:59The company still expects capital expenditures in excess of$25 billion this year. Here's CEO Elon Musk on the company conference call. We should be spending on CapEx as fast as we can spend as fast as we can without it being too wasteful. So we're not trying to aim for some extremely high efficiency capital spend because that would slow things down. So it's a balance between how much capital efficiency versus time. And Tesla CEO Elon Musk also said he could not comment on a possible merger with his other company, SpaceX. Well, Nathan, we also got earnings from IBM. That tech giant pre-announcing an earnings shortfall earlier this month, and now it cut its full-year sales outlook, including for its closely watched software unit.

5:49It's been a rough year for Big Blue. IBM shares have declined 31 % this year, including a 25 % drop in a single day after the preliminary earnings were announced. And the big tech earnings continue this afternoon, Karen, when Chipmaker Intel reports its latest quarterly results. Let's get a preview from Bloomberg's Tom Busby. After falling behind rivals like AMD and NVIDIA, Intel has roared back to life thanks to a turnaround effort aimed at capitalizing on the boom in artificial intelligence spending and rising demand for its Xeon server chips. That helped make up for a sluggish PC market hurt by a shortage of memory chips.

6:24Bloomberg Consensus calls for revenue of$14.43 billion and adjusted earnings per share of 21 cents. Tom Busby, Bloomberg Radio. All right, Tom, thank you. U.S. Treasury yields are trading near two-month highs ahead of next week's Fed decision. And Bloomberg's John Tucker joins us with the latest. John, good morning. Good morning, Karen. The jump in yields reflects, among other things, the surge in oil prices. That's inflation, and it could force the Federal Reserve to raise interest rates. Traders see roughly a 30 % chance the Fed's going to raise rates at their policy meeting next week. You also have to consider the strength of expected growth, the higher cost of capital, the swelling government deficit, and the investment boom in AI.

7:06Yields on Tuesday, they were higher by roughly 2 to 5 basis points across maturities, with a 10-year hitting the highest since late May. And so far this year, the 30-year bond, the long bond, has traded beyond 5 % for 28 days. That is the longest stretch since the dawn of the financial crisis. In New York, I'm John Tucker, Bloomberg Radio. All right, John, thank you. Well, the Fed decision might not be till next week, but it's decision day in Europe, where the European Central Bank is forecast to leave interest rates unchanged. Policymakers are continuing to assess the impact of renewed fighting in the Middle East.

7:40Economists and traders expect the ECB to keep rates at two and a quarter percent after raising borrowing costs at their last meeting. Well, Nathan, the UK's new chancellor says he will back businesses in his first major meeting with the city of London. John Healy spoke to executives at Bloomberg's headquarters in London this morning. My message to British business is quite simple. To British businesses, to British innovators, to British investors, I will back you as your chancellor. And I'll back you in financial services, in technology, in retail, in industry, in all parts of the economy. And John Healy succeeded Rachel Reeves as the UK's finance minister after Andy Burnham took over as prime minister on Monday.

8:23May Karen another sign this morning that artificial intelligence is affecting the job market. But Uber says it has cut 10 % of jobs in its customer service operations. The ride-hailing company says it's part of a broader effort to simplify its ranks and, quote, embrace artificial intelligence. Now, this marks the first time Uber has tied layoffs to AI. Businesses from financial services company Block to cloud provider Oracle have cited the technology as a reason for job cuts in recent months.

8:53Time now for a look at some of the other stories making news in New York and around the world. And for that, we're joined by Bloomberg's Michael Barr. Michael, good morning. Good morning, Karen. New York Mayor Zoran Mamdani and Council Speaker Julie Menon are at odds over the city's response to a Legionnaire's disease outbreak. Menon is calling it a failure, and Mamdani is defending his administration's actions. Ma 'am Donnie has been criticized for spending time on issues outside of his control, such as calling for the arrest of Israeli Prime Minister Benjamin Netanyahu. Meanwhile, Menon highlighted key vaccines in the health department and a lack of guidance for affected neighborhoods.

9:31Dr. Daniel Kablowski, an infectious disease specialist with Mount Sinai, says legion of bacteria can spread when cooling towers release contaminated water particles into the surrounding environment. I think in terms of the number of cases that we've seen, we are probably on the tail end of the peak. So we're probably going to see a decrease in those number of cases. The Legionnaires outbreak on Manhattan's Upper East Side has grown to at least five confirmed deaths and 82 cases. Confirmed Ebola deaths in Democratic Republic of Congo have prompted a warning that the outbreak could become one of the worst on record.

10:09Deaths have doubled in just over two weeks, with the National Institute of Public Health reporting 2 ,536 cases and 1 ,033 deaths. Doctors Without Borders' Trish Newport says the response is just not big enough. So if we don't have proper surveillance in place, if we're not able to monitor every single person that was in contact with a confirmed case, every single person that's at risk of developing the disease, if we're not able to monitor this, the outbreak will continue. Trish Newport with Doctors Without Borders. A modeling scout with close ties to late sex offender Jeffrey Epstein has been found dead at his French home.

10:47Daniel Sead was accused of raping a Swedish model in France in 1990 and was one of the subjects of a probe into Epstein's links in France. Global News 24 hours a day and whenever you want it with Bloomberg News Now. I'm Michael Barr and this is Bloomberg Karen. Thanks, Michael. Time now for our Bloomberg Sports Update. and for that we bring in John Stashauer. Thanks Karen, the streak is over. The Red Sox in the day part of a doubleheader in Boston scored four runs in the first inning and beat Baltimore 6-3. That made it 15 wins in a row, tying the club record that had been held since 1946. Tried to break the record in the nightcap but the Orioles scored four in the first and won 5-1.

11:25In New York, the Yankees and Pirates also with a day-night doubleheader. Pittsburgh won 5-3 in 10 innings and then the Yanks got the split with a 2-0 win as Max Fried returned from injury and threw five scoreless innings. That's your Bloomberg Sports Update. Stay with us. More from Bloomberg Daybreak coming up after this. As markets move and headlines break, what matters most is context. A Bloomberg subscription gives you unmatched reporting, sharp analysis, and powerful tools that help you connect the dots. Visit Bloomberg.com slash podcast offer to learn more. Coast to coast on Bloomberg Radio, nationwide on Sirius XM, and around the world on Bloomberg.com and the Bloomberg Business app.

12:13This is Bloomberg Daybreak. Good morning, I'm Nathan Hager. The war in the Middle East appears to be expanding with Iran-backed Houthi militants claiming an attack on Saudi oil tankers in the Red Sea, as President Trump indicates he has no plans to let up on Iran's threat to the Strait of Hormuz. We don't need the Hormuz Street, but we do it because we have to do it, because we cannot let Iran have a nuclear weapon. That was President Trump at a rally in Marietta, Georgia. Joining us from Istanbul this morning is Bloomberg Middle East breaking news editor Patrick Sykes. Patrick, give us more details, if you could, on this reported Houthi attack and the significance of potentially having strikes in the Red Sea.

12:50Good morning. Morning, yes. We know that the Houthis have hit at least one. They claim two tankers, but we know they've hit at least one refined products tanker in the south of the Red Sea. That's been confirmed by the British Navy as well. It's significant because it is the first time they've successfully acted on this blockade on Saudi ports that they announced a few days ago. That means that in practice there is now a whole new front in the Iran war, and it will just amplify in the minds of ship owners, of traders, the dangers of trying to do business in that part of the world. they're now wrestling with not just one choke point, a strait of Hormuz being effectively closed, but a second as well.

13:35So that means if you wanted to get from the Saudi port of Yambou on the Red Sea to a crude buying market in Asia, for example, you've now got a choice between risking the passage through that very narrow strait controlled by the Houthis or going all the way into the Med and potentially all the way back around Africa. So it's a huge disruption for shipping that will add costs and create logistical challenges, even if ships are able to avoid the security risk. And just looking at the price action just this morning, Brent crude is trading back close to$100 a barrel once again. What are we hearing from market participants about what the impact on the oil market could be and where things could go from here?

14:16Yeah, I think it underlines that with, in particular, this opening of a second front, the risk for shipping that it creates. it brings us back into the much more highly escalated territory that we were in at the height of the war back in March, April kind of time. How far that goes really depends on the duration of the disruption, right? If the U.S. strikes that have so far been trying to degrade Iran's ability to threaten the Strait of Hormuz to reach some kind of breakthrough, or if some other kind of security assurance guarantee was to be provided that would alleviate some of those security concerns, then we would see more product coming through to market and in turn the price coming down in line with that.

15:05But for now, it's the opposite. We're seeing only increased risks and there seems to be no, for the moment, assurance on the security side that would allay those risks. This is Bloomberg Daybreak, your morning podcast on the stories making news from Wall Street to Washington and beyond. Look for us on your podcast feed by 6 a.m. Eastern each morning on Apple, Spotify or anywhere else you listen. You can also listen live each morning starting at 5 a.m. Wall Street time on Bloomberg 1130 in New York, Bloomberg 99.1 in Washington, Bloomberg 92.9 in Boston and nationwide on Sirius XM Channel 121. Plus, listen coast to coast on the Bloomberg Business app, now with Apple CarPlay and Android Auto interfaces.

15:51And don't forget to subscribe to Bloomberg News Now. It's the latest news whenever you want it, in five minutes or less. Search Bloomberg News Now on your favorite podcast platform to stay informed all day long. I'm Karen Moscow. And I'm Nathan Hager. Join us again tomorrow morning for all the news you need to start your day right here on Bloomberg Daybreak.

16:15Thank you.