Oil Surges Past $100 a Barrel; Khamenei’s Son Takes Power in Iran

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1:29Now your plans refined. Run a smoother business when you're all aligned. Do that with Acrobat. Learn more at adobe.com slash do that with Acrobat. Bloomberg 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, it's day 10 of the war with Iran. Once again, there is little sign of let up on either side. the U.S. and Israel continue to launch heavy airstrikes on Tehran while Iran is attacking Israel and Arab Gulf states regularly with drones and missiles. Iran says it can keep up this level of fighting for at least six months.

2:11But Defense Secretary Pete Hegseth says at some point Iran will surrender. We're not flying a mission accomplished banner like George W. Bush on an aircraft carrier. We're not doing that and we haven't done that. But we can be clear with the American people that this is not a fair fight, and that's on purpose. Our capabilities are overwhelming compared to what Iran's are. In an interview on CBS's 60 Minutes, heard Sundays on Bloomberg Radio, Defense Secretary Pete Hegseth said President Trump will set the terms of Iran's surrender. But former U.S. Ambassador to Israel Tom Nide says it's important to take a step back.

2:45We have to understand what the objectives of this is, how do we determine what success is. I'm not sure success is necessarily, quote, regime change, but one will have to debate that. And I do believe Congress has a role here, guys. I think it's important for us to understand that. Former U.S. Ambassador to Israel Tom Nides was a guest on our new show, Bloomberg, this weekend. In the meantime, the U.S. has ordered non-essential diplomats in Saudi Arabia to leave. That's after a U.S. service member wounded in an attack over the weekend, died overnight, bringing the U.S. death toll to seven. Iran says more than 1 ,300 people have died in U.S.

3:19and Israeli strikes so far. Sources tell Bloomberg News that President Trump is considering a special forces ground operation to seize Iran's enriched uranium. That's on growing concerns it may have been moved. President Trump says that's something he could do later on, but he's not considering it right now. Well, Nathan, Iran is signaling no let up to the war after naming the hardline son of the assassinated Ayatollah Ali Khamenei as its new supreme leader. 56-year-old Moshe Abba Khamenei has deep ties to the Islamic Revolutionary Guard. Bloomberg senior editor Wendy Benjaminson says the decision was not a surprise.

3:52This was the man that the U.S. really expected would take over for his father. It's the first generational succession since the 1979 revolution. And he seems to be the kind of guy who will continue in his father's footsteps in every way. Bloomberg's Wendy Benjaminson, President Trump, told Fox News he was unhappy with Mushtabas Khamenei's appointment. Karen, oil has smashed through$100 a barrel this morning as the war rages on. Checking NYMEX crude right now, it's up nearly 14 percent at$103.36 per barrel. Brent is up 15 percent at$106.62. The price was even higher earlier, but talks on a coordinated release of reserves took some heat out of the market.

4:39Stephen Stepchinsky leads Bloomberg's team covering energy in Asia. I think some of the worrying things that happened over the weekend is the retaliatory strikes from Iran continued. It did not look like there was any easing of tension. In fact, it looked like it was getting worse. The U.S. wasn't showing like it's going to back down, especially rhetoric coming out of the White House and from Trump himself. And on top of that, you had some major producers. You had Kuwait and you also had Adnok looking to adjust or lower their oil production because their inventories are getting high as they can't export the fuel.

5:11Bloomberg's Stephen Stepchinsky says the group of seven finance ministers will discuss a possible joint release of oil from their reserves today. President Trump says$100 oil is a, quote, small price to pay for world safety and peace. Well, Nathan, oil is not the only thing on the move this morning. We're seeing a big sell-off in stocks around the world. And Bloomberg's John Tucker joins us with the very latest. John, good morning. And Karen, U.S. stock futures down over 1%. Japan's Nikkei plunged 5 % this morning, sending that market into correction. Global bonds, they continue to sell off, so that's pushing yields even higher.

5:44About$6 trillion of market value has now been erased from global stocks since the war in Iran began. Investors are pricing in a deeper and longer-lasting supply shock. This is one that could squeeze growth while reigniting inflation, what we know as stagflation. The dollar has emerged as the haven asset of choice, with the Bloomberg Dollar Spot Index up almost 2 % since the war began. Now, that adds to cost pressure since oil is priced in dollars. And Helen Jewell of BlackRock says the war introduced more unwelcome obstacles for investors. Uncertainty about the Fed path, which we didn't have just a few weeks ago.

6:23Well, expectations for Federal Reserve interest rate cuts have already been pared back. And veteran strategist Edgar Denny has raised the probability of a market meltdown. As he puts it, the U.S. economy and stock market are stuck between Iran and a hard place. You're in New York. I'm John Tucker, Bloomberg Radio. All right, John, thank you. There's another source of tension in New York City. Authorities are investigating potential terrorism linked to two suspects in custody of what Police Commissioner Jessica Tisch says was an improvised explosive device thrown near Mayor Zoran Mamdani's residence.

6:55Tish says the device was thrown by a counter-protester during an anti-Islam demonstration. Witnesses reported seeing flames and smoke as it traveled through the air before it struck a barrier and extinguished itself a few feet from police officers. New York City Police Commissioner Jessica Tish says the confrontation unfolded outside Mayor Mamdani's home during a protest organized by far-right activist Jake Lang to, quote, stop the Islamic takeover of New York City. Well, in Europe, Nathan Chancellor Frederick Mertz suffered a setback after his conservatives lost a crucial state election to the Greens.

7:31The loss is ominous for Mertz, whose authority will be tested in four more regional elections this year. Turning back to markets now, Karen Bloomberg News has learned Live Nation's close to settling a federal antitrust lawsuit accusing the company of illegally monopolizing the live music industry. The settlement discussions have intensified since a trial kicked off last week. Under the proposed plan, Live Nation's Ticketmaster subsidiary would eliminate some exclusivity in ticketing contracts with concert venues, as well as make some concessions around the use of its amphitheaters. Nathan, about a confidence for NVIDIA billionaire Leo Kuo-Guan doubled his stake in the chip giant to 2 million shares.

8:10While small relative to his$13.4 billion fortune, as measured by the Bloomberg Billionaires Index, the acquisition is a notable move by Kuo Kuan, whose net worth for years largely has been tied up in just one stock, Tesla. And this program, no Karen, markets may close on Fridays, but the world doesn't. And that's why we are bringing you a new live radio and TV show, Bloomberg This Weekend. It looks beyond the daily headlines to the bigger themes driving politics, business and culture. Join David Gura, Christina Raffini, and Lisa Matteo for smart conversations and in-depth interviews that help make sense of the week that's been and what comes next.

8:46Get Bloomberg This Week and live Saturdays and Sundays from 7 a.m. Eastern on Bloomberg Radio, Television, and the Bloomberg Business App. Time 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. The partial government shutdown at the Department of Homeland Security is being felt by air travelers spending hours in security lines at airports like Louis Armstrong International Airport in New Orleans and Hobby Airport in Houston. This woman waited for hours and missed flights out of Houston.

9:23She says nerves are fried. There's a lot of frustration. A lot of people are very upset, kind of sad that you're not being where they're supposed to be going and frustrating, just waiting in the line. Officials in New Orleans told flyers to show up three hours ahead of their flight because of a shortage of TSA agents. The New York Police Department is mourning the loss of one of their officers while helping the U.S. mission in Iran. Officer Sorefly Davies suffered a fatal medical emergency and died while deployed to Kuwait. Davies, who was a major in the Army National Guard, was a 12-year veteran of the NYPD.

10:05The California Public Health Department is warning the bird flu virus is a serious problem, sickening marine mammals too. Dr. John Schwartzberg, clinical professor emeritus at UC Berkeley School of Public Health, alerts Bay Area residents bringing pets to the beach to beware. You should be careful when you're approaching other mammals, particularly if you're going to be, for example, on the beach and you see a seal, particularly if the seal looks sick, but a well animal could certainly be infected and spread the viruses as well. The Marine Mammal Center in Marin County reminds people and their pets that they should not approach live or dead animals.

10:47In Los Angeles, a person fired shots into the home of singer Rihanna on Sunday afternoon while she was at home. Fortunately, no one was hurt. A female suspect is in custody. 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. NFL free agents can begin signing officially on Wednesday. but we'll start hearing about some of those signings today. Among the free agents, quarterbacks like Kyler Murray and Kirk Cousins, receivers like Mike Evans and Tyreek Hill, and a running back in Kenneth Walker, who was the Super Bowl MVP.

11:28The golf in Florida was won by Akshay Batia in a playoff with Daniel Berger. The Celtics have gotten Jason Tatum back from that leg injury. He's now played in two games, and the Celtics have won them both. It was 109-98 in Cleveland. That's your Bloomberg Sports Update. Stay with us. More from Bloomberg Daybreak coming up after this.

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13:22Coast to coast on Bloomberg Radio. Nationwide on Sirius XM. And around the world on Bloomberg.com and the Bloomberg Business App. This is Bloomberg Daybreak. Good morning. I'm Nathan Hager on day 10 of the war with Iran. President Trump has said there will be no deal with Tehran until unconditional surrender. Asked what that looks like, Defense Secretary Pete Hegseth had this to say on CBS's 60 Minutes. This is not a remaking of the Iranian society from an American perspective. We tried that. The American people have rejected that. President Trump called those wars dumb, and we're not fighting that way.

13:58Defense Secretary Pete Hegseth on 60 Minutes heard Sundays on Bloomberg Radio. This morning, we're joined by Bloomberg News Deputy Washington Bureau Chief Laura Davison. And with us from Dubai this morning is Bloomberg Middle East correspondent Jumana Bersechi, the anchor of Bloomberg Horizons. Good morning to both of you. Jumana, I'll start with you just to give us the latest on what has been happening in the Middle East. Good morning. Yes. Well, the main news over the weekend was the appointment of the new Supreme Leader, essentially the son of the former Supreme Leader, Mushtaba Habane. and many are taking that as an act of defiance.

14:32He's essentially a continuity candidate. The IRGC is very, very close to Mushtaba Khamenei. They've already pledged full obedience to him in a statement. And remember, this is an individual who was placed under U.S. sanctions in 2019. He's been accused of influencing past elections and very brutal security crackdowns in the past. And so the fact that he was appointed and elevated to this position tells you that Iran continued to be defiant and that the security system, the military system are going to continue to play a very dominant role in terms of decision making around all of the nuclear and military decisions that they've been making around the war.

15:14And, you know, President Trump has also, in the run-up to this, deemed the selection of Mushta Bahamane to be an unacceptable choice and has reiterated over the weekend that they're going to be pushing for a complete surrender. The fact that the Iranians have actually appointed the son of Ali Khamenei suggests that they are not going to yield, at least imminently, to some of the demands that the U.S. have been asking for. Let's bring you into this, Laura, because as Jumana mentions, President Trump has said he's not happy with the appointment. He's said that he wanted a personal role in choosing Iran's next leader.

15:51What kind of a response can we expect from the U.S. now? The U.S. is looking at a bunch of different options. You know, Trump went into the weekend saying that he would be striking different sites in Iran that had not previously been targeted. We've really seen a broadening and escalating of the war over the weekend as there's been additional strikes. The U.S. is also reportedly considering looking at some sort of special operations ground strike. This would go against what Trump and other top officials have said in recent days, that they're not incending any ground troops, no ground operation.

16:20This one would specifically focus on looking at securing the enriched uranium supplies and somehow taking that away from the Iranians. This, of course, would be a really big escalation, both in terms of exactly the U.S.'s role here, but also in terms of risk, that this is a much riskier expedition than what's been happening so far. You know, and this is really, as we've just seen, safety concerns spread across the region. The U.S. Embassy in Riyadh, Saudi Arabia, they've asked all diplomats who are not emergency personnel to leave along with their family members. This is the first of such of those orders, not to mention all of the economic spillover effects we've seen with oil smashing through that$100 barrel marker.

17:01And just at least so far today, both in Europe and Asia, markets really not responding well, which creates a political problem for Trump at home. Well, what do we know, Jumana, about the situation on the ground in Tehran right now, where the possibility is of the uranium being located and what kind of damage Tehran has been under at this point? Well, you know, let me just go back to your first question. I think, you know, in many respects, to go back to what I was saying about Mushtaq Hamadeh, he does represent continuity of the regime and the very strong presence of the Revolutionary Guard Corps.

17:38So from that perspective, he represents everything that all of those demonstrators were protesting against earlier this year. However, there's little sign of the system collapsing from within. And there has not been any reporting or recent reporting of demonstrators taking to the streets, if anything, that has been reporting of the Iranian regime preparing the paramilitary force, the Basij, to get ready in case people start taking to the streets again. Now, as for the location of the enriched stockpile, you know, this has been a question that has been toying, I think, the minds of experts ever since the 12-day war from last June.

18:19But satellite imagery, even in the run-up to this war, the most recent war, suggested a bit of activity around the Isfahan site. And the latest reporting that Laura was just citing there, you know, that U.S. officials are considering sending a specialized force over there to help somehow retrieve that enriched stockpile would take place around the Isfahan site because of increased detected activity on satellite imagery that we saw in the run up to the wars. Of course, it is very risky. And ultimately, it boils down to two choices. You know, if they want to take on that risk and put troops on the ground to go and try to retrieve the stockpile, they've got two things that they can do with this.

18:59They can try to extract it from the country, which is similar to what happened in the run up to the JCPOA, or they can try to dilute it. But at a time of, you know, extreme war and targeted military operations with Iran on the offensive, again, it raises a lot of question marks about sort of what the security situation would be if the U.S. were to commit to sending troops or extra personnel to Iran to try to retrieve this uranium. We're speaking with Bloomberg Middle East correspondent Jumana Bersechi in Dubai, along with Bloomberg News Deputy Washington Bureau Chief Laura Davison. And just picking up on what Jumana was saying in terms of the security situation in the Middle East right now, of course, we've seen Iran respond to U.S.

19:45and Israeli attacks with retaliatory strikes across the Middle East. And now the news overnight that the U.S. embassy in Riyadh is being ordered and all of Saudi Arabia is being ordered to get out of the country in terms of American citizens there. What is the potential now of a wider war? What is the signal that the U.S. is sending by essentially evacuating Saudi Arabia? This is a signal that the U.S. expects that there will be more strikes, bigger strikes, broader strikes. It was the same, you know, a similar but more targeted signal we saw the State Department send before the war began, you know, just nine days ago, asking diplomats and non-essential people, you know, giving them the option to leave some of the embassies in the region.

20:32You know, these orders are essentially a precursor for an expectation that things will get more dangerous, not less. And this is kind of the same sort of, you know, sentiment that we've really seen ripple across the globe today of, you know, both from on the market side as well as from the diplomatic and geopolitical side, realizing that this is likely not going to be a short term conflict and that this is something that will last weeks, if not months. where there's no real clear end in sight, you know, with both sides, both Iran and the U.S. saying that they, you know, want the other side to surrender.

21:02They're not willing to negotiate. There's no clear out yet, particularly because the U.S. has not articulated what it sees as success here. Trump has talked about regime change. She's talked about, you know, Iran being disarmed. But there's been no clear sense here about, you know, what the U.S. is actually seeking. And the response from the Middle East, as you know, Jumana, has been curtailment of oil production from several countries, including Kuwait and Qatar with the liquefied natural gas. This news that the G7 might be considering a joint release from their reserves has taken some pressure off the market this morning.

21:37But what are you looking at in terms of market impact right now? Yeah, I mean, the oil price moves this morning have been nothing short of extraordinary. When I was on air a couple of hours ago, we got very close to$120 a barrel where Brent was trading. At around the same time, these reports came out suggesting that the G7 finance ministers were having an emergency meeting to discuss the release of strategic petroleum reserves, those SPRs. And on the back of that, you saw some of the gains get erased. We're still up anything from 10 to 15 percent just today. And so this really does speak to tightening physical supply.

22:13And, you know, speaking to many experts in the industry, the analysts around, the main problem here is not necessarily the fact that these sites have sustained a lot of damage because they haven't. They can still produce if they want to produce. The issue is getting the oil and the gas and the other products derived from gas out there and through the Strait of Hormuz. And so that is the major concern here. And effectively what it means is as long as the Strait of Hormuz remains effectively closed for the safe passage of vessels, you're going to continue to be in a situation where many of these key OPEC producers are getting increasingly concerned about their storage getting filled up.

22:56and they have, many of them, announced that they are either cutting production, slowing down production, or announcing force majeures with some of their key customers. This morning, Bahrain also joined the list of some of the refiners in the region that have announced a force majeure with their customers. So this squeeze, the physical squeeze on the market, doesn't seem to be letting up, even though the announcement and the potential release of SBR from an oil perspective could help ease some of the upward price, upward movement in price. Thanks to both of you for this. Bloomberg's Jumana Bersetchi with us this morning from Dubai, along with Bloomberg Deputy Washington Bureau Chief Laura Davison.

23:33Karen. Nathan, and stocks are tumbling as the war in the Middle East fuels turmoil in energy markets, sending oil above$100 a barrel for the first time since 2022. Bond losses are accelerating while the dollar hits its highest level since January. S &P futures, they're down nine-tenths of a percent, down 62 points. Dow futures down 1.1 percent or 524 points. and Nasdaq futures down 1 % or 255 points. We're joined now by Ethan Devitt, Senior Investment Advisor at Moneta Group. And Ethan, good morning. Thanks for being here. You say the oil price shock is the story of the week, but is this a short-term story?

24:12What if this drags on? It would very well be a short-term story. We don't know yet. That is exactly the uncertainty. I'd say if we look to predictions, say, that's a built-in to inflation expectations, They may be stale now, but nobody foresaw this shock, as you mentioned, the spike in oil. And the rest of the picture for inflation was looking quite subdued up to now. We had based our interest rate expectations on that, and the consumer was feeling relatively complacent based on that. This, of course, is a shock, and we know it's going to just start to have collateral damage throughout different sectors as importers are affected.