Trump Signs Iran Deal; Warsh Rocks Bond Market

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1:32Bloomberg 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 the latest on Iran. President Trump has signed the interim deal to end the war and reopen the Strait of Hormuz. The president insists the agreement will ensure Iran never obtains a nuclear weapon, but he's suggesting Tehran should still have the right to enrich uranium for electricity, access its frozen funds, and develop ballistic missiles. If other countries have them, it's a little bit unfair for them not to have some. A ballistic missile is not the same thing as what we're talking about when we talk nuclear.

2:15But if Saudi Arabia and Qatar and they all have some, I would say in relative proportion, I think it's okay. Speaking at the G7 summit and remarks heard live on Bloomberg Radio, President Trump also defended the$300 billion development program that's included in the agreement. We have their money. We have taken their money. It's not our money. It's their money. And we froze it. At a certain point in time, I guess we're going to have to give it back. You know, if we didn't give it back, nobody would ever invest in the dollar again. And despite President Trump's assurances, it is unclear whether Iran has begun taking steps to fully reopen.

2:52the Strait of Hormuz. Well, Nathan Bloomberg, Middle East correspondent Abir Abu Omar says the interim deal opens the door to 60 days of negotiations. Mainly about the nuclear program, mainly about Iran's ability to get a hold of those frozen assets if it falls apart and the concessions are not met. President Trump did threaten military strikes could go back again if he doesn't like the situation. Bloomberg's Abir Abu Omar reporting from Dubai. Details of The deal have prompted criticism from President Trump's fellow Republicans. His first term, Vice President Mike Pence tells Bloomberg government the agreement falls short of verifiably dismantling Iran's nuclear weapons program.

3:32The National Iranian-American Council, meanwhile, is cheering the deal, saying the measures in the agreement should not be read as concessions. President Trump is firing back at critics on Truth Social this morning, saying, quote, Fools who think he hasn't been tough enough on Iran are either jealous, bad, or stupid. Well, Karen, following news of the deal, gas prices have fallen below$4 a gallon for the first time since March. AAA's nationwide average for regular unleaded is now$3.99. Crude continues to tumble as well. West Texas Intermediate's down 2.6 % on the session, trading just shy of$75 a barrel.

4:09Brent's below$78 for a drop of 2.2%. Katie Kaminsky's chief research strategist at Alpha Simplex, she says the downward pressure on oil makes sense, but carries some risks. The hopes that things just open and then everything's going to be fine may be a little bit optimistic, and I think that's a worry that we do see because you still see some long signals in energies. But I think it's really going to depend on how that proceeds in the next week or so. And so I think if the energy shock ended or will be ending, that's very positive for markets. Katie Kaminsky at Alpha Simplex says oil's move is a positive sign for risk assets, the Fed, and inflation.

4:46There are more moves in geopolitics this morning, Nathan. Defense Secretary Pete Hegseth has announced a review of U.S. military assets in Europe. I'm announcing today a six-month Department of War review that will examine America's force posture and basing in Europe. and stepping up to make sure that our access, basing and overflight are clearly delineated and assured. Defense Secretary Pete Hanks has spoke at a NATO meeting in Brussels. He says the review will be designed to ensure Europe steps up to take primary responsibility for its own defense. Well, Karen, let's turn now to the Fed and its historic first meeting under new chair Kevin Warsh.

5:25Policymakers voted unanimously to leave interest rates unchanged. Warsh made clear the central bank will not tolerate high inflation. Persistently high prices are a burden for the American people, but the recent past need not be prologue. I am pleased to report that members of the FOMC are unambiguous and unanimous. This committee will deliver price stability. Fed Chair Kevin Warsh also announced a number of new task forces, including one focused on the central bank's$6.7 trillion balance sheet. One thing Warsh didn't do is submit an interest rate path projection, signaling changes ahead for forward guidance.

6:05Some along the committee, I think, dropped it, I suspect, from our discussion the last couple of days, because they said at this moment in time, it doesn't feel as though providing forward guidance is right. Others have, I'd say, different views and think as a general proposition, forward guidance isn't the business we should be in. Chairman Warsh also says he'll have Fed staff and outside experts review the central bank's forward guidance and communication practices, including the dot plot. Well, Kevin Warsh's comments, Nathan, they sparked a sell-off in short-term treasuries and a pile into bets.

6:38The Fed will raise interest rates as soon as next month. J.P. Morgan Asset Management fixed-income CIO Bob Michaels says it was a hawkish tilt. It is a hawkish tilt from the committee. Half of the committee is expecting rate hikes this year, which is, I think, a real shot across the bow to the market. We were thinking two, maybe three to be decorative. We didn't think half the committee. So, you know, it's something quite different. And JP Morgan's Bob Michael says a rate hike this year is certainly possible, given inflationary pressures from AI spending and the Iran war. Let's take a look quickly at SpaceX shares, Karen.

7:19They declined for the first time since their record IPO, shedding 5 % at the end of a volatile session that saw Elon Musk's rocket AI company initially gain 6 % before going in reverse. Still, the shares are more than 40 % above their IPO price. The low float amplifies the impact of retail buying. In the pre-market, SpaceX shares recovering a bit. They're up about 1%. Well, we turn from Wall Street, Nathan, to the Kenyan of heroes. Later this morning, New York City will pay tribute to the NBA champion Knicks with a ticker tape parade up Broadway. Bloomberg's Lisa Mateo will be there and has this preview.

7:55The festivities are expected to begin around 10 a.m. Eastern near Battery Park. The team will then travel north along Broadway through the Canyon of Heroes, concluding at Broadway and Chamber Street next to City Hall, where Mayor Zoram Mamdani will present the team with keys to the city. Officials say there will be more than 10 ,000 members of the NYPD assigned to the parade. 2 ,500 pounds of shredded paper confetti were delivered to 22 buildings along the route. While other New York sports teams like the Yankees, Giants, Rangers, and Liberty have all received the honor, this will be the first ticker tape parade for the Knicks.

8:30Lisa Mateo, Bloomberg Radio.

8:35Time 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 John Tucker. John, good morning. And good morning, Karen. Well, for the parade, some fans are paying professional line sitters hundreds of dollars to guarantee a front row seat. Let's find out more from Bloomberg's Charlie Pellett. Airtasker, which is a mobile marketplace for odd jobs and local services, says it has received more than 35 requests for Knicks Parade line sitters, some offers reaching as high as$950. And Robert Samuels, the founder of the professional line-sitting service, same old line dudes, says he's charging$25 an hour plus a$25 overnight fee to hold spots along the parade route costing around$330 total.

9:23In New York, Charlie Pellett, Bloomberg Radio. Tragedy in Central Park after an 18-year-old tourist killed after falling off a horse-drawn carriage while on vacation with his family. Video shows the moments when the horse took off near Tavern on the Green. Yesterday afternoon, there were plenty of witnesses. I saw the horse stumble, and his friend was right next door to him, and then it just collided and it turned into a mess. The horse got spooked by something and ran off with the carriage drivers taking a picture of the family. Convicted Gilgo Beach serial killer Rex Heuerman was sentenced to life with the murders of seven women over 17 years.

10:00The judge at one point addressed Heuerman in court. Are you a little bit sorry for what you did to these poor, innocent women? Eight women that you strangled to death? At least eight that we know of? Are you at least a little bit sorry for that? Yes? Yes, I am. Well, prosecutors say there is one additional victim they're still working to identify. Global News, 24 hours a day, whenever you want it with Bloomberg News Now. I'm John Tucker, and this is Bloomberg Karen. Thanks, John. Time now for our Bloomberg Sports Update, and for that, we bring in John Stashauer. Thanks, Karen. Big day in New York.

10:33The parade for the NBA champion Knicks begins at 10 o 'clock. They go from Battery Park down the Canyon of Heroes to City Hall while there'll be a ceremony. And the U.S. Open golf tees off today at Shinnecock Hills on Long Island. Some big names like Rory McIlroy and Scotty Scheffler with early morning tee times. Winners at the World Cup, England, Ghana, and Colombia. Portugal and Congo finished to the tie. Everyone has now played once. That's your Bloomberg Sports Update. Stay with us. More from Bloomberg Daybreak coming up after this. The thing about AI for business, it may not automatically fit the way your business works.

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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. The deal is signed. An interim agreement to end the war with Iran and reopen the Strait of Hormuz is now in effect with President Trump putting pen to paper in Versailles last night. He says getting the agreement done will be vital for the U.S. economy. Rather than possibly going into a depression, rather than having your favorite president be Herbert Hoover, I was always the one I didn't want to be. That was President Trump discussing the agreement at the G7 summit in France.

14:04Joining us for a reaction this morning is Terry Haynes, the founder of Pangea Policy. And I can tell you the market reaction is certainly positive, Terry, with Nasdaq futures leading the gains this morning. Crude oil continuing to sink. Is what's good for the market good for the world? Good morning. Good morning, Nathan. In the very short term, it is. And, of course, but the proof's going to be in the pudding, and the pudding is whether the strait reopens or not. And we're certainly going to know that soon enough. Either the Iranians are going to make good on their initial promise to reopen the strait or they're not.

14:42And from there, we're going to figure out whether or not this memorandum of understanding has potential to lead to something even more binding and comprehensive or not. There's still some questions about the strait itself, aren't there, about whether there's going to be a mechanism in place for Iran and Oman to maintain some level of control over the Strait of Hormuz. Could this leave us in a different position in the strait than we were before the war? Well, there's some potential of that, sure. And you accurately described the situation. I would add one other factor in that situation, which is that all the nations on the west side of the straits, Saudi, Bahrain, UAE, etc., are very much interested and invested in maintaining the pre-conflict status quo.

15:43So that gets resolved in the past 60 days. That gets resolved in negotiations. But I imagine that there's going to be a lot of weight and a lot of pressure placed on Iran to make sure that the strait remains open. Let's remember here that one of the major incentives in this deal for Iran is having the Gulf states, which Trump last year called the major non-Native allies of the United States, invest in Iran in order to not just rebuild it, but frankly kind of keep it on side. Of course, there's a debate already building in Washington about what comes after this interim agreement. The president suggested that maybe the nuclear file isn't as important as it might have been in the past, talking about access to Iran's frozen funds as well as whether it has the right to develop ballistic missiles.

16:42Is the U.S. potentially conceding too much following the interim agreement? uh the you know the i understand the uh the kerfuffle about uh ballistic missiles but at the same time uh there's never been a situation of denying uh iran uh conventional means to defend itself uh so you know you have that uh and i imagine all that i imagine today my instinct is that that all gets clarified uh there is a potential of giving them too much sure but again And one thing I would mention to folks and point out is that this is not a deal just between the United States and Iran. This is a construct I've been calling the four-legged stool, where the Gulf states and China have been important and even essential to making this sort of a deal.

17:35Their interests all push in the direction of not wanting Iran to be unfettered. So, you know, the directional arrow today, I think, is tentatively in that direction. Got about a minute left here. But on top of all this, Defense Secretary Hegseth just announced a six-month review of the U.S. military posture and basing in Europe. Where does the U.S.-NATO relationship stand now, Terry? I've always been non-consensus positive on the U.S.-NATO relationship. the United States has been blustering, cajoling for a decade that the Europeans should make good on their defense budget promises to NATO. Some of them have after a decade.

18:25Some of them still haven't, as we're well known for the UK. The NATO alliance remains strong. But I would point out, But force posture also means where those troops should be placed. And we've moved troops out of Germany but into Poland, which tells you that preliminary force posture tends to be a little bit more aggressive than detractors suggest that it is. Thank you for this, Terry. As always, good to get your thoughts this morning after a number of major developments geopolitically. That's Terry Haynes, the founder of Pangea Policy. Karen. Nathan, let's repeat some of our top stories. This morning, gas prices have dipped below$4 a gallon for the first time since March after the U.S.

19:10and Iran signed their interim deal. AAA's nationwide average for regular unleaded is now$399.9. SpaceX shares closed lower for the first time since their IPO, snapping a near 50 % rally. They fell about 5 % yesterday, sending them back below Amazon's market value. And the New York Knicks victory parade kicks off at 10 a.m. from Bowling Green to City Hall. Some fans have been paying as much as$950 to hold their spot along the free parade route. We have more on those stories coming up on Bloomberg Daybreak. And it is 5.18 on Wall Street. Federal Reserve Chairman Kevin Warsh put his stamp on the U.S.

19:47Central Bank yesterday with a bevy of changes coming out of his first policy meeting and a news conference that made clear the central bank will not tolerate high inflation. We want to get more now with Claudia Somm, Chief Economist and New Century Advisors. Claudia, good morning. Good morning. Let's begin with your overall takeaway from Kevin Warsh's first meeting as Fed Chair. What did you make of it? So it was different. There were certainly several changes afoot. It was a bit low substance in terms of, I mean, very affirming in the statement. This committee will deliver price stability. That is a message everybody wants to hear.

20:29That's a reality everybody wants to see. but we didn't get a lot of information on, well, how? How do you expect to do that? Now, I know it's the first press conference, first Fed meeting as the chair. And so we should measure our expectations. But there was a lot to process. There's a lot of moving pieces here in terms of kind of changing the leadership and we'll see how they deliver. Okay. He didn't say much about how it will happen, but he did promise a lot of task forces. He's Fed uses. He's going to take a look at the balance sheet. So there might be changes and more information maybe later in the year.

21:10That's true. And I do welcome the idea of how it sounded like the task forces that Kevin Warsh is assembling will have outside perspectives. So it's not just going to be inside Fed officials, Fed staff, though we'll include some Fed staff, he said. So it's good to bring in outside perspectives. It was wide ranging, five task Force, I mean, this is a big lift. What I found maybe a little puzzling was, oh, well, their work will be done by December. And I mean, these are big questions, like first principles, what causes inflation? These are really deep questions that each of the five task force are asking, but they're on a really short timeline.

21:45So then it makes you wonder exactly what's going to come out of this. And also, are any of those five task force going to unlock the path to price stability, it really isn't clear what we'll get out of that. But I think long term, it's beneficial to have outside perspectives come and weigh in. Now, what about the question of Fed independence? Did you make anything from the fact that, hey, he didn't kowtow to any of President Trump's demands to immediately cut interest rates? Does that mean we might see a more independent Fed than some had feared? this felt more like a fed focused on monetary policy day it it i think there really was a shift while there were big differences from say any of recent uh fed chairs it did feel more like a focus on monetary policy it didn't feel like you know the audience was the president of the day as it maybe did still at the hearing because confirmation hearing so i think that's a that's a positive so So, you know, and there was a signal, maybe not from Kevin Warsh, he didn't participate in the Summary of Economic Projections, but there was definitely a signal from many of the committee members that it could be appropriate to raise rates this year, which is very much at odds with what the White House would like to see from the Fed.

23:01Yeah, he didn't participate in the dot plot, but that was to be expected, really, wasn't it? It wasn't surprising, but I think it still was disappointing. Because the Summary of Economic Projections, they're not perfect and they're often misunderstood, but they are actually an exercise in answering that question of, well, how do you plan to deliver price stability? Because those forecasts, that dot plot, it's actually not just a forecast. It's what each official thinks would be appropriate. What's it going to take to get to maximum employment and price stability at the end of the projection over the next few years?

23:34So going through that exercise of what would it take? And you had half the committee saying it's probably going to take some rate hikes. Another half of the committee said, no, we can hold or maybe one person said we could cut. So I think that going through that exercise of like, how might we deliver given what we know now price stability is a useful exercise. So I think it's unfortunate that Warsh didn't participate in it. And he did kind of undercut it in the press conference. But you know, maybe they'll find a better tool for having that kind of discussion and presenting it to the public. Were you able to take enough away to make any kind of indication of what the Fed might do going forward, at least in the short term?

24:11So I think it's important. I have very little feel for what Kevin Warsh would like to see in terms of policy. I think he's playing it really close to the vest. But I do think that there's to take very seriously a shift on the committee, a willingness to raise interest rates. And it's notable because in the statement, they also pointed at the fact that a lot of this inflation is supply-driven. Typically, traditionally, the Fed looks through supply-driven inflation. And this Fed, there's many people saying enough is enough. Nonetheless, we should be raising rates. So I think the kind of market reaction to this, that this is a Fed that really could be moving on rates sometime this year, I think that's an accurate reflection of where the committee is.

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25:33Search 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.