Trump Urges Iran Leadership Change; Oil Spikes on Hormuz Disruptions

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1:46I'm Nathan Hager. And I'm Karen Moscow. Here are the stories we're following today. Karen, it is risk-off across markets with a third day of attacks underway across the Middle East. Blasts have been heard this morning in Bahrain, Kuwait, the United Arab Emirates and Qatar as Iran targets U.S. interests in the region. President Trump says the bombing campaign against Iran could last for weeks. He's calling on the Islamic Republic's remaining leaders to give up. I once again urge the Revolutionary Guard, the Iranian military, police to lay down your arms and receive full immunity or face certain death.

2:24It will be certain death won't be pretty. President Trump spoke in a new social media post late yesterday. The president told the New York Times he's willing to drop sanctions on Iran if its new leader is pragmatic. But in an interview with ABC News, he said his favored choices after the death of Iran's supreme leader have all died in the attacks. Iran's security chief says Tehran won't negotiate with the U.S. And this morning, Kuwait's army said a number of U.S. fighter jets had crashed, but all crew members survived. Iran's semi-official Fars News Agency says 555 people have been killed in U.S.

3:02and Israeli attacks. Well, later this morning, Nathan, the Pentagon plans to hold a news conference on the operation against Iran, and that's set for 8 a.m. Wall Street time. The White House says Congress will receive a full briefing tomorrow from the Pentagon, State Department, and CIA. Republican Congressman Michael McCaul says Iran faces an extraordinary opportunity. Since 1979, there's been a dark veil that descended across the Middle East, and that shroud has now been lifted. And the people of Iran now have a chance for freedom and a chance to take back their country. But the top Democrat on the Senate Intelligence Committee, Mark Warner, says the White House still has not spelled out its ultimate goals from this conflict.

3:44Is the goal Iran's nuclear capability? Is it the ballistic missiles regime change? And let me acknowledge the fact that the Iranian leadership, the supreme leaders taken out. I mean, that is good news. I mean, this regime is awful. But I can tell you from the intelligence standpoint, we don't have great visibility about who or what comes next. Senator Warner and Congressman McCaul were guests on our new show Bloomberg this weekend. Catch the show Saturdays and Sundays from 7 to 10 a.m. Eastern across Bloomberg platforms. Karen, Iran is looking for a successor to Ayatollah Ali Khamenei, the 86-year-old supreme leader of Iran who was killed in the airstrikes.

4:28Golnar Motavali leads Bloomberg's coverage in Iran. In Iran, under the Islamic Republic, there is always a contingency for the appointment and the succession process of the Supreme Leader, almost as soon as the Supreme Leader is appointed in the first place. And that's actually embedded in the Constitution. So even if Khamenei had died of natural causes or of old age, and he was 86 years old, so there would have been some form of preparation for his succession. We've known that for some time. Bloomberg's Golnar Motavali says Iran's constitution does call for an assembly of experts to choose the next supreme leader, but that may not be possible in wartime.

5:13Well, Nathan, there are more signs the conflict is spreading across the region. Israel bombed Beirut and told residents in dozens of southern Lebanese villages to leave after the militant Hezbollah group fired rockets and drones into the Jewish state. Speaking yesterday through a translator before the latest military action was announced, Israeli Prime Minister Benjamin Netanyahu praised the U.S.-Israel offensive against Iran. It has truly reached the record of all time, an alliance in peace and in war. And this war will bring about true peace. Israeli Prime Minister Benjamin Netanyahu is speaking through an interpreter.

5:51Lebanese authorities say more than 30 people were killed in the Israeli airstrikes today. And there is plenty of reaction from world leaders this morning to the military action in Iran. Karen, Japanese Prime Minister Sana 'a Takahichi condemned Iran's nuclear program in a carefully worded response that avoided commenting on whether Tokyo supported Washington's strikes on Tehran. North Korea condemned Israel's military attack with U.S. military support as a, quote, shameless and illegal act of aggression. The U.K., France and Germany have issued a joint statement saying they were not involved in the strikes but are in close contact with the U.S., Israel and partners in the region.

6:30Prime Minister Keir Starmer says the U.K. will not be involved in offensive action. I want to be very clear. We all remember the mistakes of Iraq and we have learned those lessons. We were not involved in the initial strikes on Iran, and we will not join offensive action now. But Iran is pursuing a scorched earth strategy. So we are supporting the collective self-defense of our allies and our people in the region. Prime Minister Keir Starmer says the UK has since allowed the US to make use of British military bases for the specific purpose of destroying Iranian missile sites. Well, Nathan, as we mentioned, there's a massive market reaction this morning to the strikes in Iran.

7:16And Bloomberg's John Tucker joins us with the very latest. John, good morning. Good morning, Karen. Let's start with the major stock averages worldwide, pushing lower. U.S. stock futures down 1%. Brent crude, this is the international benchmark now, up over 8%, about$72 a barrel. Spot gold, that has topped$5 ,400 an ounce, building on a gain of more than 3 % that we saw last week. The dollar performing like a haven asset right now, up six-tenths of a percent, dollar DXY. John Taylor at Alliance Bernstein says markets have reached critical levels. I actually think the longer this goes on, and if oil prices stay higher for a longer period, people will start to think about the negative economic consequences of that, and that could push treasury yields lower.

8:01Now, with the rise in oil, the major energy companies think strong gains across Asia and Europe. Let's look at ExxonMobil and Occidental Petroleum, pre-market up around 5 % each. Now, with the prospect of an extended war, you have the defense stocks. They are jumping. RTX Corporation, Lockheed Martin pre-market, they are up over 6%. And then, of course, the airline and travel stocks. We'll have more in a moment, but they have plunged from closures of the airspace and the rise in oil. The closing of Middle East aerospace also threatening the margins of freight carriers like FedEx and United Parcel Service.

8:38So the impact here stretches to almost every corner of the market. In New York, I'm John Tucker, Bloomberg Radio. All right, John, thanks. Let's get more now on that travel chaos you mentioned in the Middle East and beyond. Airlines across the Persian Gulf have extended suspensions of operations. Bloomberg's Aviation and Transport reporter Danny Lee says it's not clear when these disruptions might end. We're looking at around thousands of flights a day being cancelled in and out of some of these key transit hubs, particularly Dubai, the world's busiest international airport for transit travel.

9:12And that also extends to Abu Dhabi and Doha. So with the region's airspace also being closed, it really means that the airlines cannot operate in the Persian Gulf. That's Bloomberg's Danny Lee reporting. And European airline stocks are plunging. Lufthansa's down more than 6%. IAG, the owner of British Airways, is down 5%. Nathan, Amazon Web Services says it suffered a disruption to its services after an unidentified object struck one of its data centers in the United Arab Emirates. The incident impacted services from the data center in one of its regional groups and power to the facility was shut off by the fire department as they work to extinguish the blaze.

9:51In company news, Karen, Berkshire Hathaway's shares are down almost 2 % in early trading. In addition to the overall market weakness this morning, the conglomerate's operating profits fell nearly 30 % in Warren Buffett's final quarter as CEO. Analysts noted weakness in Berkshire's insurance businesses. And we have a programming note here, Nathan. As we just saw this past weekend, markets may close on Friday, but the world does not. and that's why we're bringing you a new live radio and TV show. Bloomberg this weekend is looking beyond the daily headlines to the bigger themes driving politics, business, and culture.

10:29Join David Gura, Christina Ruffini, and Lisa Matteo for smart conversations and in-depth interviews that help make sense of the week that's been and what comes next. Get the show live Saturdays and Sundays from 7 a.m. Eastern on Bloomberg Radio, TV, and the Bloomberg Business App.

10:49Time 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. Authorities say a gunman wearing clothes with an Iranian flag design and the words property of Allah killed two people and wounded 14 at an Austin, Texas bar. Police shot and killed a man who had used both a pistol and a rifle in the shooting early Sunday, the day after the U.S. and Israel launched an attack on Iran. FBI special agent in charge, Alex Doran. There were indicators that on the subject and in his vehicle that indicate potential nexus to terrorism.

11:31Again, it's still too early to make a determination on that. That's why we're investigating it very closely with our partners with Austin Police Department. Multiple people briefed on the investigation saying the suspected gunman is a 53-year-old man originally from Senegal. The Supreme Court will hear arguments today in a major Second Amendment case over whether unlawful drug users can be barred from owning firearms. The government is arguing that there has always been laws restricting gun access to people who are considered habitual drunkards. At least 43 states have laws restricting gun access to drug addicts.

12:10The Reverend Jesse Jackson will be in South Carolina for a final public farewell. Today, Jackson will lie in state at the Capitol in Columbia. After the South Carolina services, Jackson's body is expected to be taken back to Chicago before a final set of services at his Rainbow Push Coalition Chicago headquarters. Jackson died on February 17th at age 84. A wild scene in eastern Texas over the weekend. A hot air balloon crashed into a communications tower. The two people in the balloon were stuck for more than 900 feet in the air. First responders quickly arrived on the scene. This man witnessed it.

12:54The people are actually coming down right now, and it's pretty wild. I'm assuming they have harnesses and stuff. I sure hope so. This is one of the craziest things. Firefighters performed a complicated rescue that took about four hours. 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. Sunday in the NBA began in New York. The Knicks beat the Spurs 114-89. That ends San Antonio's 11-game winning streak. The last game was in Boston.

13:30and the Celtics improved to 40-20. They beat the Sixers 114-98. College Hoops with the Big Ten in upset. Ohio State beat eighth-ranked Purdue. Michigan State won at Indiana. Chad Baker-Mazzara is USC's top scorer. On Saturday, he asked to be taken out of a game, and then he went and sat in the stands. USC announced he's no longer with the team. That's your Bloomberg Sports Update. Stay with us. More from Bloomberg Daybreak coming up after this. Running a business is hard enough, So why make it harder with a dozen different apps that don't talk to each other? One for sales, another for inventory, a separate one for accounting.

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16:42www.bluomberg.com will continue until all his objectives are met. These actions are right and they are necessary to ensure that Americans will never have to face a radical, bloodthirsty terrorist regime armed with nuclear weapons and lots of threats. That was President Trump in his latest social media post on the conflict in Iran. Joining us now from Dubai is Bloomberg Middle East correspondent Jumana Bersechi, the anchor of Bloomberg Horizons on Bloomberg Television. Jumana, good morning. What is the latest from where you sit? Well, the latest is that it's very clear that this has become a regional conflict, regional war over the course of the last three days.

17:22There are now 11 countries involved in the Iran war. And what started off as an operation on Saturday morning, a joint military operation between the U.S. and Israel to take out what now we understand was the Ayatollah, alongside some key personnel, has expanded. and there doesn't seem to be any signs of things letting up. We heard from the Israeli Prime Minister yesterday, Benjamin Netanyahu, and he was saying that the operations actually plan to intensify in coming days. The U.S. Central Command has said that they've hit a thousand targets in and around Iran. President Trump yesterday said that they downed nine Iranian warships.

18:00They're going after the Iranian Navy. And in response to that, you would think that perhaps this would have been an opportunity for Iran to reassess their options or perhaps even come to the table again with the U.S. But in fact, this morning we heard from one of the key voices, a fellow called Ali Larijani, who is the chief of the National Supreme Council. And he said that negotiations with the U.S. is not back on the table again. And they continue to direct missiles and drones towards Israel, key Gulf states. And it's caused a huge amount of disruption here. Not a lot in terms of overall casualties because most of these missiles have been intercepted, most of them.

18:40But a lot of debris has caused considerable damage. And they've also targeted the airports, which means that it's estimated there are about 300 ,000 people estimated around the Gulf region right now unable to travel because of the airspace closure. So yes, most definitely an intensification. Is it an intensification that we're seeing in terms of Arab states retaliating or is it just defensive at this point? So, insofar as Arab states have responded, it's been calibrated very carefully, but the language would suggest that they are very unhappy with the way Iran has responded here. Iran have said, the Iranian officials have said that they've been targeting U.S.

19:26assets. But actually, when you're in a situation where a significant amount of damage is being leveled at key infrastructure, including the airports, which, as you know, for many of these economies, they're key passageways between East and West, between Asia and Europe. That becomes very damaging to what these Gulf states are trying to achieve. And, you know, I've spoken to many diplomats over the last couple of years and they've talked about de-escalation, the importance of maintaining this image of being a safe haven or even an oasis in a region that tends to be quite, well, conflict ridden.

20:04But the feeling and the concern is that that image is being jeopardized because of the actions that Iran has undertaken over the last couple of days. And so the language that has come out has suggested that the Gulf states position towards Iran may be changing. And if anything, it's unifying them together. It's bringing them closer together and also bringing them perhaps even closer to the United States. And some of them that they might not say this on record, but behind closed doors are actually endorsing what the U.S. is doing right now. Wow. Yeah. Given that we've seen this defiant stance from Tehran, the reaction militarily, this idea of Tehran coming back to the table that President Trump has put out there, it raises the question, who would be coming back to the table, considering that there is no supreme leader at this point?

21:01And from what we understand, there's still a process of trying to figure out who that person is. Yep, correct. That's correct. And you've got to think that anyway, they would have been preparing for this scenario. The Ayatollah was 86 years old. And yes, it is a hugely consequential chapter in Iranian history that's now closed. But at the same time, his legacy is that he massively strengthened the military, the Revolutionary Guard, alongside these hardliner clerics. And so he built up a system that is very well preserved. and the procedure is just kicking into place now. There's a transitional council composed of three members.

21:41At the same time, there's going to be this larger 88 cleric member group, a committee that will get together and they will ultimately decide on who the successor of Khamenei is going to be. A few names are being thrown out there. All of them tend to be hardliners, as you would imagine. I mean, they're not going to select somebody who isn't approved by these clerics, but also doesn't get the seal approval of the Revolutionary Guard. But the point is the language here is one of defiance that's coming out of Iran, and there are no signs yet of them capitulating or of the system collapsing. Jumana Bersetchi of Bloomberg News, our Middle East correspondent and host of Bloomberg Horizons on Bloomberg Television.

22:24Jumana, thank you for this debrief. We're going to be checking back with you throughout the morning and into the days to come, I'm sure. As we continue our team coverage of the conflict in Iran and the broader Middle East, we are joined now from Tel Aviv by our Israel Bureau Chief for Bloomberg News, Ethan Bronner. Ethan, it's great to have you with us this morning. From your perspective, where do things stand now? Morning, Nathan. I think Jumana summed it up very, very well. I mean, the one element she didn't mention is that last night the Hezbollah sent some rockets and missiles and drones into northern Israel, and the Israelis have responded with a great force.

23:06They've already killed 30-plus people. They were bombing Hezbollah sites in southern Beirut, and they've ordered some 50-plus villages in the south of Lebanon to evacuate. You know, I don't know where this is going, whether the Israelis are really going to take on Hezbollah. I think they've been looking for a reason to try to do more to disarm Hezbollah after the ceasefire of two years ago. But I do think that what you guys were talking about, the potential inclusion of the GCC, of the Gulf Cooperation Council, of the Saudis, etc., into this next phase is the most significant thing to watch. We'll see what happens.

23:49The headlines, some of which I've seen this morning, say that Israel sees no need at this point for a ground invasion into Lebanon to go after Hezbollah. What does that tell you about where things could be going at this point and what the level of strength of Iran's proxies is now that so much of the leadership in Iran itself has been decapitated? Yes, you're right. I mean, obviously, the result of October 7th, 2023, attack by Hamas on Israel, the goal of that attack was to draw the proxies into a kind of pincer motion against Israel, ultimately, in theory, to just do away with the state. I mean, this is a very powerful military force in Israel.

24:37And the opposite has happened over the last two and a half years, which is that Hezbollah, much of it was really taken out. Hamas has been largely destroyed. The Assad regime in Syria fell. And the Houthis are not destroyed, but they've been hit pretty hard. So, yes, the proxies, these are all proxy militias that have relied on Iran, armed and funded by Iran, are on their back feet. So I think that Israel, first of all, when the spokesman of the military was asked whether there might be a ground in Kersh and it's Lebanon, and he simply replied all options are on the table. My instinct at the moment is that you're right, that they probably won't, that they'll continue at it from the air because they're really so focused on Iran right now.

25:24But look, it is a kind of remaking of the region's geostrategic balance. And now this final piece, which I don't know where it's going, because I think that for the Gulf countries, seeing too strong in Israel is also another issue. But between Israel and the U.S. on one side and Iran on the other, with Iran attacking them, they seem to be looking in the direction of the U.S. and Israel, at least today. To the idea of a rebalancing of the geopolitics in the Middle East right now, we've talked together, you and I, for more than two and a half years now. That's how long this conflict has been going on between Israel and Hamas in Gaza.

26:06Now that the focus has turned more squarely on Iran, where is Israeli support for a potentially even more prolonged conflict in the Middle East? Look, I don't I don't know that we can measure the support for a prolonged conflict. But certainly if you were to take, you know, if you could somehow take a mood measurement today, I think there is resolve, if you'd like, in Israel. even though many people are being forced to sleep in shelters and so on. But there is a sense that there's an existential threat to Israel over the last nearly 50 years in the form of the Islamic Republic, which has called for death to Israel and which has sponsored these militias and which has been, at least according to U.S.

26:55and Israeli intelligence, been trying to build a nuclear bomb. All of these are reasons for Israel to feel that the decapitating of the Islamic Republic for the killing of Ali Khamenei and the other 30 or 40 people around him is an enormously significant achievement for Israel and will guarantee its long-term survival. 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.