Trump Threatens Escalation With Sides at Odds on Peace Talks

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2:11Scarlet Fu:Bloomberg Audio Studios. Podcasts. Radio. News. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts. Or watch us live on YouTube. Lots of headlines going back and forth here as it relates to Iran and the Middle East. Let's get the latest reporting. Ethan Bronner, Israel Bureau Chief for Bloomberg News. He is based in Tel Aviv. Ethan, I guess if nothing else, Iran and the U.S. as it relates to this 15-point plan, some progress seems to be being made here.

2:51What can you tell us? I'm not sure I'd characterize it as progress. Well, but I mean, you know, the Americans have presented a 15-point plan. I think it's fair to say that the 15 points are pretty much what they demanded of Iran before they went to war with it. Iran said no then. Then they went to war. Now they've gone back, made the same demands. And it looks like Iran has said no once again. So I don't know. Yeah, it doesn't sound like progress, does it? No. But I mean, they're talking. Is the fact, I mean, Scarlett and I were just saying, just the fact that they're talking feels a little bit better?

3:29I guess so. I mean, you know, it's an interesting question about good and bad. I mean, obviously, from the most perspective abroad, everybody would like this thing to come to an end. I've just written a story that we put on the Bloomberg Wire a couple of hours ago that says in this country, in Israel, that is not the goal. The goal is victory, not stopping the war. So, you know, the idea is to stop Iran from having the capacity to threaten Israel and the region any longer. And if the war stops, that won't happen unless it stops under the terms that President Trump has put forward. And that doesn't seem very likely.

4:06Scarlet Fu:At the same time, Iran is moving forward. For instance, it's been able to export a lot of oil and make a lot of money by sending oil to China, for instance. It's also charging some ships a transit fee to get through the Strait of Hormuz. So financially, you know, they're pocketing some money. They are. I'm not sure you'd let a switch change places with them. They're losing all their infrastructure by pocketing a few bucks in oil. I mean, sure. Look, I am not saying that the war is going great from the American perspective. I don't know. It's very difficult for us to assess. And there's always a propaganda war underway.

4:43At the same time, there's an actual physical war. in an attempt to persuade the other side to back down. And it doesn't look at the moment that either side is. Now, it is also true that from an American perspective, rising oil prices and all this kind of stuff for what is seen to be a war of choice is causing a lot of political trouble for the president. And in Iran, I think there's less political trouble. It's after all an authoritarian situation. And they may be willing to put up with a lot more suffering than the West is. We shall see. Ethan, if President Trump were to decide to end this war, for whatever reason he sees fit, is it a fair assumption that Israel will go along with that?

5:27It's a fair assumption, yes. I mean, as much as this country would like to see it completed appropriately, it is much more important to it to maintain its strong relationship with the United States with this administration. And it is certainly made clear that it will take its cue from the president on this. Absolutely.

5:48Scarlet Fu:Ethan, what are you looking at next? How are you determining how to kind of keep score here? I'm trying not to keep score. I'm not really sure it's all that useful for me. I mean, what I'm, you know, there are a bunch of things we're watching all at once. One is the level of attacks by the Iranians on their neighbors and on Israel. So those have gone down to some extent. In the first days of the war, there were maybe 75 or 80 a day here, and now there are about a dozen or 8, 10, 12, that kind of thing. Is that because the Israelis have successfully taken out their launchers? Possibly. Is it because the Iranians are husbanding their stuff?

6:27Possibly. Another issue, of course, is in addition to the growing international and markets pressure to end this thing, is the interesting fact that the Emiratis and the Saudis seem now, although they didn't want this war to happen, more enthusiastic about ending it along the same lines as Israel's argument has been, because they feel there's a sort of Damocles hanging over their heads with these Iranian attacks of the last week. So will that make a big difference? It'll make some difference. And of course, are there going to be airborne ground troops from the Americans heading there? Looks like they are in the coming days.

7:02So there's a lot that we're watching, a lot.

7:05Scarlet Fu:Stay with us. More from Bloomberg Intelligence coming up after this.

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9:29Scarlet Fu:You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube. Let's get a check on how this is all shaking out for the markets. Clearly, the Venezuelan case is not what's driving markets. It's all about oil prices and oil prices right now are higher by more than three percent. Brent crude the global benchmark at$106. That is, of course, raising concerns about inflation and stagflation and demand destruction. Let's bring in Kathy Entwistle.

10:06Scarlet Fu:She is managing director and private wealth advisor at Morgan Stanley, joining us from Delray Beach, Florida. Kathy, the rise in oil prices has remained elevated. You know, day in and day out, it might backtrack, it might come back again. Yet we know that oil prices are unlikely to go down anytime soon, even when the Strait of Hormuz opens up. How does that color how you view investing in risky assets? Absolutely. There's a lot of different things that we're thinking about right now. And clearly this, you know, this Iran war oil shock is the big event. However, we want to think about our clients and what they're thinking about and how we can better position portfolios.

10:46So last week's data confirmed our inflation fears. PPI came in hot. And the longer oil stays elevated, the harder it will be for the Fed to control these upstream price pressures. And what that means for clients and just the general population is that everything is more expensive. They're getting like a tax on gas. And they're also very, very concerned about their portfolios. Because usually when we have these issues with oil, we will see some downward pressure on both the equity and the bond market. So what we're looking at is favoring some high defensive stocks, such as energy, financials, healthcare, reducing overbought semiconductors, unprofitable tech, and low-quality credit.

11:33What's interesting, the market looks like on the surface surprisingly resilient, but underneath, it's like a violent rotation going on. And energy and AI infrastructure are booming, while software companies and private credit lenders are showing signs of stress. So these are all things we think about. And we're trying to remove some of the risk in the client's portfolio and add some more forward-looking investments. How about on the fixed income side here? How much credit risk do you think folks should be taking in this environment? Because, boy, you could just sit there at a two-year treasury and get close to 4 % here right now.

12:08Yeah, no, we think that investing right now in safer risk assets is the smarter move and the smarter play. We're advising clients not to be in high yield, because you're not getting paid for high yield. And these are the times where you'll start to see high yield assets start to crumble a little bit. So we want to avoid that. I look at it, if you've got money in investments and money in the bank, you've won the game, we want to protect it. and we want to grow it methodically, not take undue risk.

12:38Scarlet Fu:Where does gold fit into that? For a while, everyone was flocking to gold, and they saw it as almost a risk asset, given how it was performing. And they've definitely pulled back from that as concerns about the prospect of fewer rate cuts and now even talk of a rate hike really infect the market. Yeah, on the rate hike issue, we don't anticipate a rate hike. We're still looking at two rate cuts towards the end of the year. So it will be interesting to see that unfold. In terms of positioning with gold, we still like real assets. We like energy, infrastructure, commodities, reeds, and gold and metals still play a position there.

13:19Basically, again, when oil-driven inflation fears take over, stocks and bonds tend to drop at the same time. So real assets provide a natural shield against inflation. So that's why we like to add that to the portfolio, too. So we've been adding real

13:34Scarlet Fu:assets. Even though gold is down about 16 percent since the start of the war, it hasn't done very much. No, it hasn't. But it also, you know, anytime there's a downward trend, there also might be a buying opportunity there. And just with the thought of where we are in the markets and the economy right now and with the oil prices going up, it's just basically a hedge. And we don't put a large percentage of clients into gold, but we do a small percentage. Interesting, Scarlett, just as you were talking about gold piece of research, just hit my inbox from Richard Rosenberg, Rosenberg Research. First bullet point, we maintain our long-term bullish call on gold and are looking for the most attractive reentry point since we trimmed our position.

14:14So he says maybe buy on the weakness here. Kathy, how about the municipal bonds? I know down in Florida, you guys famously do not have those state taxes, but for those of us in high tax jurisdictions. Munis have been really, really attractive here. How do you allocate the municipal bonds for your clients? Absolutely. That's a great question. And we have lots of clients in high tax rate states, including New York. So we are using municipal bonds. The short term and intermediate term municipal bonds are very pricey right now and not as attractive. So we are using long term municipal bonds, which have still great value for clients and placing them there.

14:54So we do like municipal bonds and we are continuing to utilize them, especially in an environment where taxes are high and they may go higher at some point.

15:04Scarlet Fu:This is the Bloomberg Intelligence Podcast, available on Apple, Spotify, and anywhere else you get your podcasts. Listen live each weekday, 10 a.m. to noon Eastern on Bloomberg.com, the iHeartRadio app, TuneIn, and the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg Terminal.

15:30Scarlet Fu:If you follow markets, you know the value of long-term thinking. You plan, you diversify, you prepare for volatility. But in life, even the best strategies can't prevent every bad day. A fire, a loss, a disruption that demands immediate attention. When that happens, what matters isn't just what you planned, it's who shows up. That's where Cincinnati Insurance comes in. For more than 75 years, they've helped individuals and businesses navigate life's toughest moments with care, expertise, and personal attention. Together with independent agents, Cincinnati Insurance focuses on relationships, not transactions.

16:08Scarlet Fu:Their approach is grounded in experience, follow-through, and trust built over time. Bad days happen, and when they do, you deserve an insurance partner who understands risk, respects what you've built, and is ready to help you move forward. The Cincinnati Insurance Companies. Let them make your bad day better. Find an independent agent at CINFIN.com.

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