Inside a Lebanese village under Israeli occupation

0:00Thinking long term about your investment career? Hear stories, advice, and lessons from seasoned leaders at Capital Group on the Capital Ideas Podcast. Subscribe and start listening today. Published by Capital Client Group, Inc.

0:17Good morning from the Financial Times. Today is Tuesday, May 19th, and this is your FT News Briefing. The legal spat between the world's richest man and open AI is over for now. And bonds all over the world aren't doing so hot. Plus, we'll hear from someone living in a Lebanese village occupied by Israel. And it's been an incredibly painful experience. He sort of described the fear of constant bombardment, the fear of being overrun by Israeli military forces. I'm Mark Filippino, and here's the news you need to start your day.

0:58A California court dismissed Elon Musk's case against OpenAI yesterday. The jury determined that his suit fell outside the statute of limitations. Musk, OpenAI chief executive Sam Altman, and president Greg Brockman all co-founded the company as a non-profit. Musk says the other two breached their contract with him by turning it into a for-profit entity. Musk donated$38 million to the group before leaving after a power struggle in 2018. The decision is a huge win for OpenAI. The legal case loomed over its plans to go public in the coming year. The financial hit could have been massive. Musk was looking for$134 billion in damages, and he may still get it.

1:38He said yesterday that he will appeal the verdict.

1:46Bond yields are up across the globe. In some places, including the U.S. and Japan, they are reaching record highs. It's a sign that investors are worried about the state of the global economy, specifically, they're worried about inflation. Emily Herbert is a markets reporter for the FT. She's been covering this story and she joins me now. Hi, Emily. Hi, Mark. So, Emily, talk me through the bond sell-off that happened on Friday and we're kind of seeing into this week. Sure. So, bonds have been selling off fairly consistently since the war and Iran started, but we saw quite a sharp sell-off at the end of last week and some of that has carried on into this week so far.

2:26investors are getting more and more worried about a possible inflation surge coming from the war in Iran. The Strait of Hormuz is still closed, which is much longer than most investors had expected when the war began. And the idea of a looming energy shortage, which would push prices up across the world, is really adding to fears that we might see proper inflation, which would cause higher interest rates from central banks and has prompted quite a nasty sell-off in the bond market in the last few days. Okay, so the fear is that the war in Iran is going to send costs soaring, produce inflation, and like you said, that could raise interest rates.

3:05Why are investors freaking out about all this now? Because, you know, the war has been going on for a while. Yeah, so I think the Strait of Hormuz has been closed now for a lot longer than most investors had expected when this all began. And I think that there was a sense last week of that really hitting home for a lot of people in the market. Also, we had a few inflation data points coming out of the US, which were a lot uglier than maybe had been expected and gave some early signs that this really is feeding through into the US economy and the rest of the world. I mean, we also had other stories going on around the world, which were bad for bonds, like the political drama in the UK.

3:46We've also had quite sharp selling in Japan because there's the prospect of the government borrowing more money to fund its new budget there. So let's talk about the US side of things. How significant are the numbers on those 30-year bond yields? And, you know, what does that mean concretely? Like, what does that mean for Americans? So in the US, I mean, the 30-year bond yield, which is the kind of very long-term government borrowing, that was the highest point it's been since the financial crisis in 2008 last week. And that does matter for families. And it means that mortgages are more expensive.

4:22It means that for small businesses, borrowing money is getting more and more expensive. So this isn't just a bond market phenomenon. This really is starting to be felt in the economy as a whole. Emily, what are you watching in the next couple of weeks when it comes to this bond story? The thing that we're all watching, and I think everyone is watching in the market and beyond the market is the straight of Hormuz and whether that reopens. And I think for investors and especially for bond investors, that's kind of the only important thing right now. If the straight doesn't reopen and we do get to that point of actual energy shortage, oil shortage, that will undoubtedly have an effect on inflation and also on growth.

5:03And it will be hugely significant for the bond market, as well as the rest of the market for stocks as well. CFT's Emily Herbert in London. Thanks, Emily. Thanks.

5:19There's a new power powerhouse in the United States. NextEra Energy will merge with its rival Dominion Energy. The new company will be worth$420 billion. The deal is the fourth largest of all time, according to LSEG, and it comes as there's booming demand for electricity to power AI data centers. The new utility giant would have a customer base of more than 10 million homes and businesses from Florida to Virginia.

5:50Israel's land grab in the Middle East is growing. The FT calculates that it has seized about 1 ,000 square kilometers from its neighbors, Syria, Lebanon, and the Palestinian enclave Gaza. That's since Hamas' October 7, 2023 attack. More than half of that seized territory is in southern Lebanon. And despite a ceasefire, Israel continues to carry out airstrikes there almost every day. Nearly 3 ,000 people have been killed in Lebanon since early March. And Israeli forces are also now trying to evacuate several Christian villages in the south that they have previously promised not to touch. The FT's Raya Jalabi traveled to that area last month.

6:28I drove into Ain Ebil, which is one of the first Christian villages that you encounter when you cross into the so-called security zone. Israel says it's evacuating villages for the so-called security zone. But residents fear it's an indefinite occupation. Raya spoke to a man who's been hit by the military presence. His name is Milad Habub. He's a poet. He's also a longtime teacher at a public school in the village. And he's lived in the area his entire life.

7:04She sits down with Milad over a cup of coffee to ask what life has been like in Ein Ebel since Israeli forces arrived in March. And it's been an incredibly painful experience. He sort of described the fear of constant bombardment, the fear of being overrun by Israeli military forces.

7:25Milad is 75 years old, and he has already fled Ain Ebel once when war broke out two years ago. He tells Raya that he tried to leave this time, but…

7:41He couldn't bring himself to leave. That was the most heartbreaking aspect of this conversation. I mean, I'm used to hearing stories of people who flee in southern Lebanon, but rare are the stories of those who stay.

8:02He had thrown a bunch of things into his suitcase. He doesn't even know what he packed, but he knows that he packed his poetry books, which are very important to him. And he says that he was in the doorway, and yet he just couldn't bring himself to cross the threshold with his bags in hand. And I asked him why, because he faced the prospect of being stuck in a military zone. He faced potential death. And he said, I knew that if I left, I might never come back. And he also said that if all the residents of his village leave, then there would be nothing for people to return to. His decision to stay means he's now one of thousands trapped in the security zone.

8:36It extends about 10 kilometers into Lebanon and encompasses mostly flattened Shia Muslim villages. So in its war against Hezbollah, the Shia militant group, Israel has largely targeted the Shia Muslim villages of southern Lebanon because that's considered strongholds of Hezbollah. Now this part is important. the Israelis made vague assurances that they won't touch the Christian villages under one condition, don't harbor Hezbollah fighters. But now, despite that, residents are caught in the crossfire. Now, in effect, what the Israeli military are doing is destroying vast ways of the south. And so the picture that's beginning to emerge, and what I certainly saw on my journey down to these Christian villages, is just row after row of destroyed buildings and town centers and infrastructure.

9:21Raya tagged along with an aid group delivering necessities to the village.

9:28Residents were gathered, waiting for the convoy to arrive instead of clapping as soon as we pulled up because they hadn't seen or smelled garlic or onions or potatoes or apples even in weeks.

9:42You can hear a truck unloading huge bags of produce. Since this effective siege has been in place, it's important to say that movement is incredibly restricted in these villages. So what that has meant is that there's no commerce, there's no trade, there's nothing going in or out unless it's brought in by a humanitarian convoy. Israel says it's restricting civilian movements because of ongoing military activity and a Hezbollah presence there. But Raya describes it as being, in effect, a siege. So is it a security zone or an occupation? It's a million-dollar question. Effectively, the Israelis are sort of couching it as a security zone.

10:18They're reluctant to call it an occupation, but that's what the Lebanese government and international legal experts are saying. And that's because if they are effectively controlling movements in and out of this zone, it's for all intents and purposes an occupation. Raya Jalabi is the FT's Middle East correspondent reporting from Ain Ebel in Lebanon.

10:39You can read more on all these stories for free when you click the links in our show notes. This has been your daily FT News Briefing. Check back tomorrow for the latest business news.

11:13We embed agentic AI into your core workflows. So your operations don't just run, they evolve continuously, intelligently at scale because true advantage isn't experimenting with AI. It's making it real. PwC managed services. We evolve your operations from day one. So you can turn pilots into performance. What is running your business feel like with Avalara, the agentic AI platform for global tax and compliance. You don't hover over the submit button. You don't ask for a second opinion. You don't wake up thinking about a filing. Because Avalara's Agentic AI handles it. Calculating, filing, validating.

11:55With the accuracy and audit defensibility your team can stand behind. Avalara. Agentic AI tax and compliance with confidence.