Israel pushes to restart strikes against Iran

0:00This episode is brought to you by Hard Lessons, a Morgan Stanley podcast. Iconic investors like Stan Druckenmiller, John Gray, and Rick Reeder break down calls that worked. I knew that this stock would go up for at least two or three years and go up a lot. Ones that didn't. I quite frankly thought the company could have reversed course. They didn't. And what they learned in between. When you buy everything and it goes up, it doesn't train you to be a great investor. It's these hard lessons that make all the difference. Listen to Hard Lessons wherever you get your podcasts.

0:32Good morning from the Financial Times. Today is Wednesday, October 21st, and this is your FT News Briefing. Peace talks between Ukraine and Russia begin another cycle, and Israel made plans to strike Iran earlier this month. Plus, investors are feeling calmer about guilts ahead of the UK budget. I'm Mark Filippino, and here's the news you need to start your day.

1:07The U.S. is trying to restart peace talks between Ukraine and Russia. Yesterday, U.S. Special Envoy Steve Witkoff met with Ukrainian President Vladimir Zelensky in Oslo. It comes after weeks of tension between Washington and Kiev. The Trump administration has pushed Ukraine to stop striking Russian oil refineries. binaries. That's to try to lower diesel prices ahead of midterm elections next month. The FT's Amy McKinnon has been following the latest. Hi, Amy. Hi, Mark. So, Amy, what did we see in Oslo yesterday? So there was no immediate breakthrough from this meeting in Oslo yesterday. But what we did learn from a press conference after from the leaders of Norway, Finland and Ukraine is that they did describe the talks as as constructive.

1:52They said that they'd done some substantive work on some of the key sticking points in trying to end this war. They didn't really go into detail what they were. The Finnish president, Alexander Stub, said that they touched upon economic issues, and issues of security for Ukraine, but they didn't really go into much further detail than that. But this comes after a tumultuous couple of weeks in the U.S. relationship with Ukraine. Now, Amy, Wyckoff heads to Russia today. What are we expecting there? That's right. Trump Special Envoy Steve Witkoff, who has really led the U.S. talks on trying to end the war in Ukraine, is headed to meet with Vladimir Putin in St.

2:30Petersburg today. And he's going to relay some of those proposals that were forged in Oslo yesterday and will come back with with a Russian response. The other thing that we're also expecting from Witkoff's visit is he is advocating for the release of an American who's been wrongfully detained in Russia since 2022. And that's another outcome that we're expecting from that. I'm not going to lie. It doesn't sound like a ton of progress is being made in actually ending the war. The talks to try and end the war have taken on a very kind of cyclical nature. So the way the cycle has generally gone during Trump's second term is there is some kind of a bust up, usually between Zelensky and Trump.

3:14The Europeans get exceptionally anxious and will oftentimes step in and try and smooth things over. And inevitably, there is effectively no movement at all from the Russians. One consistent thread that you hear from the Europeans and the Ukrainians is that really the immovable object in these talks is Russia. The Ukrainians have shown a great deal of willingness to come to the table, to kind of change their goals, to engage in discussions. but there has been really no inkling that Vladimir Putin is in any way ready to give any ground on this war yet. I mean, given that we are in this cycle of lashing out and reconciliation, lashing out and reconciliation, what does that mean for the war going forward?

4:01Well, this comes, this latest cycle comes, you know, as we are heading into winter, which is a really perilous time for Ukraine. Russia has just been bombarding Ukraine's energy infrastructure. Last winter, Ukraine experienced a series of rolling blackouts, some people even being left without heating. And of course, this is a country where it gets incredibly cold in the winter months. And at a time also when global supplies of interceptors, these really important missiles, which are used to shoot down incoming Russian ballistic missiles, are in short supply because of the war on the Middle East, the war with Iran.

4:37And so Ukraine, like everybody else, is short. And that has meant that more Russian missiles have been able to get through. We've seen some catastrophic civilian casualties just in the past few weeks. So what it means in the short term is that this war is going to continue and more people are going to die. Ukraine is facing a particularly tough winter ahead unless something can be done to change Russia's calculus in this war. That's the FT's U.S.-Europe foreign affairs correspondent, Amy McKinnon. Thanks so much, Amy. Thank you, Mark.

5:17SpaceX and Tesla are considering merging. It would be the largest deal of all time, and it would unite Elon Musk's two public companies. Both SpaceX and Tesla have formed special committees to discuss this idea at the request of shareholders. Musk made the announcement on an investor call after SpaceX reported earnings yesterday. Do I think it would be a good idea? Yes. But at the end of the day, the shareholders have to be supportive of this. And particularly on the Tesla side, we will need a 50 percent vote of all shares. And that's quite a high hurdle to try to achieve. He also had some other big news to talk about with investors on the call.

5:58SpaceX's revenue jumped by an astounding 161 % last quarter. Deals to lease out its data centers boosted its sales and profits. This helped offset the company's heavy investment in AI. Capital expenditure rose a little bit more than a billion dollars last quarter.

6:20Israel's Prime Minister Benjamin Netanyahu is pushing to restart large strikes against Iran. He even instructed his military to carry out a major new offensive earlier this month, but it never materialized. That's according to three people familiar with the matter. The FT's Neri Zilber broke this story for us. He's joining me from Tel Aviv to discuss how Netanyahu's efforts could plunge the region back into full-scale war. Hi, Neri. Hi, Mark. Good to be back with you. Good to have you. So what were you able to find out about Netanyahu's plans? So my sources told me that not only is Netanyahu actively pushing, pressing to relaunch major operations against Iran, but that these preparations were a lot farther along than we had any reason to believe.

7:02And that the plans had called for launching such an operation, at least by the Israeli Air Force, two weekends ago, on and around the weekend of October 10th. these strikes would have hit a lot more inside Iran than what we saw even at the start of the original U.S.-Israel offensive against the Islamic Republic back in February. You report that this bombing campaign, which would have hit civilian infrastructure as well as regime targets, did not end up happening. Did your sources tell you why? They did. And there's one reason, and it's called Donald Trump. To the best of my understanding, according to my sources, Donald Trump ultimately did not approve initiating the attack on Iran two weekends ago.

7:46And even Donald Trump himself has said, OK, I'm not going to attack Iran before the U.S. midterm elections on November 3rd. But everything he's been saying in recent days, as well as Bibi Netanyahu, indicates that they're seriously considering, as they put it, quote, finishing the job against the Islamic Republic. Now, we should say that Netanyahu's office did not respond to repeated requests for comment. But Neri, why would this pair of leaders want to restart large strikes on Iran? They both have pretty important elections coming up in the next couple of weeks. So yes, Israel is heading to quite fateful elections for its parliament here next Tuesday, October 27th.

8:24So obviously, if he had initiated a major assault on Iran, which likely would have triggered a renewed war across the Middle East, that would have possibly delayed and postponed the election here. But for Bibi Netanyahu, Iran has been the ultimate objective going back 30 years. He really wants to see the end of the Islamic Republic and the end really of its nuclear program. And we should also caveat all of this by saying that one of my sources cautioned us that all of this talk about a renewed war with Iran could just be a pressure tactic against Iran. But as one of my sources put it, there'll either be a deal or there's going to be an attack.

9:04That is the FT's Neri Zilber in Tel Aviv. Thanks so much, Neri. My pleasure.

9:15We are one week away from the UK's autumn budget, and Britain's bond market is doing better. UK gilts suffered one of the sharpest sell-offs among major economies when the US-Iran war began, but they've steadied recently. The FT's senior markets correspondent, Ian Smith, is here to explain why investor jitters about British bonds are coming down. Hey, Ian. Hey, Mark. So how well has the UK bond market been doing recently? So like most government bond markets, it's been struggling since the Iran war set off an inflation shock. We've seen borrowing costs rise everywhere. The UK has been among that.

9:49But in recent weeks, it has outperformed against some of its peers and definitely stabilized where we've seen the jump in yield. That's the 10-year benchmark kind of borrowing costs of the UK has risen 1.2 percentage points since the start of the conflict. Whereas if you look at France, which has its particular debt troubles at the moment, that's around 1.7 percentage points. So gilts have started to do better compared to the UK's peers. Right. And just for the record, yields move inversely to prices. So Ian, it sounds like gilts are still not great, but they're doing better. What is driving this improvement that we're talking about?

10:25So if you cast your mind back to earlier in the year when Andy Burnham was on the road to becoming UK Prime Minister, he was talking about whether there could potentially be changes to the fiscal rules or some uplift to defence spending. So that fed among investors a sense that there could be more borrowing under a Burnham administration or that there was some risk of a change to the UK's kind of borrowing outlook. And what we've really seen is very much continuity economics from the Burnham administration with the prior administration of Sakhir Starmer. And that is leading up to what people are expecting to be a low-key budget next week where major spending and tax decisions are deferred into next year.

11:10So this sense that the political risk presented by the Burnham administration on top of the global factors has really reduced since earlier in the year. It has helped to steady guilt against peer bond markets. Yeah, but Ian, if the Burnham government is just deferring these big spending decisions until next year, does that mean that this calm and the guilt market that we're talking about is going to be relatively short-lived? That's definitely possible. Many investors say to me, we are waiting to see where he wants to spend, how extra defense spending is going to be funded, how his plans for social care are going to be funded.

11:46These are big questions that aren't going to be answered right now. and people are pointing to the France example and saying, if the UK deviates in any way from the deficit reduction plan that it is currently on, that's an example of, you know, where that road could ultimately lead. So there's a sense of pain deferred. At the same time, it seems reasonable that the government might respond to what has been a global rise in borrowing costs by not taking big risks next week with the public finances. So a kind of budget light seems like a sensible gamble to take. We'll see how guilt investors react in the run-up to the budget as we get closer.

12:23Ian Smith is the FT's senior markets correspondent. Thanks, Ian. Thank you.

12:32Before we go, Alberta is staying part of Canada for now. We talked about the separatist movement going on in the country earlier this week. And on Monday, Alberta residents overwhelmingly voted against holding a referendum to leave the country. More than three quarters of voters rejected it. Prime Minister Mark Carney said in a statement yesterday, above all, Albertans chose Canada.

12:59You 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.

13:48We'll see you next time. course the right way. Everybody wins. Get started at VantageScore.com. Capital raising is being redefined in real time from macro disruptions and shifting investor expectations to AI-driven demand and the rise of private credit. When headlines can tilt markets overnight, how can companies stay on course? Strategic Alternatives, the RBC Capital Markets Podcast, explores how corporates and investors are navigating new pathways to raise capital, create value, and drive growth. When conditions change, alternatives matter. Listen to Strategic Alternatives, available wherever you get your podcasts.