Russia secretly helping Iran develop supersonic missiles

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0:32Good morning from the Financial Times. Today is Wednesday, September 2nd, and this is your FT News Briefing. Russia has been helping Iran's war effort even more than we previously knew. And global bond yields are hitting levels not seen in decades. Plus, could people use artificial intelligence to make bioweapons? I'm Sonia Hudson in for Mark Filipino, and here's the news you need to start your day.

1:07An FT investigation has found that Russia has been helping Iran develop new supersonic missiles that would be capable of striking U.S. warships in the Middle East. Miles Johnson is an investigative reporter at the FT, and he joins me now to talk about it. Hi, Miles. Hello. So tell me a bit about what you found in this investigation. So we found that for several years, there has been this secret program where Russian engineers who work for the most important Russian missile technology company have been providing this technical assistance to the Iranian military to develop what are known as supersonic cruise missiles.

1:50and this type of missile would be able to give Iran something that she hasn't been able to get and has wanted for a really long time which is a type of missile that can threaten large vessels and do so in a way which would actually potentially be able to overcome modern defenses. Now we're not at a stage where this has been deployed or there it's been finished but this is something which has gone quite far down the line and has involved a lot of really close collaboration. And during our reporting, we went to the Russians and the Iranians to ask them about this, but they didn't respond to our questions.

2:27And just how significant is this development? So there has been significant collaboration between Russia and Iran for a long time, but that collaboration really has sped up in the last few years, especially since the start of the Ukraine war. And most notably, there's been this transfer of drone technology from Iran to Russia, which Russia has used extensively in the Ukraine invasion. But we spoke to a lot of experts and they were really pretty clear this is a big deal. You know, this is really a transfer of strategically important technology from Russia to Iran. And it's something that could in time really change quite importantly, the sort of indigenous capabilities of Iran in terms of the threats it can sort of use against U.S.

3:17and other countries' assets in the Middle East. Well, what could this actually mean in practical terms for the war in Iran? I think something really interesting is happening and something we've been reporting on, you know, this year, where there is this sort of change which is underway where Iran was able to hit U.S. military bases with greater precision than anyone expected and cause more damage. And what we're seeing is this reduced gap in the sort of capabilities of a country like Iran and, you know, a superpower like the United States due to Iran's ability to procure assistance and equipment and other things from places like Russia and China.

3:59So I think in the longer term, if they are successful in finally developing these supersonic cruise missiles, that would be further evidence of its ability to hit the United States in ways which would make people pretty uncomfortable. Miles, I'm curious, what do you think this reveals about shifting geopolitics more broadly? I think it certainly shows, you know, according to the people we've spoken to, that Russia is willing to sort of push the line a little bit further than it would be before. And, you know, this is something which certainly would upset countries in the Gulf, Israel, you know, Russia has a complicated relationship with, and obviously the United States.

4:40and Iran has also been getting quite a lot of assistance from China, as we've reported, in terms of things like getting satellites, which have helped it surveil U.S. military bases, which is then hit with missiles and drones. And so this is something which is happening in a context where Iran is, you know, one of the most sanctioned countries in the whole world and has to find ways of procuring items from its allies or technology or know-how in ways that it can then deploy. Miles Johnson is an investigative reporter for the FT. Thanks, Miles. Thank you.

5:20Oil prices jumped yesterday after the U.S. launched a fresh wave of strikes on Iran. Brent crude was up around 5%. It was the second round of U.S. strikes in three days after a month of relative calm. The attacks were in response to Tehran targeting American troops and commercial ships in the region. U.S. bond yields also rose after the attack. The benchmark U.S. 10-year yield hit its highest level since early 2025. Investors are concerned that higher oil prices will worsen inflation. Now, this is part of a global bond sell-off that's been building for weeks and got even worse yesterday. UK borrowing costs hit their highest level since 2008, and Japan's went to peaks it hasn't seen since the 90s.

6:09Investors and analysts think this sell-off could bleed into equities. I'm joined now by the FT's Emily Herbert to discuss. Hi, Emily. Hi, Sonia. So just how bad has this bond sell-off gotten? Yeah, the sell-off has been kind of deepening over the last few weeks. Bond yields have been kind of grinding higher. So the moves yesterday weren't enormous on their own, but we did start to hit levels that we haven't seen for many decades that investors are getting really worried about. Yeah, one of your sources even said the bond market is stuck in a, quote, doom loop. What do they mean by that? What's causing the sell-off?

6:48Yeah, so something that a few investors were talking to me about yesterday was the kind of vicious cycle of this bond market sell-off. So in the short term, it's been caused by higher energy prices because we've had more escalation in the Middle East. And what that means is that borrowing costs have gone higher for governments. And this is only adding to the existing problem of their kind of fiscal sustainability, the amount of money that they're just spending overall. And that in itself pushes borrowing costs higher. So governments are looking at this kind of doom loop, as my source said, where they're having to spend more money borrowing money.

7:24and the fiscal picture is definitely not getting better for a lot of these governments. So it's just increasing the original fears that bond investors had and then yeah you get stuck in that doom loop. But is the stress in the bond market bleeding into other markets? Yeah so we are starting to see a bit of that in some trading sessions. So we saw a bit of weakness in the stock market yesterday in the US and in Europe and some investors were saying that this was partly to do with the bond market sell-off. So obviously, as bonds sell off, the price goes down and the yield goes up. That's how bond yields work.

8:00And that means that an investor might then look at a 10-year US Treasury bond and say, oh, well, the yield has gone up to not far off 5%. And if I can get 5 % return on a 10-year US Treasury bond, then maybe I should just buy that instead of buying equities. So it's definitely a big question for the market at the moment. Like, is there a kind of magic level? And I don't think there is. I don't think we will find a kind of magic level where all the money tips out of the equity market into the bond market. But I do think it's becoming a worry for equity investors that we might start to see a bit of money kind of leaking out of the stock market into the bond market and trying to capture some of those high yields.

8:40Yeah, but also, Emily, there are lots of other factors that impact equities. How are you thinking about this bond market sell-off in conjunction with those other forces? Yeah, of course. And I mean, borrowing costs and bond yields have been moving higher for a lot of this year, especially since the start of the war in the Middle East. And stocks have also moved higher in that time. So that kind of money moving out of the stock market argument hasn't really held up so far this year. And I guess the explanation for that is that earnings have just still been really, really strong. And investors are still really optimistic about the revenue, the profits that will come from the AI boom.

9:19So I think until we maybe start to see some cracks in those earnings, it might be a hard sell for investors to really move out of the equity story where there is still a lot of hope. Emily Herbert covers markets for the FT. Thanks so much. Thanks, Sonia.

9:41Artificial intelligence groups are racing to contain a growing risk. Anthropic, OpenAI, and Google DeepMind are developing advanced systems that could help discover new drugs or prevent pandemics. But they could also be misused to create new viruses or develop bioweapons. Now, the companies vet users before granting access to any advanced capabilities, and they also monitor account behavior. Experts are worried, though, that AI's scientific capabilities will be the industry's next public security threat. That's after they raised cybersecurity concerns over the summer that AI could turbocharge hacking operations.

10:29You 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.

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