Treasury Sec. Bessent: A Deal with Iran 8/4/26

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1:28open the strait and move towards a more normalized position in this conflict. And Snap CEO Evan Spiegel, he's built glasses or specs for this new artificial intelligence driven era, and he's ready for the next big invention. What I'm really looking for are those sort of leading signs of, you know, what are the new consumer products that are being invented? What are the new experiences that are going to drive more demand? All that ahead. It's Tuesday, August 4th, 2026. Squawk Pod begins right now. Stand Becky by in 3, 2, 1, cue, please. Good morning, everybody. Welcome to Squawk Box right here on CNBC.

2:08We are live from the NASDAQ market site in Times Square. I'm Becky Quick along with Joe Kernan. Andrew will join us later from the annual Aspen Economic Strategy Group meeting. Yesterday, the Dow closed at a record high. You're going to see this morning it's pulling back by about seven points. Energy prices pulled back yesterday. And once again, this morning, you are looking at prices a little bit higher, up by about$1.50,$81.82. Brent crude is up by about 2.5 % to$85.82. That's in peace. 7 ,600. Yeah, it's all. You start getting uncomfortable if you got a 7 ,000 target for the end of the year?

2:45Perhaps. See, I would think that if you had a 7 ,000 target to start the year with, you'd still be thinking, you know what? I'm sticking with my 7 ,000. because we don't know the war and everything else that's going on. That's just the mentality of people that are wrong a lot. And they will probably ride this 7 ,800, if it does, if it goes, or 8 ,000. And then finally, the towel gets thrown in when it just becomes. But I think at this point, they can still sort of wishfully think, you know, I think there's so many things still staring us in the face that it could easily go. And it could easily go.

3:24And we just said, Tom, you know, Leon is saying there's going to be some type of pullback before we he thinks we ended 8000 for 2026. But in the meantime, he thinks a six handle possibly. Right. Look, oil prices spike. Something happens in the Middle East and you can see some very quick moves on some of these. And AI. Yeah. Chips, chips, software. I mean, just think about how different the narrative looks today than it did a week and a half ago, two weeks ago. Was that it? That was it. That was the dip to buy? I'm still convinced that this was that situational awareness, that that was a huge blip that came from that.

4:06But did we get... People get nervous. Did we get it out of our system, the worry that companies are spending too much on AI? I don't know. You had the CEO of Hugging Face yesterday saying that he thinks China could catch up this year. And by the way, they're already ahead, he thinks, in the open AI models. Well, we better spend some more money. Palantir is surging in the pre-market. The company beats second quarter earnings and revenue and said commercial revenue more than doubled from a year ago. U.S. government revenue grew 90 percent to more than$800 million. In a CNBC interview, CEO Alex Karp reiterating his criticism of Frontier AI Labs, arguing that businesses shouldn't be forced to give up their intellectual property to work with the companies.

4:50He also didn't blame Chinese open source AI companies for distilling Frontier Labs' work. How do you think the models got their value? They distilled all the value of IP everywhere, including enterprise everywhere. Like, we're in a battle here. Those things have to work. There's only one way for them to work ethically, and that's called an application layer on the back of your own compute where you control the model. There's a way to get it. It's not the only way, but the best way to do it is you buy Palantir, you install it, you have us do it. Palantir also lifted its full year revenue guidance.

5:24And prior to last night's earnings, the stock was down about 29 percent this year. But it's been a big winner over the past couple of years. Yeah. If you were in, you were happier in Palantir early. Right. I still go back to what Alex Karp told us. Must have been June when he came on about that. I think it was right before July 4th. Just talking about the idea that those models that we have here are not beloved. In fact, they're pretty, Silicon Valley does not feel very kindly towards them. And that there is a lot of antagonism and concern and questions about what happens. Because that is something that every technologist, every CEO I've kind of spoken with since has verified his thoughts on that.

6:16It's hard to find somebody who disagrees. The tokens. Yeah. President Trump criticizing Chevron and Exxon Mobil for making, in his words, too much money. As oil prices have risen throughout the Iran war on Friday, Chevron reported a nearly 400 percent increase in second quarter profits. Exxon's earnings more than doubled. They're making too much money. OK, based on a shortage, they're making too much money. I don't like it. And I should be the last one to say, because I'm a big free enterprise guy. Nobody bigger. And, you know, you're going to see oil when we're finished with Iran. You're going to see the prices drop through the floor.

6:58But they made too much money, too much money. I don't know. The president called on oil majors to lower the cost of gasoline, saying is his words that they better cut the retail price. there's they could discuss this on so many different levels but we'd sound like we were we were talking about Elizabeth Warren if if we did populist angle that comes in I mean you know I get it I know this is how this is how the president rolls I understand how it happens but you know when there's something like a pandemic where oil goes to 20 dollars no one comes in and says we're going to help you at that point.

7:38It is they're in that business. There are people that risk their capital to invest in oil companies. Something like this happens and the price goes where it is. Would we have a Republican talk about a windfall profits tax? Potentially. I mean, that certainly sounds like something that he seems to be threatening. The one thing I will say is these major oil companies, Chevron and Exxon in particular, have been the reason that oil prices haven't gone higher with the refinery output that they've been putting through. They have been not just producing higher amounts of oil and energy to try and keep these prices down during the Middle East, but they have been refining at 96, 97, 98 percent of capacity.

8:23And if you did not have that, you would have seen much higher spikes because of the war in the Middle East that the president started. And the shareholders and pension plans and whomever is, are the actual, you think of companies, not just as monoliths and CEOs, you know, raking in cash, but the people that have risked their dollars to do like capitalism works when things like this happen. Okay. Either the company explores more, either the company hires more people, that would be good. The company returns more cash to shareholders, does buybacks, does dividends, whatever it is. It's that's the way that's what you sign up for when you go into a capitalist system.

9:09Now, the whole capitalist system is under assault from these DSA nut jobs. So it's just a bad time to be not understanding. What do you think the profit margins are for ExxonMobil? I don't think they're exorbitant, probably. Eight point eight percent. Right. OK, what do you think the profit margins are for NVIDIA? Eighty eight point eight. Well, right now it says 63, but I think you're right. I've heard profit margins above 80 % for some of these companies. So on a lot, none of it makes sense. You know what? Does anything that's really populist ever make sense on a logical basis? No, but they are the issues that hit voters the most, whether it's the gas you're paying at the pump, whether it's the medicine prices that you have to pay for.

9:47Okay, so you have a choice. You have a choice of either pushing back and explaining it or just going ahead with it and realizing that that's what elections are based on. I guess it's the world that... I criticize the other side enough for it. So I can't just say, oh, well, in this case, it makes sense. No. I'd like to. But again, if you push back too hard on these companies and they slow their production or they slow their refining capabilities... What if they do return it to shareholders? Shareholders are the ones that when climate activists want to shut down or block the entrance to a fossil fuel company.

10:32You risk your money, and if it works out, that's the way it works. And you want those shareholders risking that money so that you can in turn... Exactly. Instead of having the government... You want the government running. Cheese will be next. Coming up on Squawk Pod, a news-making conversation with the Treasury Secretary, Scott Bessent. Yen, oil prices, and the Fed leadership under new chairman Kevin Warsh. I think every meeting should be live and that market participants should make their own judgments. You're listening to this podcast, so you've got a curious mind. Here's a helpful fact. Drivers who switch and save with Progressive save over$900 on average.

11:18Visit Progressive.com to see if you could save on car insurance. Progressive Casualty Insurance Company and Affiliates National average 12-month savings of$946 by new customers surveyed who saved with Progressive between June 2024 and May 2025. Potential savings will vary. This episode is brought to you by Schwab Market Update, an original podcast from Charles Schwab. Join host Keith Lansford for this information-packed daily market preview delivered in 10 minutes or less, including projected stock updates, monetary policy decisions, and key results and statistics that may impact your trading.

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12:37Welcome back to Squawk Pod from CNBC, a split show today between the NASDAQ market site in Times Square and the Rocky Mountains. Hey, guys, it is just past 7 a.m. on the East Coast. I'm in Aspen, Colorado, where it is 5 a.m. You're watching Squawk Box right here on CNBC. I'm Andrew Ross Sorkin, along with Joe Kernan and Becky Quick. As I mentioned, I'm in Colorado today at the annual Aspen Economic Strategy Group meeting. We've got a huge lineup, guys, of folks that we're going to be talking to here today and tomorrow. I was at dinner last night. Jay Powell is here. Jonathan Gray from from Blackstone.

13:17John Waldron. We're going to see Janet Yellen, by the way, tomorrow on the broadcast. And then also Neil Kashkari. Lots of you could describe it as nerd debates about what's happening. inside the Fed. Is it cold, Andrew? It's actually not cold, guys. What do we think it is here? No, the 50s? We think we're in the 50s. We've done this before at this hour, and it has been freezing. So it's a lot better than it has been in the past. In fact, it was super hot here, yet last night people were sweating through their shirts at dinner. It was maybe like in the 90s. You've got to bring layers for the mountains, right?

13:56Lots of layers. It's great. Awesome.

14:02The U.S. and Japan confirmed a coordinated yen buying intervention. Join us now with the details of how it came together. Treasury Secretary Scott Bessent. Mr. Secretary, it's good to see you this morning. Joe, always good to be with you. You you know about about the yen. I guess you had some experience in the private sector, maybe from the other side of the trade at one point. Is there anyone who is as adept at working with yen? I don't know. Is it manipulation? What is it? Support? Or in the last case, it wasn't support. It was actually shorting it, I think. Well, Joe, I think it's important to have a framework here.

14:45And just to level set here, the framework begins with the strong relationship between President Trump and the prime minister. And I have an extremely good working relationship with my counterpart, the finance minister, Katayama. And I have been I've been going to Japan since, I think, 1989 and have more than 50 or 60 visits here. So I'm well versed. But what's important here is we've been in close contact with our Japanese allies and they are great allies in the region, both militarily and economically. And we understand that they are making serious efforts to stem the substantial undervaluation in their currency.

15:34And Joe, this is more than just a market intervention that through our conversations with them, we believe that they are going to continue to put the right policies in place that will lead the yen to get back to more of a normal equilibrium price. Yeah, I was wondering whether you've got some ideas about how Japan needs to do that, because there obviously are still some problems. Rates are probably negative there with the short term rate at one percent. And we think we've got it tough here in terms of debt as a percentage. I think they're at 230 percent right now. That's almost hard to believe, Mr.

16:18Secretary. Well, there are a lot of ways of counting it because most, excuse me, much of it is held by Japanese citizens and by their pension system. So, you know, I think if you net it down, it doesn't look like that. And the other thing, too, is, look, they're moving toward budget discipline. They're going to have a primary surplus for the first time. And Joe, if I put on my economic historian hat and look back, in the late 90s, 97, 98, the Asian financial crisis, in my opinion, part of it was triggered by an overly weak yen. So I think a stable yen is not only important for the U.S., but very important for the entire region.

17:07Because if the yen were to weaken substantially, then the other currencies would follow it. We'd seen excess volatility in the Korean yuan. Many people believe that the Chinese RMB is undervalued. So given the trade flows, given the size of the economy, given their contribution to the global savings market, very important to have a stable yen. The Japanese government understands that, and we are proud to stand with them in implementing their policies and help them stabilize the region. It's obviously that for a lot of reasons, it's probably in the United States best entrance that we don't see a run on the or a continued run on the end.

17:55I just got to ask you, you're a sly dog. When you wrote that down by five to 10 billion and the printing looked so big, you've done this before. Haven't you where, you know, people are looking over your shoulder. You know, did you need to be reminded of things to do by 10 to billion, 5 to 10 billion in yen? Tell me what was really going on there. Well, I just wanted to make sure that all the reporters looking on over my shoulder also knew the symbol JPY for the Japanese yen. So, OK, instead of shorthand yourself. Yeah. You know, I was going to finish the list. You know, the the rest of the list was, you know, like, go go and have lunch with the Supreme Leader, play tennis with Putin.

18:39You know, but I thought I would just leave it at the buy five to 10 billion a Japanese yen. Well, it's got a much better chance of a coordinated probably intervention because Japan blew through about I don't know how much of they did they blow through in April and May. that didn't really stem the decline. And speculators are on notice now. If they lean too hard on the carry trade, they're going to get it handed to them. That's part of the rationale, I guess. Well, Joe, I think in 2011, 2012, when the yen, which was substantially overvalued at that point, it was about 78. From the earthquake, yep.

19:23Yeah, but even then and pre-Abenomics, the yen was bouncing around 78 to 82. And at the end of the day, you can give market signals with intervention, but it's policy that turns it. So it was the beginning of Abenomics, Prime Minister Shinzo Abe. It's been a resounding success. Japan has come out of deflation and they're back. And I think here we can give market signals. But at the end of the day, it's going to be policy and fundamentals. And the U.S. decided to join because we are very optimistic on their policy path. Would it also require a rate hike by the Bank of Japan, do you think? I think that the policy path, I'm not going to prejudge what the BOJ should do.

20:13I've known Governor Ueda for more than 15 years, and I believe that he will do what is needed. And, you know, I think that the prime minister, who is doing a fantastic job, and, you know, if we look back, one of the little noticed things in Abenomics was something called Womenomics. Japan had traditionally had a very low participation relative to Europe, relative to the U.S., of women in the workforce. And now, you know, in Japan, we have women with two of the top three jobs. But, you know, it is going to require policy to follow up with the intervention. And I'm highly confident we're going to see that.

20:56I guess one thing we definitely don't want is Japan selling treasuries to do this. So you have encouraged the Federal Reserve to upsize. Can we call it a FEMA? FEMARF, is there an acronym for this? The Foreign and International Monetary Authorities Repo Facility. Have you ever called it a FEMARF? Can I coin that? Can I trademark that? Sorry, Joe. A day late and a yen short. It's called the FEMA facility. And we'll give you something. We'll come up with something for you next time. And look, the facilities that the Federal Reserve has, whether it's the FEMA facility or the swap lines. The purpose is to protect the U.S.

21:45economy and to keep any volatility offshore, prevent it from happening before it reaches our U.S. shores. And the FEMA facility was done in 2020. Size of the bond market was much smaller then. So I think it would be reasonable for the Fed to consider upsizing the facility. I'm happy that the Japanese government wants to use it and draw on it. And it's a completely secure lending facility. We have swap lines outstanding. So it's really no different than a swap line that the country posts collateral. And we lend them the money to intervene in this case. And I think it is a very robust facility. And I think it was set up for occasions just like this.

22:36Mr. Secretary, you spoke about this as kind of a currency intervention as diplomacy because we have a close relationship with Japan, because we're trying to work with them on a lot of things. But the Treasury Department actually sold euros to buy those yen. The sale of the euros, is that kind of collateral damage in this or was there diplomacy that was at work there, too, for partners we may not be as happy with lately? No, the Europeans are obviously in close contact with our European partners, including at the central bank, including some of the finance ministers of the nation states. And I assured them that it was just a reallocation of our reserves.

23:21Seems to me that the euro is much closer to an equilibrium price. I'm not going to talk about where the euro should or should not trade. But it's really the substantial undervaluation of the yen here and the policies that the Takeichi government is putting in place to change that. The idea of the carry trade, obviously you're protecting against people relying on the carrying trade too heavily. Do you think it would be a bad thing if the carry trade went away entirely? Or does it depend on if that's an orderly move? Well, I don't think the carry trade is ever going to go away entirely. Japan has a gigantic surplus of foreign assets, and they provide liquidity to the rest of the world.

24:10Japan, Inc., since the 70s, 80s, all through the 90s up until now, has accumulated substantial overseas assets, and I see no reason for that to stop. And it's just the level of the yen that could trigger other problems or trigger competitive devaluations, which is unhealthy. A lot of things are making it sort of tough on Japan right now, Mr. Secretary. I'm just wondering whether just purely fiscal and even monetary changes can really help. I mean, there's a lot of capital inflow. It's good for us. AI, all the money's coming here. around the world, because this is where the returns are in AI. You know, the war in Iran makes their importers of energy in Japan.

25:03I mean, it's just what's the Shakespeare quote, how all occasion doesn't form against us. It just seems like one thing after another has put additional pressure. Could could they raise rates like they should? Could they end QE or would that just compound their problems? Well, a lot to unpack there, Joe. So let's start with, in my ex-post over the weekend, I said, I believe the Japanese government understands that we're at the end of Abenomics, or one phase of it, and now we're in the implementation stage. It has been wildly successful in reflating the Japanese economy, normalizing the economy, bringing them out of deflation.

25:45And I think now we're going to see strong growth. They've had strong wage growth. The economy is quite strong. Japan's tech sector, while it doesn't match the U.S., is very, very strong. Japan, Korea, two of the strongest in the world. And then when you talk about the energy price, Japan is a substantial importer of energy from the Gulf. And we've seen President Trump last week threatened what would have been one of the largest military campaigns or the largest military campaigns since World War Two against the Iranians. And now we are, because of that, we are in talks with the Iranians. And I think there is a chance we may have a deal today or tomorrow to open the strait and move towards a more normalized position in this conflict.

26:46And that's because their air force is wiped out, their navy is wiped out, substantial portion of their missiles are wiped out. More importantly, their missile production capability is wiped out. So anything that happens in the Gulf will benefit Japan and indeed the rest of the world, Joe. Just to clarify on that, Mr. Secretary, the idea of having a deal today or tomorrow to reopen the strait, would that be reopening the strait but the Iranians somehow having the ability to charge a toll on that? Or would that be reopening the strait and it's free and clear and anybody can move through? I think it would be freedom of movement.

27:25And even though things are still a little dicey there over the past few days, we've saw quite a few ships coming out even now. So I'd expect the energy prices to settle back down, which, as I said, will be good for the entire world. And once the strait reopens, there are hundreds, if not a thousand ships sitting in there waiting to go out. And Becky, it's not just energy. It's fertilizer. It's refined products. It is the various industrial gases. So I think that we could see a big relief trade as those prices go down. In fact, as you've been speaking, Mr. Secretary, the WTI price is dropping. We were looking at oil at 82 earlier this morning.