The Strait of Hormuz Is Open (Sort Of). So How’s It Going?

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0:33Alex Ossola:Keir Starmer's resignation continues an era of political turbulence in the UK. What does that mean for its economy? Plus, in an exclusive interview, Microsoft CEO Satya Nadella offers a blistering critique of how the AI race has played out. When college students are booing commencement speakers who utter the word AI, that's a tell on, hey, they're anxious. And influential Fed Chairman Alan Greenspan has died at age 100. It's Monday, June 22nd. I'm Alex Oselev for The Wall Street Journal. This is the PM edition of What's News, the top headlines and business stories that move the world today.

1:16Alex Ossola:The U.S.-Iran peace deal that was signed on Wednesday last week was meant to reopen this trade of Hormuz. So how exactly is that going? I'm joined now by WSJ reporter Joe Wallace. Okay, Joe, let's start with like what's going on in this trade right now. Are we seeing ships moving through it? Yeah, there's been a notable uptick in traffic over the past week or so. We have to be careful not to read too much into any one day's transit numbers. But there has definitely been a heavier flow, leaving in particular over the past week or so. Also quite a few ships going in. But the ships coming out are really the more interesting ones right now.

1:52They're carrying oil from several Gulf oil producers, Saudi, Iraq, the UAE and Iran itself, because the US has lifted its blockade on Iranian oil exports. So there have been several cargoes from Iran, including from Karg Island in the past few days. There was a bit of a drop off on Friday when our colleagues spoke to some seafarers saying they'd been turned back by the Iranian Navy and a bit of a confusion on Saturday when the Iranian military claimed it had closed the strait again. But the numbers over the weekend really undermined that claim. There was actually quite a big increase over the weekend and today a fairly steady flow again.

2:29Alex Ossola:What is the kind of balance we're seeing of ships coming versus going? It depends on the day, to be honest. I would say more going out than coming in, but there have been a few recent days with quite a few going in. Towards the end of the war, albeit during the ceasefire, there were quite a few ship owners getting their ships into positions such that they could capitalize on what would likely be a rush to export oil from the Gulf as soon as the war formally wrapped. But now, over the past few days in particular, there have been more coming in than going out. And that reflects the demand for oil and refined oil products like diesel, especially in Asia, where, as we know, economies and companies have been scrambling to import fuel from the world over to replace the lost barrels from the Middle East.

3:12Alex Ossola:So the demand is most certainly there, as we've covered a lot in the past months. But traffic, it sounds like, isn't quite at the volume yet that it was before the war. And yet we're seeing today oil prices are down pretty dramatically. I mean, today Brent crude, the international benchmark, was trading under$80 a barrel, which is just a bit above the pre-war levels. What are traders responding to here exactly? Yeah, as you say, although there has been an increase in traffic, we said that a fraction of pre-war traffic rates, And analysts have tried to estimate how quickly it will take to clear some of the backlogs and get ships back into the right places around the world.

3:48But the best guess is that maybe within a month, assuming there are no more setbacks in the talks, you might get to about 50 percent of pre-ball levels.

3:57Alex Ossola:That was WSJ reporter Joe Wallace. Thank you, Joe. Thank you. In markets today, oil prices fell after the U.S. cleared the way for Iran to sell oil in dollars, adding to investor optimism around peace talks. Major U.S. indexes were mixed. The Dow rose 0.3 percent, while the Nasdaq tumbled 1.3 percent on a choppy day for tech stocks. SpaceX, which makes up about 5 percent of the Nasdaq, fell 16 percent, marking its third straight decline. An even bigger Nasdaq component, Alphabet, suffered its worst day in more than a year, down about 5 percent amid concerns about its artificial intelligence business.

4:34Alex Ossola:The S &P closed down about 0.4 percent.

4:40Alex Ossola:When Keir Starmer became the UK's prime minister, he promised continuity and a steady hand on the country's economy after years of leadership turnover. Now almost two years since taking office, Starmer has resigned. So will the person who succeeds him be that steady hand that Starmer couldn't? For more on Starmer's resignation and what comes next, I'm joined now by our UK correspondent, Max Colchester. Max, how much of a surprise was it that Starmer resigned? Well, Starmer's demise has been predicted for quite some time here. He's seen his support slowly ebb over the last few months, and there have been a succession of scandals which have slowly eroded his political capital here.

5:18So it wasn't actually that surprising that he stood down. It was really a question of when as opposed to if.

5:25Alex Ossola:To that point, I mean, why now after weathering all of these controversies over the past few months? Well, the main catalyst for his departure is the arrival of a credible challenger in the eyes of Labour lawmakers, which is in the form of this guy, Andy Burnham, who's the former Manchester mayor. And previously, Burnham couldn't challenge Starmer because he was not a lawmaker. But that changed on Friday when he convincingly won a special district election in northwest England and was elected to Parliament. And Starmer read the writing on the wall and quit. I remember when Burnham was first floated as a possible challenger to Starmer, and there was this really big market reaction.

6:06Alex Ossola:How are things looking there now, and what are investors expecting from Burnham's possible leadership? The market reaction today has actually been quite mooted because everyone has seen this coming. The pound moved a little bit, borrowing costs edged up a little bit, but it's nothing noteworthy. The real movement may come when Burnham actually fleshes out what he wants to do in power and also who he's going to put in key positions in his government, such as his chancellor of the Exchequer. Initially, he caused a lot of ruckus in the markets because he said the UK government should sort of ignore the bond market and borrow more to fund state outlays.

6:40He has since rode that comment back and has now tried to reframe himself as a more centrist mainstream politician. So there's a lot of uncertainty in the market about what Burnham really stands for.

6:51Alex Ossola:Zooming out a little bit here, Max, I mean, the UK has long prided itself on political stability. Like, between 1945 and 2016, Britain had just 13 prime ministers. Now, if Burnham does become the PM, he will be the sixth prime minister in seven years. What impact is this having on how the country actually functions and on its international reputation? It really is an astonishing shift. When I was a kid growing up in London, I mean, you know, you change prime ministers every 10 years or so. it was quite a rare occasion and it'd be a big deal. Now it's every 14 months on average, we get a new prime minister.

7:25And it's eroded a lot of trust in politics in the UK. And it's made it a lot harder to govern the UK because you have new people coming in with new mandates or new ideas. So the economic impact has been quite stark in that this uncertainty of the political direction of the country has pushed up borrowing costs. It's also made investors more reticent to invest into the UK economy because they don't know what's going to happen here. And that has got to do a picture of low growth, which is really what stands behind Starmer's fall here, which is that the UK economy has been growing very sluggishly and people are really feeling a cost of living crisis here.

8:01And ultimately, until a politician arrives who can tackle that underlying problem, we're going to continue to see this rotation of Britain's political class.

8:09Alex Ossola:The journalist Max Colchester joining me from London. Thanks so much, Max. Thanks so much. In another leadership shakeup, Russell Wiener, the CEO of Domino's Pizza, is transitioning to the executive chairman role. The company's operations chief, Joe Jordan, will take over as CEO on October 1st. He'll take the reins at a tough time for pizza overall, as Domino's seeks to reinvigorate growth. Shares of the world's biggest pizza company are down about 30 percent so far this year. Coming up, the legacies of a music industry kingmaker and the man who made the Fed famous. That's after the break.

9:12Alex Ossola:You wreck.

9:18Alex Ossola:Microsoft helped usher in the AI boom. Now, CEO Satya Nadella has a new vision for its next wave. In an exclusive interview with The Wall Street Journal, Nadella criticized how the race for AI supremacy has played out, with a small group of companies capturing the technology's value as they make dire prophecies about safety risks and job losses. You can't say, hey, all white-collar jobs are gone, and this could even be a weapon and we will use all the power to build data centers. It's just not something that society needs. What society needs is new technology, which is great innovation that ultimately is solving the challenges of people and planet and where everyone feels like, wow, I'm going to get better drugs and I'm going to have better economic opportunity and I will have a real stake.

10:06Alex Ossola:Nadella didn't directly name OpenAI, with which Microsoft has a longstanding partnership or any of the other companies building the most advanced proprietary models. Instead, he made clear that Microsoft is seeking to steer the AI race towards cheaper models and more user control, with political messaging to earn society's trust. In other Microsoft news, the company has struck a 20-year deal with Chevron to power what could become one of the country's largest data centers, a 2.7-gigawatt campus in West Texas. Chevron is partnering with energy company Juland to build a power generation complex using natural gas from Chevron's fields in the area.

10:42Alex Ossola:The companies didn't disclose the cost of the project, which is expected to start delivering power in late 2028. Separately, U.S. auto safety regulators have opened an investigation into a fatal wreck near Houston, Texas, involving a Tesla on Friday. The driver said the car, which crashed into a home and killed one person inside, was operating with an automated driving assistance system. Tesla didn't immediately return a request for comment.

11:12Alex Ossola:There were a few notable deaths today. One was Clive Davis, the hit-making record producer and music titan, who died at 94 from age-related illness. With no musical training, Davis transformed Columbia Records into a rock and roll powerhouse, signing artists like Santana, Billy Joel, Bruce Springsteen, Aerosmith, Pink Floyd, and Earth, Wind & Fire. Later, his own label, Arista, helped launch the careers of Patti Smith. Kenny G, and Whitney Houston. Davis shaped the careers of artists as both a producer and advisor, with a mix of financial acumen, taste for popular music across genres, and willingness to encourage creative freedom.

11:56Alex Ossola:He's one of few non-performers inducted into the Rock and Roll Hall of Fame. Davis was married and divorced twice, and is survived by his four children and eight grandchildren. The second obit is for a rock star from the world of central banking, Alan Greenspan. Greenspan, who died today at the age of 100 from complications of Parkinson's disease, served for more than 18 years as the chairman of the Federal Reserve from 1987 to 2006. He achieved a level of fame and influence rivaled only by U.S. presidents and devoted his professional life to understanding how the U.S. economy worked. WSJ chief economics correspondent Nick Timrose says two moments from Greenspan's career come to mind to help define his legacy.

12:38The first was in 1994. The economy was coming out of recession, and he concluded that he should launch a preemptive strike against inflation. The Fed doubled their overnight benchmark interest rate in the span of 12 months in 94-95. the Fed achieved a so-called soft landing where we did not have a downturn. In 1996 and 1997, he saw the productivity boom that technology was enabling before it was really evident in the data. And so he cautioned his colleagues against raising interest rates. They held off. And that today is seen as a remarkable call because the 90s were an era of unparalleled prosperity.

13:25Alex Ossola:Nick says that Greenspan's philosophy became a driving force of regulatory policy for decades. But when the financial crisis hit just two years after he left office, some said that the deregulation of Wall Street, which Greenspan had championed, stripped away safeguards that might have prevented it. Alan Greenspan had a deep faith in markets that the people in them would act in their own self-interest. And that is what made him a brilliant reader of the economy in the 1990s and early 2000s. But in the end, it also left him in what he described as a state of shocked disbelief after he was Fed chair and the housing bubble burst.

14:07It ricocheted through the global financial system. It forced massive bailouts intervention that his whole hands-off philosophy had said you would never want to take. And so he did, at the very end of his professional life, admit that he had been wrong about thinking that markets would always be able to self-regulate and self-police, that something had broken down in his worldview.

14:31Alex Ossola:Greenspan is survived by his wife, veteran journalist Andrea Mitchell. And that's what's news for this Monday afternoon. Today's show is produced by Danny Lewis and Anthony Bansi with supervising producer Melanie Roy. I'm Alex Osula for The Wall Street Journal. We'll be back with a new show tomorrow morning. Thanks for listening.

15:19Alex Ossola:Transcription by CastingWords subscribe.wsj.com slash takeontheweek to subscribe now.