00:00Let's get to our team coverage now with Bloomberg's Washington Deputy Bureau Chief, Laura Davison, Emma Ross-Thomas, who covers
00:05oil, and markets reporter Morwenna Konium.
00:09Laura, let me start with you. Markets certainly decided that they were interpreting President Trump as this war will come
00:15to an end.
00:16But there are so many questions still to be answered, right? Like if this war is coming to an end,
00:21what happens to the Strait of Hormuz and why is there a third aircraft carrier on its way to the
00:26Middle East?
00:29Yeah, there are a lot of questions that have yet to be answered, including whether Trump is serious about this
00:34two- to three-week timeline for withdrawing from the war.
00:36He has famously in the past set some of these deadlines and then blown past them or completely ignored them
00:41as they got closer.
00:43So there's a lot of risk here.
00:45Two, he has not yet laid out sort of what his metrics for success are, what he foresees the withdrawal
00:50timeline being.
00:51And, of course, when it comes to the Strait of Hormuz, he suggested that he would leave that to allies
00:55in Europe, Asia, in the Gulf region to figure out how to open that up.
00:59He suggested that the U.S. doesn't rely on oil from the region, which is broadly true.
01:03But because of global oil markets, it means that if that strait remains closed, that global oil prices will continue
01:09to be elevated for quite some time,
01:11posing both a risk to the global economy, inflation, but also to Trump politically as he faces midterm elections and
01:17his party faces midterm elections here in November.
01:21Emma Ross-Thomas, let me come to you and ask you, if the president is pulling out, at least pulling
01:25the U.S. out of this war,
01:27what's Iran's incentive for making sure the Strait of Hormuz reopens?
01:32Yeah, that's a really good question.
01:33And I think, you know, for the oil market, it's all about the Strait of Hormuz, isn't it?
01:37And it's not just the violence that we're seeing at the moment, but there's also this talk at the moment,
01:41isn't there,
01:42about a sort of what the post-war order might look like in the Strait of Hormuz.
01:46Instead of being a sort of open international waterway, that Iran might be, you know, they've been preparing legislation on
01:51this,
01:51that they might seek to extract tolls.
01:54You can imagine what the other countries in the region think about that.
01:58And so, you know, I guess as you're coming, as you're thinking about what that situation might look like,
02:04you have to imagine what Iran's incentive is to maintain a level of friction, right, as you sort of negotiate
02:10that position.
02:11Exactly. And, Morwenna, equity markets around the world, and it has to be said bond markets to a certain extent,
02:17have decided that this war is essentially over for the most part.
02:21But you have to wonder why this massive rally, particularly in tech, you know, the stocks index was up 6
02:27.25% and so on.
02:29You know, this war is going to keep going in some capacity, you would have to imagine, even if it
02:33becomes more regional.
02:34Yeah, absolutely. I mean, you say there's a big rally. I wouldn't say they're totally pricing in it all being
02:40over.
02:41If you actually look at how much, say, the stock 600 has fallen since the beginning of March.
02:46I mean, you're looking about sort of down 6%. So we haven't even made that up halfway.
02:51And likewise in the bond market, yes, we are seeing big drops in yields today, and particularly, I mean, the
02:57U.K.,
02:58where we've seen a particularly harsh reaction, I think, to the conflict and the inflation risk.
03:06But yields now are, you know, still only sort of back down where they were in the middle of March,
03:11not back at the beginning of March. So we're sort of halfway there.
03:14But I think that uncertainty is still actually priced in.
03:16And we should point out as well that it was the last trading day of the quarter,
03:19which may have had something to do with everything that was being priced in.
03:23Laura, let me come back to you, because we are anticipating a speech, a speech to the nation, in fact,
03:28on the part of President Trump tonight.
03:30He's going to want to sound, you know, enthusiastic, to say the very least, and maybe even victorious.
03:36What else will he want to get across to the nation?
03:41So these speeches are relatively rare for Trump.
03:43This is a time for him to essentially blanket the airwaves.
03:46All the networks will take this live.
03:48It's a speech at 9 p.m. Eastern time.
03:50And typically, these addresses have more of a somber tone, more serious.
03:53And Trump, like all presidents, sticks to the teleprompter versus speaking off the cup,
03:58as Trump is one to do.
04:00But this is an opportunity for him to sort of give the message that he wants to resonate with people,
04:05with voters, as he, you know, makes this decision to back away from this war,
04:09whether that is setting out, you know, what he sees as the successes here,
04:12what he sees as the economic consequences or lack thereof.
04:15This is his moment to sort of make that case.
04:18Typically, we would have seen an address like this before the war started.
04:21We never saw that.
04:21But now we're seeing, as Trump is trying to control the message,
04:24as this war has become more unpopular, as prices have risen,
04:27gas prices, for example, hitting $4 this week in the U.S.,
04:30he's looking to have a little bit more control over the messaging,
04:32even as the geopolitical situation has gotten out of his grasp.
04:37Emma Ross-Thomas, one of the questions for the oil market now is,
04:41if Trump does pull out and Iran keeps the strait closed,
04:45does Trump then have to get involved again, right?
04:48Or can the U.S. go it alone and leave it up to everybody else
04:51to sort out their own oil price mess and their own Strait of Hormuz mess?
04:55Yeah, it's interesting, isn't it?
04:57I mean, I guess it's a big question, Mark, what the Europeans do.
05:00Weeks ago, we had Macron making noises about, you know,
05:03putting some coalition together, but very much the idea was that after,
05:07that would come after the conflict has subsided.
05:11The other thing I think to keep an eye on are these sort of bilateral negotiations
05:14between Iran and other countries.
05:16We've had, you know, we've had a few ships going through the strait,
05:22and we think that is probably as a result of some government-to-government talks,
05:26some payments being exchanged.
05:29And so I think that will, a lot of, there will be, on the one hand,
05:32the military piece, but on the other hand, sort of bilateral negotiations.
05:36And again, going back to the other producers in the region,
05:38again, that's their worst nightmare.
05:39They absolutely do not want to get into negotiating with Iran's safe passage.
05:44Morwenna, do equity markets care why oil is coming down,
05:47or do they just care that it is coming down?
05:49And if it starts going back up again, will we see you selling again?
05:52Well, I think, I mean, it comes down to the inflationary risk,
05:55and actually we are seeing a lot of companies starting to price that in,
06:00into their outlooks, coming into a lot of the commentary.
06:03So I think if it does come back again, that will obviously amplify those concerns.
06:09I think it falling a certain degree, as you pointed out earlier,
06:13we're not back where we were at the end of February.
06:16We're still looking at inflationary risk.
06:18I suppose how prolonged it is, how prolonged those higher energy prices persist,
06:24affects the way in which companies are able to hedge those risks
06:28and their longer-term planning.
06:30But I think, you know, obviously we are seeing movements in sort of tandem
06:35with how the oil price is moving.
06:37But I think the actual sustainability of a continued retrenchment
06:43is quite important to the equity outlet longer term.
06:46So if you're looking at how the impact has been put,
06:46So we're looking at how the oil price is going to be put on.
06:46In this place, how long have you been put on?
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