Trump Pledges Safe Mideast Oil Transit, Chance of Quick Iran War Fades | The Opening Trade 3/4/2026

0:01 Good morning. It's Wednesday, March 4th. Here's what's on the agenda. The biggest South Korean stock crash ever. Oil keep surging on day five of the US-Iran war. And Washington threatens Spanish trade. So let's check on the markets. It is not focus on the conflict in Korea. It is what the impact is being felt across the Asian benchmark and the MSCI specific down 4.2%. But to your point, is the cost money closing down about 12%. The concerns, of course, rippling through the South Korean economy and the gains that have come through year to date, those gains are still there. But clearly the selling has been significant. European stock futures, interestingly, looking to break higher after losses of about four and a half percent so far this week, looking to add six points, maybe a bit more stability building in to the European picture with all those

0:47 question marks that remain around the conflict in the Middle East. Brent, crude prices higher again. Looking through those reassurances coming through from President Trump, not finding that reassurance at this point. Prices up 3% on Brent, $83, $83, about closing in on $84 a barrel. Oil prices remain, of course, central to the story out of the Middle East and how markets react. The countdown to trade starts right now. Good morning, everybody. Welcome to the opening trade. It is Wednesday, the 4th of March. Let's unapologetically go straight to the markets. The impact that we're seeing through the Asia session and time. You were talking about what this does to

1:34 the MSCI Asia Pacific down 4%. Let's go more granular and look at some of these Asian markets, because the cost be as you been flanking is certainly the epicenter of this isn't day to day to worse than day one. So down by 12%. And this is a market was closed on Monday. So always playing a little bit of catch up here. But it isn't just the top, the Cosby that's down. We're also seeing selling extensively across Japanese markets. Aflac, the topics down, the Nikkei, both of those particularly weaker. And this seems to be a couple of things going on here. One is very much to do with what is happening in Iran and the higher oil prices. And of course, that has an impact on economies and countries that import oil. But also you're just selling things that have done really well, in particular the cost base, because even after all of this, we're still up 20% on the cost the year to date. It's only March the fourth. So that just underscores how how much strength we'd seen until these worst two

2:23 days in the market since 2008, how euphoric that rally had been. But it is unraveling fast for the Cosby. Interestingly, Korea, the world's eighth biggest crude consumer, hence why you are seeing the feed through from the US-Iran war here. You've also seen the Korean War selling off against the dollar yesterday. It's recovering somewhat today, But again, coming back to that Middle East risk. So it's energy, it's stronger dollar, it's supply chain risk as well for South Korea and Japan. And to your point, it's about the major, major energy importers. South Korea benefits, of course, from from that conviction around high bandwidth memory. But there is leverage at play. That seems to be what we're hearing from Korean investors. There was a lot of leverage. It was a lot of margin. A lot of that is being unwound. And interestingly, the Korean authorities now readying potentially to intervene in the Korean markets after the biggest drop on record.

3:09 The other part of this is to what extent we have to ask, to what extent, more broadly the pressure that we're seeing across the markets, but also in prices up on oil and gas, to what extent that pulls Trump into the sidelines and raises the question of whether or not where is the pain point for President Trump? When you look at the markets right now in terms of his view, in terms of how far he wants this conflict, there is a put though he doesn't need it on US stocks because US stocks have, in the words of David Solomon over at Goldman Sachs, being quite benign in their response. You wonder whether that changes at all. I mean, US futures are pointing quite decidedly negative, but we have seen that before. I wonder if there's a link between tech in Korea and tech in the US. Nasdaq futures down 7/10 of a percent, although it's such different tech landscape that maybe that's hard to believe. European futures, you make this point on European features do look quite resilient. I wonder if that holds, though, given the selling we're seeing in Asia, or

3:58 does Uber feel like we've done enough of this and we need to factor in a little bit of the late in the day positivity you had out of the United States? Well, as you say, it all comes back to oil. So Brent briefly topped $85 a barrel yesterday. It's now at 83, just shy of $84 a barrel. Clearly, this is the biggest shock to the market since the Ukraine invasion. And you look at the oil price, but the Strait of Hormuz remains all but shut. You had Trump saying that the US would provide insurance guarantees and naval escorts for oil tankers passing through the strait to try and head off an energy crisis. Oil paring some of its gains briefly on the news, but then rising again because just so many questions around how this is going to work, it's not clear who's going to buy the insurance. It's not clear what the premium would be from the US International, the

4:43 Department Finance Corporation. I've never had to say that before the DFC, but it shows the bigger role that they're playing now. What premium are they going to offer because it would be a massive undertaking for them potentially. So Question Mark still about how that process would work in terms of escorting vessels through the Strait of Hormuz, which remains effectively closed, and how that insurance system would work. So the proposition is that from President Trump. But now investors are asking those questions in terms of what the detail is of that. They're also asking questions in terms of what is this is doing this conflict to the split with the US and some of his allies? And we saw another tongue lashing by President Trump yesterday, particularly talking to Spain, but also the UK as well. We've spoken, of course, to the Spanish foreign minister saying he wanted this process to go through the United Nations, and that's why Spain was opposed to the conflict that's being pursued by the US and Israel on Iran. But President Trump saying he wants to

5:31 cut off all trading ties with Spain. And that brings us back to a question about exactly how what are the mechanisms for that, given that Spain is, of course, a member of the EU? Absolutely. So it's difficult to do when the competency to talk about trade in Europe is held by the European Commission. It's not devolved out to that. It's not it's not something that the national governments do. And Annabelle Teen, who of course has a lot of skin in this game, runs at Santander and has just recently done a big deal in the United States to expand presence there. She's saying that the US and Spain will get back to that friendly relationship that has endured for centuries. Soon we will see. But we are going to hear from the Prime Minister of Spain this morning. So I think that's interesting. And we'll watch Spanish stocks at the open. I mean, I was looking at the list of things that are export it, wind turbines, olive oil. We mentioned wind perhaps, but petroleum products, aerospace, all of these things going from Spain to the United States.

6:20 Yeah, it's interesting to point out the you know, it would have been easier to. Of all trade with the UK. But Trump sparing Starmer from saying that he's no Churchill, but as you say, still criticizing him. I enjoyed your interview with Tobias Ellwood yesterday, really drawing the parallels between Iran and Iraq. Just clearly the spectre of Tony Blair and the Iraq war hanging over the UK prime minister. But the Chancellor, Rachel Reeves, telling us that the UK won't make decisions on Iran to get better trade terms with Washington even before all of this the Obama downgrading UK growth yesterday. Let's see what this war does to the UK economy and European countries, then trying to craft a very careful line and very different line. Spain versus the E3, maybe the E3 on a different page, and that has not escaped

7:06 the attention of the Iranian foreign minister, who's been saying that some European countries risk appearing complicit. And so that that will no doubt be something that that is heard in governments around Europe. Let's tell you what else is coming up on the program we will be talking about or of course, we'll be joined by Carol Nuttall, the CEO of Crystal Energy, Bella Hafez, head of Macro Hive, will be with us. And we'll talk about the broader markets and the risk of environment we've been caught in. Does that continue beyond? Samantha will be with us European Equity Strategy head. Stacy, we've talked about their call to maybe hide out a little in UK stocks with an update on that. And Miguel still. Well, Dan Brady is the CEO of the Portuguese Electric Utilities company EDP. Does everything we're seeing in the Middle East just once again underscore, ask us to ask questions about renewable energy. Will that certainly are going to be the focus of that conversation.

7:52 Let's take a look at what else we're watching throughout the day at 10 a.m. London time. We have the latest euro area unemployment numbers. Then later, the European Commission unveiling its Made in Europe plan. So this is the Industrial Accelerator Act, which aims to boost European industry through new public procurement rules and local content requirements. Then at 7 p.m. London time, it's the Fed's Beige Book coming out. And then we've got more European earnings, 9 a.m. London Time Buy a Campari at 4:45 p.m. London time. And then stateside, Broadcom and October reporting today. Yeah. Can US earnings come through in that quite benign environment that we've seen so far for US stocks, if that is continued? Coming up on the program, we will watch Spanish stocks. As we've been saying in the open, as President Trump threatens to cut off all trade with Spain after it denies this

8:39 fact. Spain, that is, denies the US access to military bases for the war in Iran. Plus, the US president also ramping up criticism of the UK over the use of British air bases. Chancellor Rachel Reeves tells US military decisions won't be based on the prospects for future trade deals. We will bring you more of that exclusive interview with the UK Johnson out next week. It extends gains despite the US promising naval escorts in the Strait of Hormuz. If you have any questions, get involved in that conversation or any of the others we're having around this desk. I'm BBC's Go. Is the functional Libyan back terminal. This is being back.

9:34 Welcome back. We are, what, about 50 minutes or so? A little under 50 minutes from now, right? This Wednesday. European futures currently flat, penny low by about a 10th of a percent, but looking to stabilize potentially after losses of around four and a half percent so far this week on concerns around the Middle East. That is the picture US UK futures looking to gain about five points. We'll see how that just as we build up to the open this Wednesday. President Donald Trump, meanwhile, saying that the U.S. will insure and escort tankers passing through the Strait of Hormuz. Reports say Iran is now claiming to have, quote, complete control of the waterway. And then it's warned global shipping networks not to sail through it. Meanwhile, Iraq is beginning to shut its biggest failed oil field, and Saudi Arabia's major oil storage sites are filling rapidly.

10:20 Bloomberg's chairman upset she is in Dubai. Jomana, what is the state of play right now in terms of this conflict? Are we seeing an escalation? Certainly the lines around infrastructure in the energy space within the Middle East seem to be coming pretty thick and fast. There's more detail in terms of some closures and shutdowns. Where are we in this conflict? Yeah, well, the war seems to be escalating operationally and as it pertains to the reverberations on financial markets as well, particularly on energy markets. And President Trump is taking note, it's pretty clear that they're trying to do something about the Strait of Hormuz. He did announce yesterday that the US are willing to provide naval escorts, insurance guarantees for the tankers and vessels that choose to to pass through the straits. However, the reaction from the markets

11:07 and obviously this is well received and would be welcome, is that it will be actually, in effect, quite difficult to implement. And it's unclear at this point whether any companies are going to subscribe to it. But one thing is for sure, there are major concerns not just about rising costs in terms of insurance premiums, shipping costs, but also in terms of actual security, with the Revolutionary Guard saying this morning that they still practically maintain control over the straits. And as we heard yesterday, it's having an impact on some key OPEC producers. Iraq are already beginning to reduce some of their production. Saudi Arabia is thinking of other ways to get their oil over to the to the Red Sea. They have a pipeline that can transport about 5 million barrels of oil a day. But all of this still having a notable impact on the energy market.

11:53 At the same time, operationally, the joint US-Israeli operations in Iran are amplifying. Yesterday, Israel targeted the a building that houses the so-called Assembly of Experts. That's a group of clerics that are supposedly meeting together to think about who's going to be the successor to the supreme leader. His funeral is happening later today. And the CENTCOM, US Central Command saying that they have targeted over 2000 main sites around Iran since the inception of this conflict. At the same time, Iran continues to retaliate a lot still against Gulf states. I will tell you that in terms of the intensity, it started to slow down, but there's still targeting key US assets. Overnight, they targeted the Dubai

12:40 consulate, hitting the parking lot there. They also targeted the CIA base in Riyadh, Riyadh, saying that they intercepted almost a dozen missiles and drones that were heading towards various parts of southern part of the country alongside the east as well. And so this volley of attacks continue perhaps with less of intensity and scale as before. But to answer your points, yes, this war has expanded both in terms of economic implications and operationally. Jamal and I thank you very much. Maybe because you're one of us actually joining us, that from Dubai. Well, the president's announcement, as we've heard, that the US will provide insurance guarantees and naval escorts for oil tankers, reduce some of the risk premium and energy markets.

13:26 Perhaps traders do remain skeptical about how any of this is going to come together. However, President Trump expects short term pain for oil only. If we have a little high oil prices for a little while. But as soon as this ends, those prices are going to drop. I believe lower than even before. President Trump speaking yesterday at the White House. Joining us now for more in-depth analysis is Carolyn Mackley, CEO of Crystal Energy. Carol, nice to have you with us. Thank you for joining us. So before I start with the latest news flow, President Trump talking about providing insurance and naval escort perhaps to all kinds of shipping that wants to get through the Straits of Hormuz. I wonder what this will mean for the energy industry and a lot of voices suggesting that this isn't the only

14:12 thing that's needed. We spoke to an insurance expert just this week who said getting insurance is only part of the decision that goes into whether you want to make that journey. But what's your perspective? And definitely when President Trump made the announcement, we saw a tiny bit of a relief because we saw prices, oil prices easing by maybe a dollar or two. But it was just a question of time before they picked up again higher. So the announcement shows that the Americans are willing to provide support and protection to ships and tankers crossing the Strait of Hormuz. And there's also the political risk insurance that companies could get in case their own insurance providers. Don't provide that, Don't offer that.

14:58 However, is that enough for companies to really take this heightened risk? I'm not quite sure, because I'm not quite sure of some of the practicality in terms of implementation, especially at the time when the war is simply expanding and escalating. But if we resolve the issue of the Strait of Hormuz and tankers resumed their operations, I doubt, first of all, that we would go back to normality as long as there are bombs and drones flying above them or into them. There is other very important and more worrying issue that is attacks on energy infrastructure in the neighboring countries and not just energy infrastructure, but attacking those countries directly, which might lead to even worse scenario that is involves dragging those countries, the DCC countries, into the war with Iran.

15:43 So far they have been protecting themselves, But maybe at some point, if Iran pushes it further, they might end up being dragged into the war and that would be really a very bad scenario for oil markets and energy markets globally. Yeah, Carol, Does the market reaction to this proposal from the president suggest to you doubts about the implementation or is it because it would presumably just cover us flagged vessels and say perhaps it's not enough to make a difference to global flows? Would we have a two tier system here when it comes to oil? Well, I'm not sure you going to distinguish between the tankers or the vessels that are crossing the strait that I mean, if you have some support, it's going to ease a bit of the pressure and the fear. But let's see who's going to act to take

16:29 those words and then act upon them, because there is still a risk and important risk taking measures. Now, we saw something, albeit a much milder level in the Red Sea or when the way that pirates attacked. But there you are dealing with a very targeted group of pirates that were attacking the ships or the houses when they were sending a couple of rockets here and there that was implemented and protection was provided. There you have a much you it's much a smaller space to operate. And also you are dealing with Iran, which I don't think until today it has used its most sophisticated vessels. So definitely it helps in terms of reducing the risk but not really eliminate. And there is still the tensions are pretty high to see the implementation and seeing companies accepting to take that risk.

17:16 Maybe if they start demonstrating with a couple of vessels, even if they were Americans, that would be good news. But let's wait and see how that is going to evolve practically. Carol, good morning. Is talking alongside Ana and Lizzie. Does the 10% increase in bread that we've seen since Friday, does that actually reflect the risk premium that we're seeing in the Middle East right now? Well, it depends really on how people look at the risk in the Middle East. But I don't like to look at the situation in the Middle East without taking consideration of the wider situation and global oil market, because we started the year with expectations of a notable surplus in the market. And therefore what we are seeing today has caused some disruptions. Actually, every day we are we received new news about a further disruption.

18:02 So Iraq, for example, shut down its major oil producing feed because they are lacking of storage capacity. So at the moment the market is not panicking. We are seeing a justifiable increase in the risk premium and in oil prices, but there is no serious deficit to start with in global oil markets. We do have some cushion, you know, from outside Opec+ higher prices would encourage more share production. It will not happen overnight, but it is going to provide some cushion, safety cushion. We do have that. Egypt petroleum reserves minister was in the IEA members that can be activated if we are facing serious disruptions. We have a lot of oil and accountable for the sanctioned oil that may be could come to the ready from Russia and Venezuela today. So it's not a panic stage.

18:49 But again, if the situation further escalates and the war expands and the players in the region are dragged further into the war, then I would expect to see a worsening scenario when it comes to oil prices. But at the moment, I think that is a reasonable reaction that we are seeing in prices. And Carol, what's your assessments of how short we will be in terms of oil globally as a result of this? Is difficult to say because we don't know how long this lasts. But if Iraq is shattering, if Saudi Arabia is trying to use other routes to get some of its products to the Red Sea, if we are seeing the possibility that China, for example, could use coal instead, I mean, all of these moving parts and no doubt still add up to a shortage, how big is that shortage?

19:35 It's very difficult to pin a figure on that because you have to envisage all sorts of scenarios. But the good news is the following There is some alternative, even if not fully available, to absorb all the tankers, let's say, and the volumes that you would normally trade through the Strait of Hormuz, but you can divert some of those barrels, several million barrels a day. This is to a land infrastructure that the countries in the region have implemented. Even Iraq, they do have the option in the north via Turkey. But again, they do have some issues with so that it's not immediately available, but they can work on it to make it, to open it and then send some of their oil to the global oil market. And at the same time, we should not only think in terms of supply because we were we started the year with a not so great outlook when it comes to oil demand. So all demand, yes, was growing, but was

20:22 rather limping rather than growing at a faster rate. Higher prices are going to dampen further the growth in oil demand. So while, yes, we would have some shortages in supply, which can be compensated for to a certain extent, but it might take some time to see that effect because of the lag that we have, whether for production in the US or using alternative infrastructure for trading oil from the Middle East. But also there is a demand factor. We might see a slowdown in demand growth and that could puts a if you want, a lid on how far prices could go higher if the situation does not end anytime soon. But that's not good. You always appreciate your analysis. Carl Northway, the CEO of Crystal Energy with Brent just shy of $84 a barrel. Well, here's what else you need to know.

21:10 This morning remark understands Russia is dismayed by US and Israeli attacks on Iran, but feels mostly powerless to aid its ally and sees potential benefits for its war on Ukraine. We're told Moscow believes demand for air defense missiles from Gulf states means there may be fewer resources for Ukraine. Under the last few minutes, Decision Desk HQ says State Representative James Talarico has beaten Congresswoman Yasmin Crocket in the Democratic primary for the US Senate. In the Republican primary, US Senator John Cornyn and Texas Attorney General Ken Paxton look to be heading for a runoff, and Bloomberg has turned that to more than 25 Senior leaders across Blackstone collectively pitched in some 50 million to the Blackstone Private credit Fund.

21:59 That, along with $250 million of the firm's own capital, went to help cover a record redemption request of roughly $3.8 billion or equivalent to around 7.9% of net assets. So it just shows how far these investor, these managers are willing to go to quell investor fears, retail investor fears about the cracks in the industry. But one of those that winds up papering, I mean, it's pretty remarkable that managers up and as we describe in the story door knocking of the managers at Blackstone saying, can you can you chip in to what is a flagship fund? It's a bellwether fund for the industry as well. Look, this is a fund that attracted significant inflows last year. And I think it's interesting you point out that this is a retail investor concern because there seems to be a split and certainly there are those in the industry who say institutional

22:46 investors, they're still committed. It's the retail investors where you're starting to see some panic to the point where Blackstone managers are having to chip in about 50 billion of their own capital to ensure that they can meet these 7.9% redemptions and the extent to which retail investors should have exposure to private credit and private funds generally is still alive. Conversation. It was really interesting, the Bloomberg Investor Conference and we heard from a lot of the titans of the industry talking about pain still to come. So I'm putting a time horizon on this of 18 to 24 months and some, of course, probably talking their own books, but suggesting that the way through all of this is a diversified firm. If you're not only lending to Ally or you're not skewing towards lending service or software, then you don't suffer quite the same air threat. But to your point, the institutional investors saying, no, this is how it is kind of shrugging your shoulders somewhat Apollo's Mark and saying

23:33 openly, if you wanted a higher dividend, you took more risk. Basically, if you want to ride the wave up, you've got to ride it down as well. Yeah, And the fundamentals, we still don't have evidence of fundamentals in terms of the assets that are exposed to are fundamentally cracking. We're seeing that in the public markets, but these are privately held assets, of course, within the software space. That's where the concern is coming up as stocks sing around the world. But I'll have these from macro highs tells us how markets are pricing the Iran story. That's coming up. This has been Bloomberg. 30 minutes from the start of cash equity trading. This is Wednesday, Wednesday, the 4th of March. And the futures picture looks a little more positive for Europe than it did this time yesterday, that's for sure. We were substantially weaker during

24:21 yesterday's session, down 23% on some of these major markets on European equities, the US. So it was much more resilient. So towards the end of the day, or even just the latter half of the day in the States, we saw a little bit of a recouping of earlier losses. So maybe we're just pricing in some of that. I wonder how long that last because US futures are pointing down once again, Lizzie. So that's the story in stocks yesterday. The Bond story was all about higher yields. Yeah, the bottom sell off continues today, yields up again across the curve across the European continent, more so notably then for treasuries. We have seen double digit basis point moves higher for gilts yesterday. So we'll wait for those to open as well. But traders starting to price in an ECB hike and pricing out one of the two brokers that they were looking at for this year Tom. Yeah, inflation risks, of course, and that's tied to what's happening in the gas price and the oil price, but

25:07 prominently for Europe, of course, the gas price today, European gas prices are up just one, just shy of 2%. They're up about 75% since the conflict started. So there's that context, of course. So 55 megawatt per megawatt hour, that is the pricing right now. So up just 2%. So again, a little bit more stability. You're seeing a bit more stability in equity markets then of say a little bit more stability in terms of the gas prices. Oil around $83 a barrel on Brent. So we'll see if that if that lasts, of course, in the headline, risk remains. Meanwhile, Spanish Prime Minister Pedro Sanchez is due to make a statement at 8 a.m. UK time. That's after US President Donald Trump said he will cut off, quote, cut off all trade with Spain. The threat comes after Spain denied us access to their air bases for Iranian

25:53 strikes. I told Scott to cut off all dealings with Spain. They were the only country that NATO would not agree to go up to 5%. I don't think they would agreed to go up to anything. They wanted to keep it at 2% and they don't pay the 2%. So we were going to cut off world trade with Spain. We don't want anything to do with Spain. We don't want anything to do with Spain. Let's bring in Bloomberg's chief Europe correspondent, Oliver Crook. Ollie, how realistic is this? What does this do to us EU relations? Yeah, I think it's really going to complicate things. If this is a serious threat, again, we take everything that Donald Trump says with a grain of salt, particularly on these sort of wild tariff threats, particularly since all of those tariff threats are sort of undermined by that Supreme Court ruling.

26:40 But the other person you didn't see in the frame of that shot was chancellor of Germany, Frederick Mertz, that was sitting next to Donald Trump and really his number one mission, going to Washington, D.C., before this war started in Iran was to get clarity on the sort of tariff policy, the legal groundwork on which the United States would be operating their tariff policy in order for the Europeans to be able to restart the ratification progress of their trade deal. And of course, the other issue was Ukraine. These are the two main issues that really, for the German chancellor were the priorities going into this meeting. Of course, it was totally overshadowed by the situation in Iran. They were both sitting there in the Oval Office. Most of the questions went to Donald Trump, but Frederick Mertz did manage to say a few things for the few seconds that he got to speak in the Oval Office. Have a listen to what he had to say about Iran. This is, of course, damaging our economies.

27:25 This is true for the oil prices and this is true for the gas prices as well. So that's the reason why we all hope that this war will come to an end as soon as possible. And we are hoping that the Israelis and the American army are doing the right things to bring this to an end and to have really a new government in place who is coming back to peace and freedom. Now, something had to be done, and it's been 47 years. And so you hear it there from the chancellor. So of course, the main sort of preoccupation for the Europeans in terms of the knock on effect is, as you were highlighting their time, they raise the rising and price and prices of natural gas. That, of course, is very a sensitive topic for the Germans, which industry has, of course been so decimated over the last few years from the increase in

28:11 oil, or I should say, the prices of gas from the sort of Russia situation now getting further compounded by the situation in Iran. But what is also been interesting is seeing the sort of fracturing we're seeing across the political spectrum within Europe. We have the UK, France, Spain, to a very large degree being critical of the United States and their activity within Iran. Germany has been much more on board with the US and Israeli actions really sort of standing behind it. That being said, this is not a situation any European is sort of comfortable with, but we should remember that these sort of Europeans, certainly the Germans are held hostage to a certain degree by the United States and Donald Trump because they continue to need the support on the issue of Ukraine and a doubt that they really got that much airtime in discussing the situation in Ukraine, which really was the second most priority for Fredric March heading to the White House for this visit.

28:58 Holly, thank you for the update. Our chief Europe correspondent, Oliver Crook, there. Well, turning back to the market reaction now, Asian stocks have plunged the most in nearly a year led by the biggest South Korean crash ever. This is mounting concerns over the Iran war trigger an exodus from some of the world's best performing markets. For more, we're joined by Bilal Hafeez, head of market strategy at Macro. Hi, Bilal. Good to see you. So many places to go, but I feel like the big question is do all the roads lead to inflation in the short term? In the long term, higher oil prices, higher defense spending? Is the market pricing around central banks correct? Well, I think certainly all roads do lead to higher oil prices. And there's also the broader supply chain shocks. What's less clear is whether we have pure inflation or whether we also get a demand shock as well.

29:45 So then you have this stagflation outcome and each economy around the world will contend with this in different ways. But in general, this is an inflationary shock and we basically need to see how long the oil shock lasts for it to kind of have a broader impact on inflation expectations and then work its way through the system to raise inflation. Well, take Europe and specifically, I remember a time a few news cycles ago when you were talking about euro dollar at 140. Now you're saying at 114 within the month maybe. How realistic is the pricing that the ECB hikes this year? I think it's more than 60% now. Yeah. I mean, I think the ECB is in a very tough situation because the energy disruption will really hit Europe in a dramatic way, which will impact growth, which would make the ECB dovish. But then the inflationary side would

30:33 would then lead for them to be hawkish. My bias at this stage is for them to be relatively neutral. I think the market pricing could well change very easily in terms of the dollar. I think at the moment the dollar's heavily beige and that's why we have this view that the dollar will. Your dollar could head down towards 115. Longer term, I'm still of the view that the dollar is in the midst of a long term downtrend. So eventually the dollar will weaken. But right now is not that time to play that interesting. Ben, good morning. So that's the oil story, the inflation story. We're also thinking about stocks and how they chart a course through all this geopolitical uncertainty. And sometimes stocks are quite resilient to that. We had a conversation with one guest yesterday. We were going back to the 1970s and thinking about parallels for stocks there. You take us back in your notes to the nineties and you suggest maybe there were there were parallels there. I mean, different geographies are handling this very differently.

31:19 But what are you seeing in the sort of history books that tells us anything useful about where stocks go now? Yeah, it's a great question. I mean, we looked at other Middle Eastern conflicts or those North African conflict that parallels to today. The two that seem to be most relevant is obviously the Russia-Ukraine conflict and then also Gulf War One during Gulf War One. Interestingly, that's where even US stocks did tumble for a relatively prolonged period of time, a number of months. That also coincided with the US recession. We recession, we talked dynamic Russia. Ukraine, on the other hand, saw short lived equity weakness before it bounce. And I think my my sense is that investors at the moment are using the Russia Ukraine playbook and then also taking the view that this will be a short lived conflict and that could well be wrong.

32:05 I think people are too much on the side of a very quick resolution, whereas the Gulf War one may be the better analogy. And does it make sense for the assumption to be that the US is more insulated from the seas? Its role in the oil markets has changed markedly and actually could benefit from higher oil prices, more exports of some of its energy products. And that resilience we're seeing in US stocks. Therefore, does that that really make sense and is that something we lean into? I mean, there's two things there. You know, number one, I think at the moment we're seeing significant de-risking of position unwinds and investors have essentially piled into global stocks away from the US over the last few months. Global stocks have outperformed the US. So we're seeing an unwind of that which is making the US look attractive. That said, you're right, the US does have an energy surplus. It does meet a number of those of a number of those boxes. But the big engine of.

32:51 US equity outperformance has been all the big tech stocks. And the problem we're seeing now is if we do get this energy hits, then the whole story, which is partly underpinned by energy, gets hit quite significantly. And so that could challenge the US story going forward. That's interesting. But in terms of the unwind that we're starting to see in European stocks is still just about outperforming the S&P today. But of course it underperformed since the conflict started in terms of the European corporate story. And you kind of touched on this with inflation impacts the impact on growth. Do we need to start rethinking the earnings outlook for European corporates on the back of one weak euro and to higher energy prices? Yes, I think we do. I mean, again, this all sort of depends on how long this conflict last, how elevated energy prices will be.

33:37 But assuming they remain elevated for a longer period of time, for sure, that will impact European markets and corporate earnings. We saw that on the Russia-Ukraine crisis. And Europe just doesn't have the resilience to deal with an energy shock. China, we know, has, you know, coal and other sources of energy. US obviously has its own energy production, so Europe will be hit quite significantly and this will then impact consumers. You get a recessionary type dynamic and then you have all that there's impacts on earnings. How much concern are you hearing from clients? I mean, if we have that Gulf War, one scenario that you outlined for us, where do you hedge? What are you telling clients in a scenario like that? Yeah, I think for now, my my bias would be, you know, the dollar will do well in this type of scenario. One is defensive in general.

34:23 So one tends to favor the countries that are away from the Middle East. Energy producers of Canada, US Swiss franc. If you if you wanted to pick one in the currency markets bonds, I think a very difficult right now because you have this kind of fight between safe haven. So recession versus inflation and don't know in equities. I'll just stay on the sideline on on the equity side, one market I think that does in the end I think will be more resilient than most will be China, because although it does import a lot of of energy from the Middle East, it just has so much sources of resilience and it manages its markets a lot more aggressively than others. So for me, China is the one that I think will end up being one of the more stable markets throughout this whole crisis. Will you take us to Asia? We've seen this plunge in Korean stocks. Is that an overreaction? Of course it's tied to the energy story

35:11 as well. But you were talking about how trade is dropping the trades that were winning and the story as well. If the outlook in the Middle East improves even just incrementally, would you see people rushing back? And I think I think at the moment we're seeing a large de-risking. So that essentially means that we'll get an exaggerated move to the downside. So if we do some see some stability, we could see some sort of short term bounces. That said, I think this really does hit the Korean story in a significant fashion. You know, we saw this exponential move up in cost B and now we're seeing this big, big drop. So I'd be reluctant to buy into any any dips on on the cost B side given the the energy impact. Can I ask about China? You mentioned how China could be an area of resilience. I mean, that is interesting because there's been a lot of focus on a lot of the uranium barrels were going to China. Now China's stocked up a lot on energy

35:59 in the run up to this. We understand all of their storage people were wondering where they were putting it. And, you know, are they are they able to take any more unlike the Europeans? Right. Right exactly. And for gas in particular, left a left lower than 100% after into the winter, rather. So why are you convinced then that China is going to be as resilient, so resilient? Yeah. I mean, number one, I think China just has a, you know, an incredible hold on the global supply chain system. It really knows all the routes really well. It's got all sorts of built in redundancies as well. So on the energy side, it has has coal, has nuclear ramped up its solar energy as well as all sorts of other routes to be able to access energy. It's built up its inventory too. So I think China China has all sorts of means to kind of get energy from different sources.

36:46 And then outside of that, you know, China is involved in all sorts of trade routes around the world. You know, it's basically the largest player in pretty much every single trade in the world. So it can reroute everything much more effectively than almost any other country in the world. So I think China in that sense has this redundancy built into its system. You have mentioned gold. Yeah. Bilal It's been bumping around kind of 5200 per troy ounce. It briefly broke about 5400 earlier in the year, didn't hold above that level and kind of bouncing around 5200. Is there is there another break out for gold or is it kind of capped at these levels? Do you want to be adding gold in this environment? Yeah, I mean, my sense of gold is that initially it was a victim of position unwinds. Gold had done incredibly well. People unwind position gold gets hit. If this conflict does continue to last longer, then everyone thinks that I think gold will go higher. And I think there's parallels with the

37:34 wars that we've had. There's also a big parallels with the 1970s and back in the 1970s you had multiple oil shocks. You had a change in the international financial system. You had, you know, high deficits coming off the Vietnam War. And gold did incredibly well over that decade. So I think all of those things come into play and. Gold could go way higher after after this bell. Thank you very much. Thanks for joining us. But I'll have his head of macro hive. Now the UK chancellor tells me bag you can't trade principles for deals. You can't make a decision about whether to get British armed forces involved in a conflict because it may or may not make it more likely to get a trade deal. That's the UK chancellor, Rachel Reeves, talking exclusively to Bloomberg. That was following the spring statements. Of course, we'll have more coverage and

38:20 the conflict in Iran. That's coming up next. This is going back. This is going to be really, really hard. And I just think market participants are dealing with an enormous amount of uncertainty. Right now, it's just too soon to know what imprint this has on inflation and for how long. Inevitably, the world that we're living in may change. Geopolitically, we may see realignment of alliances. Energy prices has a big impact. We may see inflation come back in, woke up or the market opened up.

39:07 Down, down 1100 points and now it's come back. It speaks to the resiliency and robustness of the market. Some of our guests at Bloomberg Invest in New York reacting to war in the Middle East. Joining us now with his perspective on markets and markets live, executive editor Mark Cudmore. Mark, it seems as if we're seeing quite a lot of geographic divergence in terms of the response to this new geopolitical threat to war in Iran. It's been an incredible session in Asia, a lot of negativity, a lot of negative prints on the screen. Is it over, do you think, by any stretch? I think, first of all, no, the negative impact from the conflict in Iran is not over.

39:52 And that's because we're just not going to have an easy full flow of energy from the Middle East for a good while to come. I know there have been promises made. Our potential insurance, our potential escorts for boats are still going to take even the most optimistic scenario. That's still a few days away from being implemented and probably quite a while before we get a full flow of energy. So we've got some sort of energy shot that's still going to feed through to markets. And you've got to remember the context where we've been. It's an incredible day in Asia. Some of the size and scope are immense. The worst day for Korean stocks ever. It's the worst, the voting of two trading days. And it's already the worst month for Korean stocks as designate. Quite dramatic. But on the flip side, the stock market in Korea still up more than 20% year to date. And I mean, that's the context you got to remember is that when you look at year to date moves, most assets seem to be doing phenomenally well, which kind of justifies the idea from David Solomon

40:41 that it's been a benign reaction so far. This does not look like a year where we've had a major multi-nation war fully involving the US in the Middle East and a sort of energy shock. It looks like overall in the year to date US is doing pretty well and that's the context you need to see this. So therefore, I think we get much more of a correction across assets over the coming weeks, significantly more. But I don't think that's a sudden, you know, panic mongering bear market. It's just that, hey, the year has been bizarrely good up until last week and we've got more of a correction to come. Mark, in that context, we have gold up today. Bilal Hafeez just told us that it's got further to climb. But you don't agree. I disagree now. I think he might be talking a much longer term horizon. Sure, central banks do want to buy some of the longer term themes of their.

41:29 But that in the short term and what I mean by the short term, in the next couple of weeks or so, I think gold's got quite a bit of downside. I think there are three primary reasons, marginal reasons for buying the dollar recently. One is geopolitical risks. Well done. If you bought four year old risks, you got your big multi-nation war, one of the biggest wars we've seen for some time. Therefore, the trade is run. What more do you expect from now? Just, you know, we've already got full US engagement. We've got multiple nations being struck by missiles so that trade run. The other one, if you're to diversify away from the dollar, well, we're about to get it. We're in a bull market again now. Maybe not a bull market, maybe a bit of stretch, but we're in a dollar strengthening environment for as long as the conflict lasts, and that will go much further. So you don't want to buy it right now, diversify away from the dollar. And the third one is just the idea that, hey, all these momentum stocks are doing

42:15 so well, things like the cost be, etc.. See therefore this pile into all the momentum trades. Well, that one's now blowing up. Just looking at a monitor that's been up over the past week. So the three primary reasons recently for the last few months of gold have all changed. Dollars reversed, yields reversed due to political thing has run its course and the momentum trades are blown up. So therefore the gold got quite a bit of downside for the next couple of weeks. Okay. Bloomberg Markets Live executive editor Mark Cudmore, thank you. And remember, you can get up to date analysis and insight from Mark and the rest of the team by looking at MLive. Go on, you're terminal. Let's check in on the futures picture because it's looking pretty positive, in fact. But Euro Stoxx 50 futures are up 7/10 of a percent and pointing lower stateside, s&p even is down 2/10 of a percent. But weakness expected on the spanish

43:01 ibex after of course, president trump said that he would cut off all trade with spain because spain denied access to its military bases for his bombing campaign against Iran. We're waiting for remarks from the prime minister of Spain, Pedro Sanchez, coming at the top of the hour Tom. Spain in the spotlight as well in that context, of course. Let's bring in Chloe Madeley right now with some of the stocks to watch this Wednesday Chloe. Good morning, Tom. Oil companies are very much in focus today. We have seen oil prices extending those gains because of this fresh attacks in the Middle East, but also because energy traders are weighing up considering that plan by trump to escort and insure oil tankers that are passing through that region. So we could see those oil companies moving higher, even higher than they have been over the last couple of days. Today, it is worth noting that energy traders are wondering about maybe the

43:49 lack of clarity around that, that plan by Trump asking what those military escorts actually look like, what this actually looks like in practice. So this definitely will be a sector to be keeping an eye on today. Moving on to another related story, and that is Maersk. The shipping company is adding an emergency rate increase on shipments to and from some of the some Middle Eastern countries. And so we had already seen Amazon shares moving higher since the beginning of the conflict because, of course, these tensions mean that container rates might be moving higher. And that is good for those earnings for Maersk. And so we could see those shares extending those gains today and also being in the green. And finally, ASEM is also in focus issued quite an upbeat outlook last night thanks to strong demand for air, but then also a recovery in the Chinese

44:38 market. So that could boost the shares. But it is also they could also be some negative read across with some of those chip makers in South Korea seeing a lot of weakness. So let's see how this shakes out and what the market actually decides to focus on today for ASM. Okay, Thanks very much, Chloe. Good to get the updates. Boombox, Chloe, Millie that we've also seen updates, of course, from Adidas and Continental. Continental. So certainly the German market will keep an eye on those and that earnings story. So they cut through on a day like today. Actually the DAX looks as if it could be a little firmer, unlike the Spanish IBEX, which doesn't look firmer, looks negative for reasons we will understand. Yeah, added us forecasting higher profits and promising bigger payouts. Continental saying higher margins on the demand for high end tires. But it's a bit like the UK spring statement yesterday.

45:25 How long do these earnings outlooks last? The longer this war goes on and the energy price outlook starts to on the dollar, euro dollar outlook starts to feed into earnings picture. To what extent do we have to reframe how we think about European corporate earnings? The question had been up until this war in the Middle East, will euro strength be a constraint? Now we're looking at euro weakness and what that means in terms of the inflationary impact for many of the importers within the European corporate space. So that maybe needs to be reframed. We are coming up, of course, the equity trades this Wednesday, futures pointing slightly higher in Europe today. Stay with us. This is Bloomberg.

46:15 Welcome everybody. Welcome to Wednesdays program. We are a few minutes from the opening trade here for cash equities and the European session is going to be an interesting one. There were a number of really contrasting inputs going into this. This is the session in the United States yesterday, and actually after Europe closed, we saw a little bit of strength continuing to be built into US stocks. Now, is that irrelevant to the European story? Well, European futures are pointing quite a bit higher. Well, separate out Spain, that's a different story. Tom has more on that. But they are pointing higher. And that's in contrast to what we've seen in Asia, where we saw MSCI Asia Pacific down by 4%. By the end of the day, the cost be under a lot of pressure there. So despite what we've seen in Asia, it's also despite, Tom, what we see in US futures, which are pointing lower still. But the the European futures picture does look positive, yet looking through

47:00 that significant selloff that we've seen in the Asian markets. To your point and the sell off, of course, yesterday of around 3% for European stocks today pointing higher futures by about 6/10 of a percent. As banks, it was financial services almost under pressure yesterday. Today, there's a little bit more resilience, it seems, but we know the headline risk, of course, continues around the conflict in the Middle East. Footsie 100 futures points to gains of just 18 points. The IBEX is in focus for us, of course, because President Trump says he wants to cut off all trade with Spain. We'll see if that actually materializes. The complexity of doing that, given that Spain is part the EU is a major question, but nonetheless risk build again to Spanish stocks. It seems currently pointing that by 9/10 of a percent, What are the individual names you're looking at, Lizzie? Well, Tom, we've got to keep an eye on the energy sector because of President Trump's proposal that you could see Navy escorts for ships, oil tankers passing through the Strait of Hormuz.

47:47 Also that the US could provide insurance guarantees to try to head off this energy crisis. But still, so many questions about who's going to buy the insurance, what premium the DFC will offer. You flagged Spanish stocks also watching all us after that earnings on A Yeah, that's it. You've got some earnings from some German corporates. A lot of volatility in that Spanish futures picture as we head towards the market open and European equity markets then just getting into their stride. The IBEX doesn't usually take too long to open, so we might get a fairly early print there. But the Footsie 100 just fluctuating between the red and the green, the futures have settled into something quite positive overall for Europe. So we are expecting to go a little bit higher How long that lasts. We have US futures pointing a little bit to the downside. Although the US equities space has not been the epicentre of the selling by any

48:34 stretch when it comes to Iran related equity risk. Now we do have, I don't think, price on the cat count. It is up by 2/10 of 1% and we have weakness as expected in Spain, down by 7/10 of a percent of a percent. Over on the IBEX I was looking at the list of exports covers a lot of sectors of products going from Spain into the United States. But Tom, a lot of confusion as to whether it would even be possible for the United States to cut off Spain, specifically carve it out from European trade policy. But anyway, what are you seeing in the in the wider stocks right now? Media is gaining up 1.1% on the downside. Interestingly, given the context, of course, we are seeing just six five sectors right now in negative territory. Energy is down 8/10 of a percent. You've seen Brent stabilizing, at least for now, around $83 a barrel.

49:21 Energy is now down 6/10 of a percent. So it's the biggest loser so far, at least on the upside. Travel and leisure that has been a sector that's been under significant pressure. Hotels, airlines, of course, the closures of airspace in the Middle East, media up 1%. Tech gaining as well. You've seen a bit of resilience to your point around what's happening in the US. The tech space has been something of a haven for some. Tech as a sector is up 9/10 of a percent. Names like ACM in Focus and seeing some gains at least in the session today. Well, if we just dip in to the energy sectors, you've got BP down 1%, Shell down 7/10 of a percent total, only flat to the downside. You mentioned travel, Tom, And of course, earlier in this war, we had seen big losses for the airlines. But Deutsche, Lufthansa are actually up

50:06 9/10 of a percent today. Air France, KLM up more than 1%. I'd flagged the earnings story for added us those shares down 1.8%, despite forecasting higher profit and promising bigger payouts. Datto aviation up 1.8%. They had earnings as well, but of course we expect this to be tied more to the broader geopolitical story. We wait for Conti to open up as well as Bill Finger, but it seems in the defense space it's a mixed bag actually, Leonardo's at 1.7%, but the likes of Hind, Mattel and Hines sold today on in the red. It's interesting that energy stocks are weaker and I was just looking back at where the oil price was when we closed yesterday because it's been so volatile. I know it went over $85 a barrel at one point yesterday, but it was at 83 ish

50:52 when we closed yesterday and is about there now. And these moves to the downside in energy are not huge. I guess it just reflects the fact that the market's focus is elsewhere today. It seems to be on buying those stocks that have been really beaten up as a travel and leisure, as a as an area of strength, a bit more emphasis on. Well, I was going to say away from airlines, but actually you've got to be up 2% Accor, up 2% these. Are airlines, aviation companies or travel companies, rather, and hotels that had been beaten up on the Iran story. So we seem to be buying back a little bit at the margins some of those areas that were under pressure. Let's bring in Samantha, head of European equity strategy at Citi. And nice to have you with us this morning. Beyonce, thanks for joining us. So we have an interesting session underway here in Europe where we see a bit of resilience coming back into European equity markets. I wonder if this is just a holding

51:40 pattern. We just waiting for more headlines to drop a new headline risk a storm you were talking about earlier. Is no doubt still in our midst. What are you expecting to see from European stocks from here? Absolutely. So there is still a huge amount of uncertainty. It feels that the market wants to bounce and assumes that this conflict is going to last for a short period of time and there is going to be a resolution. So, of course, the hopes got higher with the yesterday announcements from the President Trump. Well, let's see how fast that can happen. But because what we are seeing for now is that nothing is going through the Strait of Hormuz rising. As long as the strait is closed, there will be upside pressure on oil and

52:26 natural gas prices and probably some volatility in the equity markets. But it is interesting that today we are we are buying marginally the previous losers, just as you say, just marginally. What kind of playbook are you reaching for then? Barter for this. We we talked to Bilal Hafeez earlier, and he was saying that 2022 Russia's invasion of Ukraine seems to be very much at the forefront of investors minds. And he sees evidence that that's what people are reaching for this time around. Does that make sense from a European stocks perspective? All that parallels with that when it comes to the performance that we've seen. Well, in the two days, I cannot believe it's been only two days of the of the working and trading week. Right. We see really the markets following the pattern, the playbook of Ukraine.

53:16 So this is well, except from today. Let's see how how this is these are early, early minutes. Let's see how the day finishes. But if you look, I'm going to give you some numbers from the commodity strategy on comparison of Ukraine crisis to this one potentially with Ukraine. Initially, the world has lost 5 million barrels of oil. Soon after it was only one because four managed to find its way through other channels. Strait of Hormuz is 15, so potentially 15 times bigger for the oil disruptions than than Ukraine crisis, Right. Ukraine or so. That's something to bear in mind. And of course, that's the assumption of the market that the situation there in

54:02 the strait has to be sorted one way or another, maybe because the stakes are so high. Absolutely. So the stakes are much higher, though, for the commodities than they were in the Ukraine. We had a piece out today and it quoted analysts saying that the Tacko trade is dead. Trump always chickens out, but not when it comes to this conflict because he has less control over it. Do we buy into that? There is surely a pain point for this president, whether it's gas prices, prices at the pump. They're at a five month high in the US, a significant sell off in US exports, which to this point we have not yet seen. But is there a point at which the markets intervene to some extent or at least constrain this president in terms of his military ambitions? Well, it's hard to say when this comes to the military conflict with Cyrus is something different. Right. This is much more serious potentially

54:49 from the security perspective. And we don't know enough about their strategy. They are not giving us enough information to assume that. But definitely the market is acting this way. But the US is not the only player, right? There is the Middle Eastern players as well. And there is Israel who play a role in the conflict. So we can't assume on a trumpet at this point. You could and perhaps you shouldn't. Right. Yeah. Okay. You can see the motivation is quite fluid and it's it's it's far from resolved. You put out a note at the start of this conflict suggesting that the UK could be

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