Israel-Iran Strikes Escalate, Oil Supply Fears Grow, G7 Agenda Scrambled
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This is the Bloomberg Daybreak Hewitt podcast, available every morning on Apple, Spotify or wherever you listen. It's Monday the 16th of June in London. I'm Caroline Hepker. And I'm Stephen Carroll. Coming up today, Israel and Iran exchange strikes for a fourth day with no negotiations in sight. Oil traders brace for turmoil as the attacks threaten energy infrastructure and put Middle East supplies at risk. Plus, Donald Trump says the United States could become involved in the conflict.

As Bloomberg learns, he vetoed an Israeli plan to assassinate Iran's supreme leader. Let's start with a roundup of our top stories. Israel and Iran have launched further attacks on each other in a fourth day of strikes. Iran fired several waves of drones and missiles over the last 24 hours, while Israel hit Tehran, killing another key military official.

Since Friday, 224 people have been killed in Iran, according to the government, which said most of the casualties were civilians. Israel's emergency services say Iranian attacks have left 14 people dead and around 400 injured there.

Sayed Ali Mousavi is the Iranian ambassador to the UK. This is our inherent right to self-defence. Now we are defending ourselves according to the Charter of the United Nations. There is no doubt that the one act of aggression has been placed against the Iranian territory.

The Iranian ambassador to the UK speaking as the United Nations nuclear watchdog said multiple strikes on Iran's uranium conversion facility at Ifsahan, south of Tehran, resulted in serious damage. In an interview on ABC's This Week programme, Israel's ambassador to the United States, Yachel Litter, says the recent Israeli strikes have had a major impact on Iran's nuclear programme. We've set them back dramatically, but not enough. And that's why this...

A series of strikes is not going to end today or tomorrow, but only at a period of time which may take weeks when we are absolutely certain that the nuclear infrastructure

with the intention of weaponizing and threatening Israel, is terminated. Israel's ambassador to the U.S. speaking there to ABC as Iran's deputy foreign ministers told state television that the country would no longer cooperate with the International Atomic Energy Agency as they did before.

Now, oil prices are seeing further gains after Israeli strikes on Iranian energy assets heightened the risk to Middle East supplies and trading routes. Brent crude, the global benchmark, rose by as much as 5.5% when trading began for the new week.

before paring some of those gains. That's after jumping 7% on Friday. Pavel Amolchanov, investment strategy analyst at Raymond James, says the unrest could cause serious industry upheaval. In the near term, prices can go absolutely anywhere based on a sense of

panic, uncertainty, all of which influence investor psychology. Little bit further ahead, however, what matters fundamentally is, is there going to be actual supply disruption from the Middle East?

Pavel Molchanov from Raymond James speaking there. While Israel appears not to have targeted oil facilities and crude shipment facilities, Israel temporarily knocked out a processing facility linked to the South Pars oil field that is Iran's biggest natural gas field in an attack on Saturday.

The reaction in the oil market comes as Bloomberg learned that President Trump vetoed an Israeli plan to assassinate Iran's supreme leader. It's unclear whether Trump personally delivered the message, discouraging Israel from carrying out the possible assassination. U.S. officials have remained in close contact with their Israeli counterparts since Israel launched a series of missile and drone strikes on Iran. Israel's prime minister declined to comment on the pressure from the White House, speaking to Fox News.

Benjamin Netanyahu had this to say. I can tell you, I think that we do what we need to do. We'll do what we need to do. And I think the United States knows what is good for the United States. Netanyahu speaking there as Trump in an interview with ABC News said it was possible the U.S. could get involved in the conflict, even as he noted that the U.S. is not at this moment involved.

Meanwhile, the U.S. president also said he believes Israel and Iran could eventually reach a peace agreement, but he suggested that they may have to continue their conflict before coming to the negotiating table. Here's what President Trump told reporters as he prepared to board Marine One. I think it's time for a deal and we'll see what happens, but...

Sometimes they have to fight it out, but we're going to see what happens. I think there's a good chance there'll be a deal. President Trump speaking there as he prepared to leave the White House to attend the G7 summit in Canada. The conflict threatens to open a new rift at the high-level gathering where leaders attempt to address US tariffs, AI and climate change.

There will be no joint statement at this G7 summit, preventing a repeat of 2018 when President Trump upended Canada's last G7 meeting by pulling out. Well, the UK government heads to the G7, both supporting Israel's action in Iran while condemning its war in Gaza. The UK has already moved jets to the Middle East to defend its military bases there, while stressing it has no intention of stepping into the conflict. Bloomberg's James Wilcock has more.

Prime Minister Keir Starmer is walking a tightrope. Listen to him on Bloomberg last Friday. Look, I do recognise Israel's right to self-defence. There's no doubt about that.

But I am very concerned about the escalation of this situation, which is why, along with Germany and France, we're really clear that de-escalation is what is needed here. The UK Prime Minister is keen to stick close to America's pro-Israel stance. But he faces major pressure from his own party to address the humanitarian crisis in Gaza.

That's how he ended up putting sanctions on two Israeli government ministers last week while also backing the country's right to self-defence. The question for the G7 is how long can Britain keep up the balancing act? In London, James Wilcock, Bloomberg Radio.

While Canada and Britain will restart trade negotiations as both countries continue to push for a free trade in response to America's tariff war, post-Brexit talks over a bespoke deal had stalled last year due to a dispute over beef. Canada's Prime Minister Mark Carney says that a deal makes economic and cultural sense.

It's much, much more than heritage. This is the foundation of prosperity for all our citizens going forward and a prosperity based on those shared values expressed through the future. Artificial intelligence, critical literals, new partnerships in security and defense, but all of the pursuit of sustainable prosperity for our citizens.

Carney used to be the UK's central bank governor before leading the Liberal Party to a stunning electoral victory in April. Carney and UK Prime Minister Keir Starmer have pushed back on President Donald Trump's assertion that Canada should be annexed by the United States.

Officials say a man suspected of shooting dead a US politician and her husband and wounding two others in Minnesota is in custody. Detectives have been looking for Vance Bolter since Democratic State Representative Melissa Hortman and her husband Mark were killed at their home on Saturday. Democrat Senator John Hoffman and his wife were also shot multiple times at their home nine miles away but survived.

And now lastly to some sports news. The American JJ Sporn has won the 125th US Open, his first major golf title. The 34-year-old beat Scotland's Robert McIntyre by two strokes and was the only golfer to finish below par after a 96-minute weather delay. NBC Sport captured his winning moment where Sporn sunk an incredible 64-foot birdie putt.

In one of the most unlikely final round Sundays in US Open history, JJ Spahn closes the deal with a birdie at the last. So that was reaction to the final shots from NBC Sport there. The 25th ranked Spahn had been anything but a favourite to capture the tournament, having previously won only once at the PGA Tour back in 2022. Those are our top stories.

On the markets, Brent crude is up by 1% this morning, just shy of $75 a barrel. The 10-year Treasury yield is three basis points higher at 4.43%. The Bloomberg Dollar Spot Index is a tenth of 1% stronger, so the euro is starting the week at 115.45. The MSCI Pacific Index, four tenths higher. European stock futures pointing lower, though, down two tenths for Eurostox 50.

Now, we have full coverage today of the escalating conflict between Iran and Israel and the latest from the Middle East, but also how markets are viewing the risks now. And there's plenty to read about this story across our Bloomberg platforms. On Bloomberg.com, a couple of pieces that I wanted to point to that give you insight from our reporters in the region as well. Ethan Bronner, our Israel bureau chief, has been writing about how people there are feeling about this situation.

latest escalation. He says that despite everything that's happened since the October 7th attacks in 2023, the last few days are on a different scale, pointing to the attacks by Iran, which made it through Israel's air defences and destroyed entire city blocks. And he says, well, there hasn't been public opinion polling about it. The strong anecdotal evidence is that Israelis, or at least Israeli Jews who make up 80% of the population, have rallied around the flag yet again for what could be a long and painful battle.

Meanwhile, on the Iranian side, Golna Motavali, who leads our coverage of Iran, and our geonomics analyst, Dina Esvandria, have reported on how people in Tehran have been reacting. Also on the strategy that Iran's leaders might actually try to employ from here. They've spoken to officials in the region, to analysts who have a range of views.

Interesting, this quote from Chatham House assistant professor. This is Bada Al-Saif, who's assistant professor at Kuwait University. He's also an associate with Chatham House, saying that Iran has been weakened this past year.

but it is not inherently weak, especially based on its performance the past few days. I think that is really quite central to, you know, how we think about this whole conflict and why it has happened at this moment. You'll find both of these articles on Bloomberg.com and at the Terminal, of course, as well. We'll put a link to them in our show notes.

Well, let's bring you up to date on the events in the Middle East four days into this latest escalation and hostilities. Paul Wallace, our managing editor for Middle East coverage, joins us now for more. Paul, what is the latest this Monday morning? At the moment, Israel and Iran are continuing to bombard each other pretty intensely. There seems to be no let up yet.

in these attacks on one another. We've had more deaths in Israel overnight in places near Tel Aviv, and the death toll there since the start of hostilities on Friday has gone up to...

At the same time, Israel continues to hit targets in Tehran and across mostly western parts of Iran. So there's growing concern, if you like, that this conflict could spread to other parts of the Middle East and potentially start to hit Iran.

energy supplies, which it hasn't done yet. You mentioned earlier in the show the gas platform being struck by Israel. That one mostly caters to domestic consumption. It wasn't for exports, but there's always a possibility that we get disruptions to oil and or gas supplies in the region.

And that's one of the big concerns, one of them. What do we know about any diplomatic efforts? Hard to talk about that, as you say, when you think of the deaths and the ongoing bombardment. But President Trump has called on both sides to make a deal in really quite contradictory statements that he's made.

Exactly. I think the keyword there is contradictory. It's almost as if President Trump doesn't exactly know what he wants at this stage or what he can do at this stage. On the one hand, he has said he wants a deal between Iran and Israel, suggesting he's pushing for a ceasefire quickly. On the other hand, he has talked about how America might get involved in

in presumably in Israel strikes on Iran. So far, what America is doing is helping Israel defensively. It's helping intercept the drones and missiles that Iran is firing at Israel. But it hasn't, at least publicly, it's saying this. It is not taking part in any offensive measures against Iran.

But there you have Trump, you know, sort of suggesting he might do that. And all at the same time, he's saying that he can still strike a nuclear deal with Iran. These, you know, nuclear negotiations that have been seemingly scuppered by this conflict that erupted on Friday. So it's difficult to know what.

Trump once at the stage. I think he is the key player when it comes to international actors. He's much more important than any of the Arab states or any of the European states. I think one thing to point out is that Israel is very much saying that this is going to continue for several days at least.

And I don't think, you know, there are no signals at all that Israel intends to stop its strikes on Iranian military and intelligence and nuclear sites within the next few days.

I mentioned a few minutes ago, Ethan Brown was reporting from Israel about the public opinion in support of this latest offensive on Iran. But how much, I suppose, political support does Benjamin Netanyahu have to escalate this conflict further on top of, of course, Israel's other military interventions, including in Gaza?

That's a good question. For now, it really does seem like the majority of Israelis back what he's doing with Iran and they see it as a necessary measure. I think most Israelis, it's fair to say, do view Iran as an existential threat and they were extremely worried about its nuclear program. So for now,

They seem to be on board, but of course they are wary about this going on for much longer. The death toll, as I mentioned, is roughly 18. That might not seem like much, but let's remember there were very few casualties when Iran struck Israel twice last year. The figure was just two or three. We're up to 18 already. That will rise. In Iran...

Far more people so far have died. The official toll there is not updated so often, but it's over 200 people, according to the government, that have been killed so far. There you also have a big question as to what the population will do, whether they'll rally around...

the government or whether this will do the opposite, which is what Israel hopes, which is lead to a situation where the Iranian people turn on their government. That's something that Israel is clearly hoping for. We just don't know which way it will go yet. Indeed, it's what Benjamin Netanyahu called for Iranian people to do, isn't it, in his televised address.

Thank you so much, Paul, for being with us. Paul Wallace is our managing editor for Middle East Coverage joining us this morning.

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Meanwhile, oil prices, of course, have continued to rise over the weekend after a big spike that we saw on Friday. Stephen Sapchinski leads our energy team in Asia and joins us now for more on this part of the story. Just tell us about how energy markets are thinking about this now at the start of this week. We saw a massive spike in prices that then eased somewhat on Friday. What about now?

I mean, I think the main thing that the market will be watching will be any impact on physical oil flows. And while we have seen a back and forth on strikes between Israel and Iran, and Israel has targeted some energy infrastructure, such as a gas processing plant,

connected to their offshore field, oil production hasn't been affected. So, okay, no near-term impact. No need to worry about right now whether or not OPEC Plus is able to meet, increase their supply to cover for Iran. That was one of the worries coming out of Friday. That was one of the worries about prices spiking, sort of that kind of immediate impact of

because Iran is still a major producer of oil. And while they're sanctioned by the United States, they still do ship some on Shadow Fleet vessels and China being one of the large buyers. Now, the next thing the market has been sort of worried about is the shutting of the Straits of Hormuz. If the Strait of Hormuz is shut, you know, that strait...

It's a conduit for 30% of oil supply, seaborne oil supply, 20% of global LNG supply. So shutting it would result in a price shock. JP Morgan said you could see oil prices, Brent, jump to $130 compared to about $75 right now. But taking a weekend to digest everything, it doesn't seem like...

It would be in Iran's best interest to play that card. One, it's physically difficult to shut the strait. You're already seeing Saudi Arabia reaching out and speaking with Iran. Likely, this is one of the topics that they discuss. China's a major buyer of oil from that region, and shutting the strait would hurt China. China would obviously put pressure on Iran.

So at the moment, a worst case scenario hasn't played out. Yes, there is a risk premium in oil. We're still up about 8% compared to where we started on Thursday before the strikes began against Iran. But the market is, I guess, in a weird kind of ease, wait and see sort of situation to see what happens next.

It's certainly not done. The situation between the two countries isn't improving. But at the same time, oil doesn't seem to be hit quite yet. Stephen, you mentioned the attack on the gas field there as well. And that's, I suppose, a different part of the Iranian energy complex that we don't focus on as much because of the oil part. But I wonder how significant that is and sort of broadly how that feeds into the question of energy mix in Iran. Yeah.

Yeah, so it is important. It's a very key piece of infrastructure for Iran, not for the global market. Unlike Qatar, which... So they developed the same field, right? There are two pieces of this field. Qatar exports their LNG, exports that gas as LNG from the field. Iran...

processes it and consumes it domestically. So there's no impact on global gas markets, but there is an impact on Iran as a country, powering themselves, making sure they have enough energy for themselves, making sure that their economy continue running. It is an issue that they're going to have to grapple with.

and try to find replacements there. So, you know, you look at this and this is it seems to be a strategic decision by Israel to cripple Iran while avoiding a wider global price spike in energy.

This is Bloomberg Daybreak Europe, your morning brief on the stories making news from London to Wall Street and beyond. Look for us on your podcast feed every morning on Apple, Spotify and anywhere else you get your podcasts. You can also listen live each morning on London DAB Radio, the Bloomberg Business App and Bloomberg.com.

Our flagship New York station is also available on your Amazon Alexa devices. Just say Alexa, play Bloomberg 1130. I'm Caroline Hepker. And I'm Stephen Carroll. Join us again tomorrow morning for all the news you need to start your day, right here on Bloomberg Daybreak Europe.

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