Trump Weighs Iran Action, $100m Signing Bonuses, Hedge Fund Gulf Push
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This is the Bloomberg Daybreak Europe podcast, available every morning on Apple, Spotify or wherever you listen. It's Wednesday, the 18th of June in London. I'm Caroline Hepke. And I'm Stephen Carroll. Coming up today, Donald Trump meets his national security team as speculation swirls that the United States could join Israel's fight against Iran. OpenAI's Sam Altman says that Meta has offered some of his team £100

million signing bonuses in a bid to lure away top talent. Plus, why low taxes, time zones and a tailor-made lifestyle are leading a growing number of hedge fund traders to push their firms into Dubai and Abu Dhabi. Let's start with a roundup of our top stories. Bloomberg understands that US President Donald Trump met his national security team for more than an hour yesterday to discuss the escalating conflict in the Middle East.

Before gathering his advisers in the Situation Room, Trump posted a demand for Iran's unconditional surrender on social media. The US President also warned of a possible strike against the country's Supreme Leader Ayatollah Khamenei, saying that we are not going to take him out, at least not for now.

According to a White House official, Trump also spoke to Israeli Prime Minister Benjamin Netanyahu as speculation swirls the US may opt to join them in directly attacking Iran. Germany's Chancellor Friedrich Merz says that the US has been considering military intervention in Iran and if it doesn't return to the negotiating table then, quote, the complete destruction of Iran's nuclear programme may be on the agenda. Bloomberg's Nick Wadhams leads our team covering US national security.

The big question, of course, is what now? So it seems that there are essentially two options on the table. One is the U.S. gets involved, so that's one potential option. And the other is another effort for diplomacy.

Bloomberg's Nick Wadham speaking there as the New York Times reports that American commanders have put troops on high alert throughout the Middle East with Iran preparing missiles for possible retaliatory strikes on US military interests. The US embassy in Jerusalem and consular sections in Tel Aviv will be closed for the next three days.

Should the US President choose to deepen military involvement, he would have the most formidable arsenals in the world at his disposal, including a suite of advanced weaponry capable of altering the course of the conflict. Bloomberg's Ewan Potts has more. The US has a range of military assets that it could bring to bear, including the 30,000-pound Massive Ordnance Penetrator, or MOP, commonly known as the Bunker Buster Bomb.

The GPS-guided munition has been widely touted as the only weapon capable of crippling Tehran's nuclear ambitions. Experts say a successful strike would require hitting Fordow, Iran's heavily fortified underground uranium enrichment facility. Built beneath a mountain and believed to be buried 60 to 90 metres deep, the site is considered virtually impervious to conventional weapons.

Many defence analysts argue that only the MOP, a weapon uniquely held by the United States, stands a chance of inflicted serious damage. Its deployment would require a US strategic bomber underscoring the scale and complexity of such an operation. In London, I'm Ewan Potts, Bloomberg Radio.

Well, both Israel and Iran have indicated plans to escalate the conflict, which has seen the sworn enemies exchange missile salvos for five consecutive days. Israel's military says that it has identified missiles launched from Iran towards Israel and has instructed the public to take shelter in protected spaces.

Meanwhile, the Israeli Defence Minister, Israel Katz, says that the military will target, quote, very significant sites in Tehran, adding that residents should evacuate. The latest strikes from both sides have pushed crude oil prices higher. Yet again, the price of oil has now extended its advance over the past week to approximately 10%.

Well, in other news, traders have made record bets that the next Federal Reserve chair will slash rates immediately. The wagers in rates futures have been gaining momentum since President Trump said he would name Jerome Powell's successor very soon and has seen record volumes this week. Partner and chief economist at Apollo Global Management, Torsten Slocke, says the central bank is at a crossroads.

The Fed is stuck with a dual mandate that's really torn. On the one hand, the upside pressure on inflation from tariffs, from oil prices, that's saying that inflation will be going up. And if inflation is going up, the Fed should be hiking. But at the same time, those shocks also will be pointing in the direction of growth slowing down. And if growth is slowing down, then Fed should be cutting.

Apollo's Torsten Slocke there. By the end of this year, traders are pricing in roughly 43 basis points of total easing. Officials are widely expected to leave interest rates unchanged for a fourth straight meeting today, even as policymakers warn Trump administration tariffs could increase inflation and unemployment.

Now, turning to the UK, the government is looking to restrict the number of visas that it gives to countries which refuse to look at joint migrant return schemes. It's part of a push by Prime Minister Keir Starmer for more assertive measures to reduce the levels of net migration. Bloomberg's James Walcock has more.

The UK government desperately wants to bring net migration figures down as the number of people crossing the English Channel illegally surges. For a Prime Minister who has made cracking down on people smuggling gangs a priority, that's a problem.

Starmer's solution is deals with individual countries to return failed asylum seekers to their country of origin. But Britain only has signed 11 of those. The government now wants to use visas as leverage to get more agreements done. In London, James Woolcock, Bloomberg Radio.

And OpenAI CEO Sam Altman says Meta has been trying to poach some of his staff with signing bonuses as high as $100 million. Meta's been trying to build up a new top-tier AI team by buying Scale AI and looking to hire engineers from rivals. But Altman told his brother's Uncapped podcast that he doesn't think the approach would work.

people sort of look at the two paths and say all right open eyes got a really good shot a much better shot at actually delivering on super intelligence uh and also may eventually be the more valuable company but i think the strategy of a ton of upfront guaranteed comp and that being the reason you tell someone to join like really the degree to which they're focusing on that and not the work and not the mission um i don't think that's going to set up a great culture uh

The OpenAI CEO added that nobody from his company had yet accepted an offer from Mark Zuckerberg, who has been personally recruiting. The hiring push and $14 billion purchase of Scale AI are a sign of Meta's desperation not to fall behind on the new technology race.

And those are our top stories for you this morning. Let's look at the markets now. Escalating tensions in the Middle East and the worry around more direct US involvement has oil prices surging, although not this morning. In the last few minutes, of course, Brent crude futures down a tenth of 1%, $76.33 the bow, but we are still around five-month highs. The Fed's expected to stay on hold today in terms of

U.S. interest rates. European stock futures this morning are down by three tenths of 1%. U.S. stock futures getting a small boost with this idea that regulators in the U.S. plan to reduce a key capital buffer for the biggest U.S. lenders that could generate more Treasuries trading. At least that's the potential upside. The S&P 500 yesterday actually closed eight tenths of 1%.

But stock futures for the S&P at the moment are up by a tenth of 1%. The Bloomberg Dollar Spot Index this morning is down a tenth of 1%. And looking at the bond markets, 10-year yields trading up a basis point at 4.4%. Those are the markets. In a moment, more on what the U.S. could do next in the Iran-Israel conflict, plus why hedge fund managers are leaving London.

for the United Arab Emirates. But another story that caught our eye this morning, while war might be on the minds of many, it's conspicuously absent from the Art Basel Fair in Switzerland. Our colleague James Tarmy has been writing about this and how dealers say that a lot of buyers are taking refuge in art in the uncertain times that we're in. And that's actually reflected in the kind of art that's on offer at this big flagship event for the art business today.

James writing that nearly every artwork on offer at the fair was, in his words, lovely and apolitical. Apolitical? Yes. OK. Well, hang on a second. The art market has also been in a very long slump. And so perhaps that's also behind it. It wasn't that there were no political statements at all. I mean, I noticed Barbara Kruger's work, of course, that did sell at $650,000. And actually the piece, Untitled, brackets, wartime war.

war crime and it's got her kind of typical typeface, you know, talking about war and the worries. So there were some, but yes, as you say, they were rare. James also picks out the Dutch artist Jonas Stahl, who's got a range of pictures of burning yachts. I guess you want to find some subliminal messaging there as well. Art Basel opens to the public from tomorrow. You can read James Tarmy's report on Bloomberg.com and we'll put a link to his article in our podcast show notes.

OK, let's get to our top story then. Israel and Iran are continuing to exchange fire for a sixth day as the focus shifts now to what the US president will do next. Donald Trump met his national security team in Washington. He spoke to Israel's prime minister. He's also called for Iran's unconditional surrender. Our EMEA news director, Roslyn Matheson, joins us now for more. Ros, good morning. What's the latest that we're hearing then from Iran and Israel this morning? Well,

Well, it seems like there's been no let-up overnight in the attacks, and so we know that Iran fired missiles again at Israel, and Israel is saying that it did target a number of sites inside Iran. In the wee hours, there were reports of loud explosions in Tel Aviv. Israel says they hit a facility that was used to manufacture centrifuges, a number of other weapons sites, they say.

across Iran. So they're continuing to strike multiple sites in the country. Iran again striking back.

In turn, most of those seem to still be getting intercepted by Israel's air defences with defensive support from the US. We know that that's been happening. So the sense is, despite what the US president is saying and the growing sense that perhaps the US is gearing up to take on a more offensive approach,

role in this conflict between Iran and Israel that, at least for now, they're continuing to really pound each other. What are the options that are open to Donald Trump if we're thinking about what the U.S. does next? Do we have any indication of what he could be considering?

Well, it seems like a lot of options are on the table and we know that he met with his security team for an hour late last night, our time. There's been no read from that meeting, although he did, of course, speak with the Israeli prime minister afterwards. So what are the options? It seems like he's yet a bit unsure what to do.

to continue in the defensive support for Israel, defending Israel against these Iranian missiles, leaning on Iran to get back to the table somehow, or, again...

pushing the US into a much more direct role in attacking Iran and taking this as a moment to really try and destroy Iran's nuclear sites once and for all. And of course, the question is if you do that option.

Are you opening U.S. assets in the region to direct attack from Iran? And so are we looking at the potential for a much wider conflict as a result? Well, Chancellor Friedrich Merz in Germany seemed to indicate that that might be a possibility too in what he said. How representative do you think his comments are on what Europe thinks at the moment on the European position here?

Well, there's obviously a lot of concern in Europe about where this is going, in a sense, to some extent, that European leaders are a bit on the sidelines with it. I mean, the French president...

Emmanuel Macron has long seen himself as a bit of an Iran whisperer and able to bring people to the table. And yet he and Donald Trump are publicly squabbling with each other at the moment in the aftermath of the G7 summit in Canada and taking potshots at each other. And so the sense is this is really the US dealing directly with Israel and with other, with Gulf states,

in the region. Of course, we know that the Saudis, Oman, Jordan, other countries are in communication with the US, possibly through European intermediaries as well, but that Europe doesn't really have a voice in this conversation, even though there are quite clearly security, defence,

and other ramifications for Europe in all of this. But a bit like where things have gone on Ukraine for a bit, it seems as though Europe's finding itself on the outs.

Okay, Roslyn Mattson, our EMEA News Director, thank you for joining us.

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Now, hedge funds have been rushing to set up in the United Arab Emirates in recent years, driven not just by low taxes and local wealth, but also a need to keep star traders happy. And it's London that's losing out. The city has lost by far the biggest number of jobs to the UAE. Joining us now is our hedge fund reporter, Hema Parmer, who is based in Dubai. Good morning. Thanks for being with us. How big has this shift to the UAE been for the hedge fund industry, something that you've been reporting on in depth?

It's been quite significant. You're seeing all of the large hedge funds essentially in New York now having outposts in the Middle East, specifically in the UAE. And so it's one of the biggest shifts that we've seen of talent from various places to this region and for a number of reasons, including the tax-free lifestyle, including the benefit of being able to trade across many regions, the quality of life.

among others. Yeah, so that's what's drawing those star traders to want to live there. In terms of where they're coming from, London's seen the biggest exodus. Are those traders being pushed out of the UK or just being drawn to some of those things you talk about in the UAE? Yeah,

Yes, definitely being drawn to some of these things. London, as you mentioned, yes, is a city that has by far lost the biggest number of jobs to the UAE. You're seeing Indian nationals especially drawn to the area to be closer to home. The flight is quite short. But the other big factor is the taxes, the UK taxes being quite onerous if you're making millions or tens of millions of dollars and getting to benefit from that tax-free lifestyle here has been a

pretty significant draw. The other thing that we keep hearing about is safety. The crime in the UK, people say, has been a factor for their decision-making to move out here as well. Okay. What do you think the shift to the UAE means for the hedge fund industry more broadly itself?

What I think it shows is we are amidst this hot war for talent. You know, pay packages are rising and hedge fund managers and portfolio managers have a lot more say. And part of the reason we have all of these hubs in the area here is because the PMs and the talent

is requesting it. One firm nearly lost out on retaining one of the employees because they wanted to move here. And because of that one employee, they set up an outpost here. And you're seeing the voice and the power of hedge fund talent really being the impetus to move out here, which shows that it's not just being able to demand high pay packages, it's also demanding where you live. ♪

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 Hipker. 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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Starting price for 25 megabits per second LTE internet plan with smartphone plan savings, plus taxes, fees, and economic adjustment charge. Terms apply. For J.D. Power 2024 award information, visit jdpower.com slash awards.

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