US Preps Possible Iran Strike, Fed Outlook Fears, Non-Dom 'Mistake'
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This is the Bloomberg Daybreak Europe podcast, available every morning on Apple, Spotify or wherever you listen. It's Thursday the 19th of June in London. I'm Caroline Hepker. Coming up today, American officials prepare for a potential strike on Iran as President Trump says he prefers to make a final decision one second before it's due. The Fed keeps interest rates steady as Jerome Powell warns of weak US growth and a pickup in inflation ahead of today's Bank of England decision.

Plus, buyer's remorse. Non-doms rushed to sell their London homes as one of the architects of the super-rich tax plan calls its rollout a mistake. Let's start with a round-up of our top stories. Sources have told Bloomberg that senior US officials are prepared

Thank you.

You don't seriously think I'm going to answer that question. Will you strike the Iranian nuclear component? And what time exactly, sir? Sir, would you strike it? Would you please inform us so we can be there and watch? I mean, you don't know that I'm going to even do it. You don't know. I may do it. I may not do it. I mean, nobody knows what I'm going to do.

The comments suggest that the U.S. president's view has changed significantly following Israel's bombardment of Iran's nuclear and ballistic missile facilities. Iran had been in negotiations with the U.S. over its nuclear program for weeks and had a further meeting scheduled when Israel attacked on Friday.

Well, since Israel's strikes started, Iran has fired 400 ballistic missiles and hundreds of drones at Israel, killing 24 people and injuring more than 800. At least 224 Iranians have been killed by Israel's attacks. That's according to the government there. The country's supreme leader, Ayatollah Khamenei, said that the Islamic Republic will not surrender.

Telling the Iranian nation to surrender is not a wise thing to say. America getting involved in this would be 100% to its detriment. The damage to America, if it gets militarily involved, would be an irreparable damage, no doubt.

The words of Iran's Ayatollah Ali Khamenei, spoken there by a translator, as Iranian Foreign Minister Abbas Arachi said in a social media post that his country remained, quote, committed to diplomacy and had never sought and would never seek nuclear weapons. Bloomberg understands that foreign ministers from the UK, France and Germany are planning to hold nuclear talks with their Iranian counterparts in Geneva on Friday.

Now Shell's CEO says that GPS jamming in the Strait of Hormuz is proving to be a problem for navigation in the area. About a fifth of the world's crude output passes through the narrow waterway at the entrance of the Persian Gulf. Shell's CEO Wael Sawan says that while the route remains open, signal blocking is a major hindrance for vessels passing through the area.

What is particularly challenging right now is some of the jamming that's happening on GPS devices and the like, which is a concern. The Straits of Hormuz is, at the end of the day, the artery through which the world's energy is flowing.

Well, so on there, speaking to Bloomberg at Japan's energy summit in Tokyo. While there has not yet been any indication that Iran will close the Strait of Hormuz, oil analysts tell Bloomberg an attempt to do so could push prices above $120 a barrel.

Moving on to the Federal Reserve, officials voted again to hold interest rates steady yesterday, but new projections highlight a growing divide among policymakers. The FOMC unanimously chose to keep the benchmark federal funds rate in a range of 4.25% to 4.5%, this for a fourth meeting in a row. After the decision, the central bank's chair, Jerome Powell, told reporters the Fed is in a good position.

Despite elevated uncertainty, the economy is in a solid position. That is why we think the appropriate thing to do is to hold where we are. The current stance of monetary policy leaves us well positioned to respond in a timely way to economic developments.

That is Chair Jerome Powell speaking. The latest Fed projections point, though, to a split amongst members. Seven members now foresee no rate cuts this year. Two signal one more cut, whilst 10 want at least two cuts before the end of the year. The Federal Reserve did also downgrade its estimates for growth this year and projected higher inflation.

Well, the Bank of England is also set to hold interest rates steady during today's Monetary Policy Committee meeting. Policymakers are expected to keep borrowing costs at 4.25% for the UK and signal that they will stick to the central bank's one-cut-every-other meeting approach. Our chief UK economist, Dan Hanson, says that investors will be focused on indicators of the rate path ahead.

We watch the vote split, we watch all these things, no one's expecting them to change rates. But I think a sign is that effectively which side of the trade-off that central banks face, is it high inflation or is it the weak labor market? I think that's going to be what effectively gets revealed.

That was Bloomberg's Dan Hanson speaking there. Bank of England officials lowered rates by a quarter point in May in a surprisingly close vote due to inflation concerns. Since then, though, inflation has surged to its fastest pace in more than a year and escalating tensions in the Middle East are now complicating matters by driving up oil prices.

With only four pending or trading IPOs so far in 2025, London's stock market is looking to Asia for new business. Bloomberg's Ewan Potts has the details on that story now. If US stock markets have sent mixed signals to Chinese companies in recent years, the message from London is clear. Your listing is welcome on the LSE.

Speaking to Bloomberg in Shanghai, the City of London Corporation's chairman told us we need more IPOs happening in London. He says the corporation can provide opportunities for Chinese firms to secure customers and funding in the UK and drive them to list in the city via its Connect scheme with Shanghai.

China introduced the Stock Connect programme with the UK in 2019, allowing companies to issue depository receipts on each other's exchanges. But six years later, only a handful of firms have taken advantage of the scheme. With the LSE facing a rash of delistings and takeovers, its promoters are very keen to get some new business through the front door. In London, I'm Ewan Potts, Bloomberg Radio.

Also staying here in London, the number of high-end London homes up for sale is at a record in the latest sign of wealthy people leaving the country. Lonres data for May shows a 22% year-on-year jump in properties worth more than £5 million on the market. The property site says that the bump is linked to Labour's tax changes, but that few of the listings are actually selling. Bloomberg's James Walcock has the story.

The data from Lonres is the latest sign there has been a sudden jump in rich people looking for an exit from the UK. It comes as one of the architects of the Labour government's non-dom policy tells Bloomberg it was a mistake to ramp up inheritance taxes from zero to 40% overnight.

Centax's Aaron Advani says that created a sudden cliff edge for Britain's wealthiest individuals. And there are now reports Chancellor Rachel Reeves is looking again at the measures, given the growing number of data points suggesting non-DOMs are on the move. In London, James Wilcock, Bloomberg Radio.

So those are our top stories for you this morning. Thinking about the markets, a check of oil prices, $76.55 for Brent crude futures. We've had a very volatile trading week, but actually those Brent crude futures are now down two tenths of 1%, despite the uncertainty and the possibility of the US getting involved with a direct strike on India.

In terms of U.S. stocks, they closed little change yesterday. Stock futures for the U.S. are in the red. European stock futures are currently down by three-tenths of 1%. Also, you've got something of a sell-off in Asia. The Hang Seng is now down almost 2%. And interestingly, Japanese companies, I was reading on Bloomberg today, are delisting from the Tokyo Stock Exchange at a record pace today.

The dollar, meanwhile, is stronger against most major currencies. The Bloomberg Dollar Spot Index is up by a tenth of 1%. We have lots of rate decisions later today. The UK, but also Switzerland, Norway, Turkey. And remember that cash trading in treasuries is closed today for the Juneteenth US holiday in America. So those are the markets. Coming up in a moment, though, we're going to bring you to the latest on the events in the Middle East, bring you all of the details and also mull over what happened.

with the Federal Reserve yesterday. Okay, they didn't change interest rates, but there was a lot that we could gain from the press conference and from the projections and from the dot plot.

But there's also another story that I wanted to bring to you and to talk about this morning. So UK consumer confidence has jumped to the highest level this year. And we've been thinking about why that is. Apparently, it is down to younger workers. So this is Gen Z, people born between the mid-90s and 2010, so younger workers. This is according to the BRC survey. This is the British Retail Consortium. The CEO, Helen Dickinson...

says that it may reflect the increase in the minimum wage from April. So I had to go back, look at what was the minimum wage increase. Now, on the 1st of April, the national living wage went up by 6.7%. So in percentage terms, quite a lot. £12.21 is the hourly rate. It actually works out to only about 77 pence per hour, though.

But even younger workers, so those 16 to 17 and 18 to 20 who have a separate minimum wage amount in the UK, they also got big bumps higher, 16% and 18% higher. It only equates to like a few pence per hour, but apparently it has made all the difference. So yes, the pain for employers, the extra burden really weighed on them, but it has done wonders actually for how young people feel. Helen Dickinson saying that their economic outlook and their

expectations for their future finances, they feel much more optimistic about those.

So that was one of the stories that I read this morning, and I'll put a link to it in our show notes as well if you want to think about that. Let's also turn our attention, though, to the Middle East. Senior U.S. officials are preparing for a possible U.S. strike on Iran in the next few days, but the situation remains highly uncertain, both by design from President Trump and also due to ongoing diplomatic talks. Joining us now is Bloomberg's head of the U.S.

of Middle East and North Africa coverage, Stuart Livingston-Wallace. Stuart, good morning. President Trump campaigned on the promise of being a peacemaker. That was the word he used, keeping the US out of Middle East wars. What do we know about possible US involvement in the Israel-Iran conflict?

Yeah, good morning. I mean, it's certainly true to say that they are preparing to do it if they feel it's necessary. And, you know, we do have to stress here that as far as we can tell, no final decision has been made. But I think Trump wants to be in a position where he can do it if he wants to. So what does that actually look like? I mean, it means refueling capacities being moved into the region faster.

It means a carrier strike group that's currently in the Indo-Pacific that could be here fairly shortly. It's already got one in the area. And then it's got additional destroyers in the Eastern Med. So in terms of its capability, it's certainly there. And when we think specifically about this conflict and the so-called targets in this conflict, which are these specifically the nuclear sites,

It really is, as far as we can tell, only US capabilities that would be able to eliminate them altogether.

because specifically they are buried so deep underground that you really need these sort of massive munitions, the so-called bunker busters, in order to be able to get down that far and really wipe them out. Yeah. Meanwhile, Iran has rejected this idea of capitulation, the demand from President Trump. The foreign ministers also talked about the country being committed to diplomacy, which

Can escalation be avoided at this point? I know, Stuart, you've said that no decision's been made by the US, but that's quite crucial. Can diplomacy avoid escalation? I mean, I think a lot of the parties would hope that it can. And when we look at the actors involved in this, it is very much the Gulf states. And I think they're looking at this.

with a high degree of anxiety because it has to be said that most of them have grown up with just these endless wars around them. And I think over the last several years, they've come to the conclusion that that is no way forward. They would much rather go after economic prosperity

than continuing this endless fighting. So I know they are trying very hard to come to some sort of agreement. Similarly, the Europeans, I think, and we saw those comments from Macron at the G7, and not just him, really pushing for some sort of diplomatic solution. But the truth of the matter is that if the demand from the US and Israel is that Iran gives up all enrichment of uranium

on any capacity that is even up to a civilian use level and the Iranians red line is that they must absolutely retain the right to do that it's very hard to see how you can broker some sort of agreement with those conditions being set by both sides. Yeah indeed and so if there is escalation what does that mean for the region?

I mean, it's a sort of slightly facile answer, but the truth of the matter is that it's not good. And I would argue also that it's not good for the wider world because the rest of the world is so dependent on this region for energy supplies, you know, that yes, they have diminished in importance in terms of what fuels the global economy.

but the global economy cannot function without it. So in a scenario where this widens out and you have a disruption, for instance, to energy supplies, that is going to have a profound impact on economies pretty much across the globe. That in turn is going to have an impact on trade, it's going to have an impact on interest rates, it's going to have an impact on everything. So in terms of why the world should care, yes, there is an immediate danger to the region itself, but it has far greater implications.

It does. Thank you so much, Stuart, for being with me this morning and for discussing this. Bloomberg's head of Middle East and North Africa coverage, Stuart Livingston-Wallace. How can you free your team from time-consuming office tasks? Amazon Business empowers leaders to not only streamline purchasing, but better support their teams.

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Which brings me to the next conversation around the U.S. Federal Reserves. They held interest rates, of course, steady yesterday, but very much thinking about...

oil prices, the inflationary impact as well as tariffs and ahead of other interest rate decisions from the UK, Switzerland and others today. Let me bring in Bloomberg anchor Kriti Gupta now on this. Good morning, Kriti. So, look, the split in the Fed's dot plot is also seen as very, very key. This is what officials expect

interest rates to do. They put it up anonymously, but where they see interest rates going, why are views now so dispersed? Is that oil? Is it tariff driven? What is it? It's a really fun combination of both, not to mention the uncertainty that's being shown up in the markets as well. And I think something that a lot of people perhaps weren't

listening to as clearly in the press conference, but also in some of the Fed speak leading up to this moment has been that because financial conditions are so volatile and because you do see inflation expectations from the markets being priced in to extremes on both ends, that actually does have real consequences for the real economy. So that's going to add into the other two elements you were talking about, which is that sustained oil pressure. And that's, of course, going to be key for Americans who are hitting the roads this summer. It is driving season in the United States for the world's

first biggest economy, but also biggest oil consuming economy in the world. The other piece of this is tariffs. And if you look at the last couple of months of data, we haven't seen that show up in the CPI. For example, we haven't seen it shown up in the labor data as much. In fact, the only cracks we've seen in the labor data has been the most recent jobless claims number that have come out in the United States. And even that was an uptick that was ultimately seen as only one data point.

early indications of that tariff impact are starting to show up in things like import prices or factory prices or producer prices, for example, because you are now starting to see that hard shipping data that we saw in terms of fewer Chinese ships, for example, hitting those L.A. ports. That is starting to show up in the in the

import data, but it takes a few cycles for that to actually affect the end consumer. We're not there yet because, again, so many retailers have been sitting and hoarding a lot of this merchandise in advance. So it takes a little bit to kind of work through. But that's the point that Chair Powell is making in that we haven't seen it yet, but don't worry, that tariff impact is coming. Yeah, absolutely. And so we have also seen the dollar catching a bit amid these concerns. I mean, the

And we also saw the downgrade to growth and the increase in inflation expectations from the Fed. But in terms of the oil and the dollar impact, maybe from these Middle East tensions, that could also be very significant. Absolutely. And the oil story is key here because, of course, I think the highest we've hit in these latest rounds of escalation in the Middle East has been a top about $78 a barrel intraday. That could

That could. There are forecasts out there and hedges out there that suggest it could go up to about 100. But the flip side of that is that even though Middle East tensions and specifically strikes coming from Iran create a floor under oil prices, the tariff impact, the trade negotiations that

risk to global growth creates a ceiling for oil prices, which is why you continue to see oil spike, but not really cross that $78 a barrel. And I think it was at a high of like $66 a barrel before the Middle East. So only a $10 change, which is a lot in the span of a couple of days, but not a lot in terms of the way to digest it. The risk is when it is sustained at that level or even goes potentially higher. And we saw an element of that

in 2021 or 2022. This is showing up in a really big way because this is where that kind of split between the dot plot actually shows up because we don't know for stuff, the escalation and how long that'll last. It could, it could,

be sorted out by tomorrow, for example, and the negotiations would be on the table and that would bring oil prices right back down. And we go back to a conversation that we had in terms of trade negotiations, in terms of driving that inflationary story. The other piece of this, of course, is the labor market. And again, this is where even Neil Kashkari made the point over at the Minneapolis Fed that

you it's very hard to predict right now yeah absolutely brief word then on what we're also expecting today we're going heading towards a swiss national bank a rate decision and also the bank of england some thoughts on those two they're both significant in very different ways the bank of england is far more reactive but expected to hold as well so keep an eye on kind of how maybe they're leading the charge and things like quantitative easing or quantitative tightening for example following the case of either the boj or the federal reserve so they're an interesting case study

The S&B is very important because the expectations are going to cut to zero. And there's a couple of folks out there who are saying they're headed into negative territory. We haven't seen that since COVID, really. So could the S&B now be a case study for where Europe is headed broadly?

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 Hepke. 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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