♪ >> today, the people of israel are under attack, orchestrated by a terrorist organization, hamas. >> it's incomprehensible and we are still waking up at hoping it is a nightmare. >> this is israel's 9/11 and israel will do everything to bring our sons and daughters back home. >> we want to say to them and to the world and to terrorists everywhere, the united states stands with israel. we will not ever failed to have their back. announcer: this is "bloomberg surveillance" with tom keene, jonathan ferro and lisa abramowicz. jonathan: live from new york city, good morning. this is "surveillance" on tv and radio.

your market is negative this morning. tk, your headline of the we can come israel is or. tom: bond market close. we will cover this continued bond debacle but certainly front and center in the news, still happening according to our people in tel aviv, this is a dynamic story on a typical monday morning. jonathan: we have to work through 3 -- this morning. where is this going next? the big one for many after seeing the shocking images, how on earth did this happen? lisa: it shook a sense of security, invincibility, intelligence. the ability to foresee what was going to happen within israel. at this point there are a lot of questions as well as how far this will percolate in a geopolitical sense. how this will really affect the israeli-saudi arabia packed that was in the works of the past couple of weeks and months. jonathan: through equity market pulling back on the s&p 500 by 0.6 sent. looking or exchange market, the

dollar is stronger against the euro, and there is the move in the oil market wti up by 3.5%. tom: that is of course a day we are not getting bond information for the united states. but one tea leaf really captured my attention. a stronger swiss franc. we really haven't seen this in the last number of weeks. swiss franc strengthens. that is an indication of the tension that we see. jonathan: working out next in the commodity market, rightly pointing to iran and for goldman sachs, sticking with that triple digit crude forecast for next year. that is where our focus will be for some of the morning. lisa: the risk that this could potentially increase sanctions on iran from the u.s., and if that really is one of the key constraints on some line, there isn't necessarily any disruption seen as of yet, but you have to

understand -- and this is what everybody's is trying to grapple with -- you have true geopolitical risk, true conflict in the middle east, a major producer of oil. this is potentially going to be disruptive preparing for that today. it is a big week this week. when it comes to economic data, cpi, ppi. we do have a host of fed speak down in dallas for the conference. dallas fed president lori logan, philip jefferson, michael barr who i know tom will be listening to. how they frame will be cut on friday given the fact that we did get a surprisingly hot number. today, the world bank and imf annual meetings kickoff through sunday. tom will be heading there later in the week. we did hear from christine lagarde today saying that the imf cut its global forecast, and today, also percolating in the headlines, undoing strikes, this

time in canada. the canadian equivalent to that uaw trying to come to some sort of labor agreement with gm having a factory there and some parts and engine manufacturing areas as well. jonathan: lisa, thank you. it's time to the top story, the israel-hamas conflict entering the third day. israeli forces responded with strikes, taking hostages over the weekend. the wall street journal reported are bonnie and security officials held will be the biggest israeli security failure in decades. antony blinken maintaining they have not seen evidence to confirm cooperation. >> there's a long relationship between iran and hamas. hamas wouldn't be hamas without the support has gotten from many years of iran. we haven't yet seen direct evidence, but the support over many years is clear. jonathan: joining us now is the

senior advisor for the transnational threats project, the center for strategic and international studies. it has been 34 years in the central intelligence agency. wonderful to catch up with you under tragic circumstances, obviously. we have to start with the main question on the lips of everybody. what happened and how did this happen over the weekend? >> israeli security forces and responsibility for gaza and the occupied territories and they have over the is demonstrated the very capable architecture of surveilling palestinian activity. this has allowed them to frustrate multiple palestinian attacks and identify, locate, and neutralize other officials. in this case, it appears hamas was able to execute within that security bubble that not only deviated israeli clearance,

but unable this operation to be undertaken without israel seen indicated that this existed. to be clear, this is an intelligence failure by israel. however, they have a very capable intelligence service and also to be clear, this is a failure by the international community as well. america and other countries do not cede the protection of their nationals to israeli security services and we also did not see the indicators of these. tom: wonderful to have you with us with your years and years at the cia. this is not matt damon in a movie, this is reality. how do you take over a geography that is two times the size of washington, d.c. and has 2 million people crammed into it? how do you link your intelligence knowledge with the military effort to de-hamas gaza? >> it is possible, and israel

has done this for some time the west bank and for lebanon. however, you raised an extremely important point. for israel to consider ground operations or rescue operations, this is one of the most challenging environment on the planet. it's not just concentrated in certain areas. this is a concentrated civilian area with very top buildings. the united states and iraq have some experience in working this in the iran afghanistan, but these are much smaller areas with much larger buildings. for israel, this is an extraordinarily difficult challenge and no one should underplay the casualty count is likely to happen for israelis and palestinians in ground operations. tom: you look at the narrow like that, in the writings you talk of a multi-polar dynamic and you take the tensions of the middle east back to 1870 and 1930, way

before 1967 as well. what is the multi polar dynamic that israel faces right now? norman: is a good news-bad news story. on the good news side, there is strategic, long-term and continuing drivers for the saudis and for others to promote regional integration that must include israel because of its geographic location. that hasn't gone away, and that will sustain the ongoing diplomatic process between the u.s., saudi arabia and israel to restore relations. on the downside, you have an international community that is pulling together russia, china, and the european community in a way that actually promotes a peaceful plaintiffs in consequence which will be impossible. lisa: there's also the question about the role of iran especially at the wall street journal's and they had an active role in helping to plan this attack. we've not heard from the u.s. government confirming that. they said they are

investigating. what i the potential consequences, the escalation potential if iran is deemed to have had an active role in planning these attacks? >> should be careful about the report. iran is unlikely to have played a robust, active role in planning attacks simply because they are not on the ground. they do not have personnel on the ground. they would not be able to provide an intelligence input to those operations, and their involvement compromise the operation. however, iran has provided drones, training, money. hamas would not be hamas that iran. but that is their modus operandi. but they do is they enable proxies to conduct operations that parallel iran's strategic objectives. those operations play out, iran is able to stay and support, iran achieves its strategic goals, but their direct hand is not seen and thus iran escapes

international punishment. lisa: the speculation is that one of the strategic aims was to disrupt the saudi arabia-israeli agreement that was being worked on and coming to some sort of fruition in the next couple of weeks and days. how much do you think that has been iced? how much are people to be discussing that aspect of the strategic potential motivation the timing of this attack? norman: there's no question that was likely one of the motivations, but this is a pie that has multiple pieces in it. this operation was clearly developed over many, many months. it would have taken a very long time because of the complication requirements. the government and its proxies have maintained a posture for a very long time. there was no specific incident that provoked this, but certainly one of the benefits for hardliners in iran is this will complicate if not disrupt the diplomatic process underway. jonathan: we know based on

reports they have taken scores of hostages. does that complicate israel's response to this? norman: usually. we should note these are international hostages. reports are unconfirmed but there may be a chinese, french, thai, as well as american hostages as well as among the dead in israel. in many ways this is a hamas attack against the international community. these hostages will be dispersed within gaza, isolating them and identifying their locations and elevate rescue plans will be very, very difficult. the united states has considerable experience here and will no doubt be sending intelligence and security personnel to assist the israelis who are also very good at this. this fall also inject considerable complications into diplomacy. united states, saudi arabia and others engage in turkey and a variety of actors to see how this plays out. it is not inconceivable that you will have iran itself insisting

on this. that rarely works out well. tom: norman, ala kissinger, robert kaplan and frankly you, is this a day where america shifts back to real politics? forget about shuttle diplomacy and all of that. this morning is all about a realpolitik that we think we have forgotten and moved on from. norman: the slime of the middle east is unlike las vegas. what happens in the middle east never stays in the middle east. the biden administration will need not only a strategy to address this issue, a strategy to see how this impacts existing programs such as the iran and 70 initiatives, but likewise they might have to staff this out. they're going to have to apply a lot of personnel and policy-maker bandwidth which will come at a cost of other issues. this is a seismic issue which will transform regional

policymaking and international policymaking. the ripples of this attack in terms of policy and domestic politics are still playing out. jonathan: i want to ask you this question to wrap things up. no speaker of the house, no ambassador. is that a symbolic failure, or one with real consequences? >> certainly a symbolic problem, but we shouldn't discount the capabilities and roles in these intelligence personnel, military help. this communication channels remain robust and these capitals often deal directly with united states and washington through their very able ambassadors. a system of handling this is underway and will be executed crisply. it just might be better and easier if these personnel were in place. israel has received a considerable boost in the number of iron to interceptors and that is without the house being order, what we need to fix this.

jonathan: hopefully we can catch up again before the end of the week. tk, they are going to have to staff this and fast. tom: that is the key phrase for me. we will have to staff assad. how many administrations have a shortstaffed in the eastern mediterranean? jonathan: on the market in the next hour, amy silverman. amh a look later in the next hour. from new york, this is bloomberg.

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ameriprise financial. ♪ >> there is a long relationship between iran and hamas. hamas hamas -- wouldn't be hamas without the support has gotten from iran. we haven't seen direct proof

iran was behind this, but the -- over the years is clear. jonathan: those comments running counter to what we heard in the report from the wall street journal yesterday evening. the journal reporting iranian security officials have planned what would be the biggest israeli security failure in decades. we will return to that in just a moment. if you are just joining us, welcome to the program. there equity market in the s&p looks a little something like this. 0.5% on the s&p 500. treasury market is closed today for columbus day. elsewhere, that risk off story, yields lower by about or basis point on the german 10-year. and in the commodity market, rally anticipated up by 3.5%. tom: i didn't look at the standard deviation move, but i did look at the stated deviation move in the israeli shekel and it was 3.8 which i would then, given the angst, is normative to

be polite and the central bank is acting on that. we grew by 3.8 standard deviations. that is within the realm of reason. jonathan: the question this morning, whether this has the potential to have a conflict beyond hamas and israel. tom: i thought lisa capture this brilliantly, the idea here of the back and the fourth in the news report and who has got it and who doesn't, that is all secondary to the sheer fury of day three of any kind of war. i would look geographically off of that wonderful conversation from norman and look to the lebanese border. to me, the idea this is a one-front war we learned in 1967, no. jonathan: steve, a question i think people will be asking the markets, whether this represents a curable headwind to investor sentiment. do you think it could?

steve: it certainly adds uncertainty. just watching the footage over the weekend, i know we have a job to do, but i feel like equities are the least important thing considering some of the images we saw over the weekend. all things being considered, just trying to decipher it, it is an upward pressure on the commodity complex and adds to the uncertainty in the markets. yeah, you saw bonds rally a little bit, but not anything major. weeks and treasury yields go up 10 basis points in a day, four basis point decline. i think the point you just made is the appropriate one. what happens next? does this become a wider regional conflict? at this point, we all have to wait and see. tom: you are wonderful at the cross-asset analysis. this bond debacle but we are in right now. how does it affect steve?

is he getting his requisite nine hours sleep a night? steve: steve and i are very close. don't know what he does at night. it is a hard one to tell. you got a yield curve that is on inverting and historically when that happens, that is a real imminent sign of recession but it is never un-inverted this way. does not like the two year yield is falling in anticipation of you got a 10 year that is rising in the question, it is very buyers strike on the treasury, or if the market trying to normalize to a new normal of 5%, 6% nominal gdp? one of those is much more bullish than the other. tom: i was shocked on the x on pioneer trend last week that these are 10, 12, 13 multiple companies where we are talking about the chosen seven for 25 and 30 multiple companies as well. how do you define federated growth?

steve: a simple russell 1000 growth versus value. coming into the year, we thought inflation the bit more adorable and that would hike more than the market expected. we still think that this market broadens out. we think it broadens out the cyclicals pricing at some recession risk in the short run. we think the dividend players and their safety are attractive. we have nibbled on large-cap growth because we have been so underweight, but we still think there is an opportunity for the market to broaden now. lisa: there's a question about how much can change in a minute given some of the concerns out of yet another front for a geopolitical conflagration. how much would your view change should oil bear the brunt of this, if we do see any kind of disruption and we do see oil prices climb above $100 per barrel on a sustainable basis? steve: what the market in the

fed are trying to pilaf year is a softer landing. and so anything that makes that path more difficult is a challenge, whether or not that is higher oil prices, resurgent inflation, rising delinquencies, a 10 year yield that becomes unhinged to the upside. those are all risk factors. but last year pulled us as you want to be humble. you have portfolios that are cost neutral, pointed in the direction of your fundamental view. but you want to stay close to neutral, because there's a lot of risk factors out here that are really unprecedented. jonathan: the conflict in israel, stagflation a shock to the israeli economy. could you say the same thing about the global economy right now? steve: it is certainly possible. what has to happen for there to be a real stagflationary event is you need to draw in some of the northern countries, you need attacks on iranian refineries

and things of that nature. that's probably not enough of an oil price shock where things are located today, but a spreading of that certainly can. and again, on this theme of humility, if you would have asked me what would have happened in the wake of the ukrainian invasion, who would have gotten the market reaction right? we are not experts in these areas, we stick to the fundamentals as best we can. jonathan: it is one of those mornings we can learn something about how the market is responding to this. it is a shame the cash treasury markets closed today but we learned that bonds are still providing these characteristics. steve: every time bonds as a downside protection mechanism have been doubted, they show up. look, unless we are looking at some mass secular buyers strike, and i think it is premature to say that, i think when there is trouble in the world, the safest

asset of the u.s. treasury and i don't think anything has changed about that. lisa: what are you watching at this progresses over the next hours and days, as we read all the news and have it is potentially spreading or being contained, what i you're looking for it change your outlook on way or another? steve: spreading north whether it is lebanon or any kind of direct involvement with iranians would certainly be something to watch. i think in addition, if you start to see any terrorist activity and non-middle eastern countries, that is something that could shake confidence in the world. and honestly more than anything, watching in horror at the atrocities that are going on and feeling heartbroken about it. jonathan: thanks for the insight. i think straightaway we are seeing is israel's 9/11.

tom:tom: and what he did here folks, and what we do have bloomberg news all through the weeks to come is to try to give scope and scale. he said here's a population of america, here is a population of israel. compare and contrast 1000 dead, and it is a scale of war. jonathan: we have to consider than way this rep is in a paradigm shift for the region as big as 911 over 20 years ago. tom: i'm not an expert on that, i'm just not going to go there. what i'm going to say is everything shifts from russia but certainly from erdogan and turkey down across all of northern africa. it is a titanic shift of tone. lisa: we don't know how it spreads. the key question in the couple of days to come, we will need a better sense of what ground operations look like and exactly how this does potentially act as a airtime shift the region. that is the uncertainty people are responding to when you can see the price change in oil.

you have to imagine this kind of instability in the heart of oil-producing global production, you have to think this is going to have some sort of ramification. jonathan: national security advisor jake sullivan a little more than a week ago. the middle east region is quieter today than it has been in two decades. it is not quiet anymore. coming up later, bloomberg's anne-marie in the studio here in new york. equities lower. this is bloomberg. ♪ dogs! when i'm not selling hot dogs, i invest in a fund that advances innovations like robotics. fresh, warm hot dogs, straight out of my torso! one for you, one for you. oh, you're a messy one. cool, right? so cool. anyone can become an agent of innovation with invesco qqq, a fund that gives you access to nasdaq-100 innovations. hot dogs! fresh, warm hot dogs! before investing carefully read and consider

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jonathan: equities falling this morning. negative on the s&p 500. down by 0.5% on the s&p following the best gains since the first of september. the nasdaq pulling back by 0.7%. tentative bond market. yields lower a couple of basis points. down 2.86 on the 10-year in germany. i don't think this is a judgment on anything at all at the moment in regards to inflation or monetary policy. this is just one of those knee-jerk reactionary moves where you go to the perceived haven of software bonds.

apparently, the perceived haven of bonds still exists. tom: i.t. leaf is to look at the german bonds. in the equity market with the dearth of disinformation, i would suggest a bracketed vix under 20. the answer is equities are bracketed given the geopolitical tensions. jonathan: textbook risk aversion. at dollar weaker, the euro against the dollar snapping 11 weeks of euro weakness. the euro against the dollar right now is 105.26. under surveillance this morning, the death toll from the conflict between israel and the militant group hamas topping 1000 500. the wall street journal

reporting iran potted the attack. they have not seen any evidence of tehran's involvement. lisa: how does this expand? how does this escalate because we are expected to get some information about what the next steps are from israel in terms of some sort of potential ground operation but also the threat of retaliatory attacks into iran which is long known to be a sponsor to hamas. this morning, i would look less at the price reaction and more everyone scanning the news to try to understand what the next shoe is to drop. tom: what is so important is not so much the diplomacy in talking about it. i'm going to go back to june 10, 1967. here is the exact quote. war ends with israel claiming the gaza strip, west bank and peninsula to the suez canal. there was a shock then as they took over gaza strip from

egypt's protection. that is where the tension began, in 1967 and it has just been a struggle for all since then. jonathan: just getting an update. israel's army plans to collect 300,000 reserve soldiers to fight. tom: with losses already including some senior military officers, i am by no means expert on that. we will have anne-marie with us. jonathan: about 30 minutes away. the bank of israel moving support markets in the wake of the attack announcing the foreign exchange for the first time since it allowed the shekel to drape freely. as much as $30 billion and will extend 15 billion through spot mechanisms. house majority leader chuck schumer criticizing on the conflict between a meeting

between xi jinping and a delegation of u.s. senators. i urge you and the chinese people to stand with the israeli people and condemned the cowardly and vicious attacks upon them. i say this with respect. i was disappointed by the foreign ministry statement showing no sympathy or his support or the israeli people during these tragedies. lisa: and then he did speak with xi jinping after making these comments. we are talking about a situation where i believe the chinese statement said they urged peace and a two state solution and did not necessarily condemn the attacks in and of themselves. the curious thing is that this is coming at a time of trying to normalize relations between the u.s. and china. we have all of these different geopolitical tensions. where does this take away from? where does this distract from? how does this add into all of the other tensions that have been percolating echo jonathan: the senate majority leader in china at a difficult time.

let's see how she responds to the criticism earlier this morning. tom: and globally as well. i think everyone has to respond. i'm fascinated how erdogan responds. it will be amazing to see particular going from her in 2002 up to the two or three are the ones we have seen and what is the next one, how he is going to respond. tom: what a different -- jonathan: what a difficult time. i think on friday we thought we would wake up on monday talking about payrolls still. tom: let's take three seconds before we get to our economics. this weekend, it was stated so much of the manpower of israel was off to the east toward jordan with the challenges israel has in the west bank and was the gaza strip territory undermanned in being surveyed by technology? that is not me saying that. that is of someone of great expertise.

jonathan: the news become dated so quickly. the saudi's could be boosting output into next year. already talking about that breaking down and not happening. tom: we will continue to watch the story. annmarie hordern joining us in the next hour. on economics, under central bank, m.ed. joins us this morning. you do such a good job of synthesizing any and all. i'm going to begin with the base assumption israel and hamas is removed from the dynamics of our economics but it does speak to a confidence within the system as tested by the bond market in the last two weeks. what is the measure of central bank confidence right now that they can assist that they can do something echo >> i think you are right to point to the way in which this would feed into our economic thinking.

i think there are a few ways in which i would see consequences from the fallout of this. i think is a number of your guests have said, the extent to which this all runs out is kind of critical in terms of the extent to which this might feed through into higher oil prices. that is something we have been watching in terms of the context of higher headline inflation. i think that does matter for both central banks might look through some supply shops on the energy side. i do think the extent to which that persists might impact the broader price basket given the import cost for goods, production and services production. i think the extent to which we see oil prices remaining elevated, that is the angle i think we need to be thinking about. tom: me, the key debate is the real yield. is the real yield generally

across 45 central banks at a tipping point or just a trajectory to a higher level? abigail: i think that is an absolute critical question. i think there are number of elements to think about which i think would be higher for longer. we have seen some of the repricing and bond markets around this messaging from central banks i think that has been around the idea that all the policymakers might be reaching the end of that hiking cycles is the case they are not an un-environment in which they feel comfortable to cut rates back again. the other element is what is happening on the inflation side. i think the question as to whether we continue to see this kind of disinflation trend continuing or whether you see some stalling and perhaps the progress on the inflation side begins to moderate.

lisa: there has been a lot of discussion on the parallels of 50 years ago, the morning beyonca poor war took place. not only because of the oil shock and potential for stagflation to take hold in a more meaningful way, do you think the parallels that go beyond just oil are applicable to the moment we are in? abigail: i think it is an interesting comparison. i think currently, the key concern is actually in the u.s. economy is domestically generated inflation. i think that is actually what the fed has been focused on so squarely as well. looking at the call basket, looking at call services, in particular and some of the stickiness there. i think the data we had out last week and i know events of the week and have overtaken some of the focus on that payrolls number but i do think that kind of continued upside surprise and some of the labor market data is

something the fed will be looking at loosely and i think that domestically generated inflation is probably a core focus. lisa: we will get cpi on wednesday and ppi on thursday to feed that. it does raise a question of how central banks can respond to geopolitical risk. how governments and fiscal authorities at a time when fiscal spending is constrained, and inflation is still a threat which really prohibits a rapid knee-jerk cutting of rakes. -- rates. how does that factor into how you see this evolving echo abigail: i think it is a really good point. that kind of focus on the kind of issues at home that many economies are facing does kind of impact the ability of central banks or governments to put through funding and support for such issues. i think one of the things -- we have seen this function in

recent weeks in the u.s., in congress and the house in particular and i think that is something that i guess is a concern on going around the ability to react to these fast-moving events. tom: let's do it right now, price down yield up. there has been a bond market bloodbath. how does that constrain the degrees of freedom, the flexibility of major central banks. abigail: i think it is a fair point and i think this was something that daily was getting at in her speech last week. when she was speaking, she talked about the idea that you see financial conditions tightening significantly to the equivalent of perhaps the final rate hike that the fed has. i think the november meeting is very final balance. we think there's a possibility they could hike given the strength of the economic data we have seen, given the likelihood we have seen the gdp data coming

out of that meeting, given current tracking estimates. i think the question for central banks is how much does this tightening in financial conditions given the moves and bond markets offset the need to do further policy action. i think that is kind of the key thing for central banks in how they will be redoing that. jonathan: thank you for your insight this morning. the latest on the israel-hamas conflict entering day three. the death toll topping 1100. according to the israel defense force, israel's army plans to call it 300,000 reserve soldiers to fight. lisa: he really pointed out a really important point which is that their efforts are really complicated by the hostages which do raise this specter of a ground operation at the same time israeli defense forces said it cannot deny hamas militants may still be entering the israeli territory through some

of the breached areas. there is a question of stabilizing the south let alone entering the next phase. jonathan: this coming just as we are on the brink of a pact between israel and saudi arabia. there are moderate countries in our region but want to normalize relations and live in peace and coexistence. definitely, saudi arabia is part of them. there is a feeling over the weekend that they could take a massive step back but i think that leaves the on the table. lisa: that is what israel is saying and the u.s. saudi arabia has put out a statement trying to support some sort of two state solution. also saying part of the situation was part of the reason for this. that said, you had israeli officials coming out and saying what they are saying officially and what they are saying behind closed doors are two different things. you feel that geopolitical tension as they try to finesse the messaging. tom: as people i getting up to

speed, i would not underestimate the immediacy of three days or the beginning of three days of action. scope and scale, 19 67, 1000 israelis died. 1973, maybe 3000. we are well on our way to those kind of statistics. jonathan: shocking is a word we will use certainly more than once this morning. coming up next on the dysfunction in washington, d.c. this is bloomberg. ♪

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terrorist attacks. jonathan: the president of the united states over the weekend following those tragic attacks on israel. first look this morning. looking accrued, 85 .91. looking at the brent price this morning. 87.65. tom: it is a nice lift on a percentage basis. i don't think it is a surprise to anyone. i guess it goes and i'm going to act like. it comes back to the suez canal which has been part of these tensions. even though egypt is perhaps sidelined from this war, the suez canal is close and that will definitely affect the oil price. jonathan: talking about it a lot this morning. whether israel directly implicates iran. the wall street journal to some degree did yesterday with its reporting. we have not heard that confirmed

by the u.s. administration and we have not really heard that confirmed by israel either. tom: the confirmation is not out there yet and yet is there. i'm not all that concerned about it other than the persistency of what iran has been doing. i mentioned this. i think it is really important for people getting up to speed on the geography. this is a two front war and i'm sure israel -- maybe a 35 four. certainly front and center as they focus on the south and gaza strip. jonathan: this function at home, we have talked a lot about a speaker less house. the list goes on. the list goes on. tom: smartest thing i ever heard this morning was norman role. we have to staff up. we may have to staff up here on our military.

let's get to it with the policy research directly -- director. there is a photograph of lyndon baines johnson in 1967. you can feel the fear in the room. the good news is they had a speaker of the house to legislate off of in john mccormick. we are fractured. how serious is the fact that america, in 2023, is not the america of 1967? >> three things come to mind. number one, i agree with the notion that it is time to staff up but i would pause that the time to staff up was probably before this. it was weeks and months ago when we had time to do so. we have held up dozens of military appointments in the senate. we have no ambassador to israel. there are numerous appointments across the government especially for policy that remain vacant

for what have largely been petty or parochial reasons. that is point number one. you will see the senate move quickly for some of these nominees be even the senate moving quickly means we have to wait a few weeks. when we think about the house, it is a little bit silly to talk about petty, personal politics of what is going on in the world. putting it into perspective but that is what we are going to have this week. i'm not fully convinced we are going to get a speaker by the end of this week. tom: you have lived this and i have lived this off the fields of ohio and onto the west. there is an american isolationist streak that says the eastern mediterranean is not our business. define modern isolationism in your washington. >> modern isolation is that we do not have to be involved unless it impacts us directly. of course, this will impact us directly. the white house does have its gloves on when it comes to iran at the moment.

in part because it is trying to figure out what is going to happen with the prices of oil. i think that dynamic is crude but something we are going to continue seeing playing a larger and larger part of this discussion. what happens to saudi arabia and iran when they get pulled into this war? what are we going to do with iran when they are more deep fully implicated? what about saudi arabia who was already showing some signs of a willingness to increase production next year? all of these things are playing into a white house that was already thinking about what it wants to do as it begins its campaign run. how it will try to expand by the nymex in a way that can hopefully appeal. the calculus here gets more complicated by the second. jonathan: our ability to provide aid in this country is not curtailed by the absence of people in key positions. >> the simple reality here is

that congress can do whatever it wants when there is -- we talk about in the senate, the procedural limitations and in the house, we talk about how limited the pro tem is. if there is a majority or a super majority, they can do whatever they want. they are not going to until we have more clarity on the speaker. i think this is going to be a wasted week on capitol hill because we are going to waste it trying to find a speaker without any guarantee we will have one. my gut tells me we may have to wait until next week with speaker pro tem mchenry leading to actually start talking about providing more aid both to ukraine and to israel. because those two are getting wrapped up together now. jonathan: that is the house. let's discuss the senate. i they embarrass this morning? embarrassed into stepping aside? not stepping aside from their position but stepping aside to

make sure those appointments can go through? >> i think the way that we should expect, a tactical retreat. they are not winnable to pull back from their positions. they believe they are righteous but i do think you will see the white house and even members of their own party implore them to allow some of the more strategically significant opponents to get through. lisa: you said something interesting about how ukraine and israel aid are getting tied together. there is the question of whether they will be an opening of funds to israel that will then mean more funds to ukraine or fewer. how are you viewing that discussion as it really evolves particularly in the house? >> i think it is very clear that getting money to ukraine has become incredibly more difficult. the politics around it have become a topic for a number of reasons and the one i continue to hear is that there is no clear strategic end? what are we hoping for.

from all of our assistance to ukraine. is it pushing back on don bosse, crimea? what is the strategic goal here. what i expect in the way the hill usually works is you create a snowball that rolls downhill and captures everything so that it is harder to vote against it. when you start thinking about what the type of package looks like, i think it includes ukraine funding was some sort of guidance around with that funding should be used for. some sort of save face for those lawmakers who are concerned and even fema funding. you build something like that, it is very hard to vote against. lisa: to wrap this all together, i am curious what you think about the intelligence failures and how you would interpret that not only from israel but globally from the u.s. perspective and what went wrong here. >> i think all of us, our thoughts are with those affected and what is still ongoing.

i have to tell you, throughout the conversations this weekend, time and time again, it came back to the fact that an operation of this scale does not get done without there being observable dynamics at play before hand. there is deep concern there was intelligence failure in israel and on our side as well. that is scaring people. i think that is something that is going to be of deep focus in the months afterward. i would not be surprised if you see this become a public part of the conversation because it does seem like the scale of the failure here is meaningful. jonathan: thank you. i think it already is a big part of the conversation. let's wrap up the next hour on bloomberg tv and radio. we will catch up with annmarie hordern dorm to break down some of these issues. beyond that, we hear from the senior fellow of the atlantic council on what is happening in the commodity market and the

breakdown potentially between saudi arabia and israel at a time we thought we might be close to a pact between the two nation. tom: there are different undercurrents. it seems like this is going to have a significant length of time. anne-marie particularly is a nerd that. she understands the timeline of these things. 1967, 6 day war. that was a six-day war of convenience. lisa: curious about how this really does evolve and escalate through the region. i think we are all watching that closely. jonathan: without a doubt. up by three point 6% on brent crude. getting closer to 19. from new york, bloomberg's anne-marie up next. what do you see on the horizon?

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>> today, the people of israel are under attack. orchestrated by a terrorist organization, haas. >> it is incomprehensible and we are still waking up and hoping it is a nightmare. >> this is israel's 9/11. and israel will do everything to bring our sons and daughters back home. >> we chose the peaceful path to achieve our rights. but israel continued using blunt force against palestinian lives.

>> the united states stands with israel. we will not ever fail to have their back. >> this is "bloomerg surveillance" with tom keene, jonathan ferro and lisa abramowicz. jonathan: tragic pictures over the weekend. for our audience worldwide, this is bloomberg surveillance on tv and radio. your equity market negative by 0.6 percent on the s&p 500. the conflict between israel and hamas entering day three. tom: and it is top of list because it is extremely dynamic right now. frankly, outside the gaza strip is just as important. diplomacy or non-diplomacy through day, day three has got to be front and center. jonathan: and i think asking the same question. how did this happen? lisa: one thing we were just hearing is it was not just an

intelligence failure by israel but also by the united states, by the other allies. how is this not picked up and it has raised questions about security on a whole host of friends as people look toward potential escalation. will israel come out and blame iran directly. >> buried in the news flow this week and is the idea what does israel do in direct confrontation with iran? they have the capabilities to do that but it is unimaginable is how i would put that in yet people are trying to put a probability on that. jonathan: in the immediate aftermath, thinking about his full ground invasion, now you start to ask the question whether hostages, the scores of hostages that hamas has taken complicates that effort. tom: on twitter, i believe from nepal who have been taken in some sort of hostage.

i would go back to our initial insight in the 6:00 hour which is the geography of this. you have 2 million people crammed into an area that is two times the size of washington, d.c. this is not urban warfare. it is highly congested territory that moss is about taking. jonathan: one of the most densely populated facets of the world on the planet. in the equity market at the moment, 0.6%. the treasury market is closed today. we turn to the german bond market. all eyes are on crude. it is a move of about 4% on wti. let's call it $86. brent crude right now close to ata. lisa: it is kind of amazing to think we would come in and talk about payrolls and how much has changed over the weekend.

some of the details of this week i getting deemphasized in favor of what you are talking about. people scouring the headlines. for those who are following the sort of normal role of economic supervision. today, we do have the kickoff of the world bank ims annual meetings in marrakech. curious, our question around how they may weigh in on this, where they may provide a. this comes after christine lagarde came out and noted the imf has cut its global growth forecast. meanwhile, there is yet another deadline for some of the autoworkers strikes. this time in canada. against general motors basically trying to get some sort of agreement similar to the one they got from ford. there is also some sort of strike at a volvo mack trucks factory in the united states by the uaw.

jonathan: thank you. our top story this morning, the israel-hamas conflict entering its third day. israeli forces responding with strikes in gaza after the militant group entered israel taking hostages. iranian support he officials -- the wall street journal reporting iranian officials helped. >> there is a long relationship between iran and hamas. hamas would not be hamas without the support it has gotten over many years from iran. we have not yet seen direct evidence iran was behind this particular attack or involved but the support over many years is clear. jonathan: joining us now is bloomberg's anne-marie. how that point their evolves, the very specific point about iran's direct involvement. it does not hold the keys to how this escalates and whether this

turns into a broader regional conflict? annmarie: remember, iran has a number of proxy groups it backs. direct confrontation with iran, say israel were to attack, if these reports are to be true, that would stem a much wider regional conflict. i have talking to a lot of people over the weekend and have yet had anyone on the phone say to me or in person say to me that iran was directly involved. we all know for years iran has backed and funded and supported hamas but directly involved, a lot of people have thrown a lot of cold water to me on that fine point. jonathan: what a difference a week makes. the middle east region is quieter today than it has been in two decades. how did they miss this? how did we miss this? annmarie: huge intelligence failure. i would say more so on the israeli side. they have supposedly meant in gaza, this huge border security

while in gaza. this is a group they have infiltrated. to that point, they are obviously, what hamas was doing was using something that was really outside of the normal structure to make sure they could in fact execute on this attack. it is a huge security failure. that is going to be looked at secondary at the moment. what israel is doing right now is mobilizing 300,000 israeli soldiers. the jerusalem post says this is the biggest conscription they have ever seen. what leads to next is likely a potential ground invasion. something we have not seen in decades and the broader implications are really going to be paramount. when people say this is a 9/11 moment, not just for the shock and a lot of what happened on the ground in israel, but the fact that this is now going to spread. this can affect everything including next year's presidential election.

tom: we talked about this over the weekend and we are all getting up to speed and particularly of a certain vintage, palestine is yasser arafat. how do you identify or more important, how does president biden identify who to speak to that represents palestine? annmarie: hamas is not the palestinian authority. it is very different. hamas owns the gaza strip. this is different than the west bank. with a biden demonstration will likely do is put a lot of pressure on saudi arabia, qatar, turkey. these are the groups that have direct lines of communication and house officials from hamas. that is going to be have a likely are able to extract hostages. the hostages at this point could be from a number of countries. these are not just israelis. you heard u.s. officials say likely americans are part of that. a chinese national potentially

very. there could be potential international pressure coming from around the world when you know hostages taken. somewhere hiding in gaza, likely in a time all. it is not just going to be washington, d.c. that is going to exert that pressure. lisa: you said this may affect the presidential election. there is a question about the hands of the u.s. and how they will be tied about the fact that we don't have a house speaker, a whole number of key positions that have been filled already preparing for this. how much does that really interfere with the u.s. ability to respond? annmarie: on the ground in israel and the former israeli ambassador was on cnn yesterday talking about -- we have a big posting in israel. people who have been doing this job for years. a lot of work that gets done in the middle east gets done in washington, d.c. they have direct dialogue with the white house.

when it comes to what is happening with the house at the moment, there is no speaker. what you hear from the interim speaker is that the only thing he can bring to the floor is a speaker vote. he cannot bring legislation. but tony blinken yesterday put a little bit of cold water on the fact that they would not be able to send israel the goods they need. we already know they are sending warships. there was a memorandum signed under the obama administration that every year, there be $3.8 billion of security assistance sent to israel. that is likely something they can use and draw from. it does create a bit of dysfunction if washington does not help when there is national security concerns. annmarie: one thing i do want to get your view on and what the political implications are is how to understand some of the statements coming out of saudi arabia, qatar and the like. they have all been critical of israel saying israel created the situation and yet there is still

this feeling that the saudi arabia and deal is still on the table. do you have any insight on how to understand the position of some of the nation? annmarie: i think we need to look at what they are doing optically in terms of press releases. they all have a domestic audience as well. at the same time, look at who their phone calls, what they are doing in terms of their phone calls. i believe there are a number between secretary of state antony blinken and his saudi counterpart over the weekend. the diplomacy will be happening behind the scenes, not in the press statements when you see these arab countries. normalization talks are going to hit a massive pause from this but i don't think they are done. the big issue was part of the normalization talks. they continually call for a palestinian state but what he said was about the life of palestinians.

they would have to be repercussions or the saudi's where israelis would have to give concessions to palestinian individuals for them to have a better life. how do you do that when there is a state of war between gaza and israel? you have to look -- gaza is also different from potential dialogue and diplomacy with the west bank. jonathan: stay close. i want to turn to the price action briefly. crude up by 3.8%. equities just a little lower on the s&p 500. we have talked a lot this morning about the lack of a speaker, the lack of an ambassador in israel, lebanon, egypt. the list goes on and on. we touched a little bit on the senate majority leader being over in china. disappointed with xi jinping's

response to all of this. where is china? annmarie: they put out a statement and talked about this conflict basically in the realm of the bigger talks, the hostilities you have seen between palestinians and israel's. it did actually come out and condemn the massacre of israelis and others that we saw over the weekend. xi jinping had this meeting with bipartisan senators. because of what happened over the weekend, this became a top priority for schumer and what he wanted to discuss in the dialogue. this was supposed to be a meeting about a ton of other issues but then became about this conflict tom: how do we project into the region? the phrase i use this morning as we have to step up. what are we going to see from the biden administration? annmarie: potentially, secretary of state antony blinken will have a shove diplomacy. we are sending warships as well. they will be a huge show of

military force. this will not go unnoticed in the region. jonathan: thank you. coming up later on this hour, we will catch up on the politics in the middle east and reaction to the crude market. tom: this is going to be an important interview. jonathan: wti up 3.7 percent. live from new york, this is bloomberg. ♪

♪ explore endless design possibilities. to find your personal style. endless hardie® siding colors. textures and styles. it's possible. with james hardie™. >> the ongoing events in israel over the next ash last few days are horrific. i urge you and the chinese people to stand and condemn these cowardly and vicious attacks. i was very disappointed by the foreign minister that showed no

sympathy or support for israel during these troubled times. jonathan: the senate majority leader speaking in beijing ahead of today's meeting with chinese president xi jinping expressing his disappointment in criticizing china over the foreign ministers statement showing no sympathy in his words or support for the israeli people during these tragedies. here is the price action. the equity market move lower on the s&p 500. yields totally unchanged in germany. there was a bit of a haven demand story into the perceived safety of bonds in places like germany. the crude rally continues. wti up by 3.7%. similar move on brent. tom: with you and -- u.s. bond market close come out also see the haven of swiss franc speaks volume.

certainly, swiss franc confirms the tension this morning. jonathan: bracing for what is next. tom: what is next and the answer to me is the son in the night and it is day three of a war. it is a little bit like february of two years ago with ukraine. jonathan: a targeted response, a broader regional conflict, ground invasion. we don't know. tom: we will have to see. right now on the markets, eddie joins us. how does the bond debacle -- i have on the real bloomberg index, i have a standard deviation move. the answer is you have to deal with this strange mathematical word magnitude. had is the magnitude of the move change your equity calculus? >> i have been thinking about that all weekend. when we came into this weekend,

the tales in the market and skew was quite low and that has been true for the last few years outside the regional bank crisis. obviously, that is going to change. i would say options markets are notoriously bad at pricing geopolitical risk. the first thing it tends to do is overreact. i do think you see that spike in volatility. what i will tell you is we have seen big tech act as a safe haven. if that does happen, that is going to start muting your volatility again. that is what we saw february 2 years ago and i would be curious to see if that continues this time around. tom: this morning is the idea that if you have higher yields, it solves its problem. yields come in because higher yields beget that kind of move. do you buy it for a minute? amy: the way we have been monitoring it is the twenty-year proxy of the etf.

that skew is extremely high. the first nuance is all the rate sensitivity etf's like your xl you, consumers, those have dropped in skew outside of this weekend but that never happened in tlt. essentially what it is telling you is the demand for downside in tlt has not changed even with the moves we saw last week. lisa: as we talk, there are a whole host of unknowns people are waking up to. looking up every hide -- headline and wondering if this will broaden into a wider regional conflict and generally cause some stagflation schedule. people are harkening back. how much could you see a positioning -- positioning shift preparing for this? i'm curious how that is even traded or imagined or whether people are even going there. amy: i think it is helpful today that the bond markets are actually closed because

essentially what you are going to see is the equity in a vacuum response. we will see what happens with energy, with the rate sensitive etf's. but we won't get the response until tuesday from rates itself. i think what you are going to get positioning wises people who have done well and participated and started from the video blowout earnings saying perhaps now there is a reason to hedge because we are not just talking about this kind of orderly possibility from heights. we are talking about those unknown unknowns. lisa: are you getting a lot of calls from people trying to figure out how to view this through a lens of protection? a getting a lot of sense that investors are watching this with nervousness? amy: yes and i think they will continue to because what we have seen so far this year's hedging has been very stratified. you have not seen it on the s&p. you have seen it in just the homebuilders space.

but what i think we will see is the question of does it make sense to have a broad-based heads right now given these geopolitical risks? everything going on, the china implications to iran. those tend to be these knife down scenarios. tom: what is the derivative space say about the chosen seven? jp morgan coming out on friday. i'm fascinated with what the derivative dynamics are of massive free cash flow. massive cash on the balance sheet text. amy: they are pretty sanguine and that has been the thing. tom: does not care about the why. she just looks at the map. amy: i can tell you the math is telling you it is sanguine. one thing clients have said to me is we talk about them as long-duration instruments but the down have to be. they can choose the buyback stock if they want. it is not necessarily the same as an excel you where they are just more duration sensitive.

there is this ability to change that which gives them slightly more optionality. then, you have had the safe haven status. as you continue to see that, that continues to be reflected. lisa: where's positioning when it comes to energy especially in light of some of the rally we are seeing today and discussions around some kind of continued price strike in the wake of other potential disruptions. amy: what i will tell you is a lot of those hedges you have seen have rolled off but that was prior to this weekend. what i think we start seeing beginning today is re-initiation. folks are going to sit here and say what are the geopolitics coming forward. of course for energy but also for rates. jonathan: thank you. your latest update this morning coming from afp quoting the israeli defense minister

ordering a complete seizure of the gaza strip. this is a quote. we are putting a complete seizure on gaza. no electricity, no food, water, gas. it is all close. tom: and again, some would say it has been all closed for decades and decades. the answer is the geography here is extraordinary on the narrow strip. again, two times the size of washington, d.c. all the way down to the egyptian border. the geography speaks volumes here. i'm going to listen to mark. jonathan: a couple of things we're listening for. whether iran is strictly implicated and whether this leads to a full ground invasion of gaza. there was a strong hint it might when we heard over the weekend from israel's ambassador to the u.n. that every inch of gaza has become part of hamas's war machine, vowing this country

into -- israel -- that is severely complicated by the scores of hostages that hamas took over the weekend. lisa: some reports is saying they number more than 150 and they are international hostages. israel confirmed that some of them are u.s. citizens. there is a question on how that complicates broad attacks but it seems to not have precluded some sort of broad severing of a lot of the basic resources to the region. we are dealing with a situation where i believe it is 2.3 million people live there and trying to weed out the hamas versus the civilians is going to be very tough. jonathan: tremendously difficult. coming up in the next hour, plenty of gas lined up to discuss this. the minister of strategic affairs for israel will be joining us at 8:15 eastern time.

later on this hour on the oil market, saudi arabia, senior fellow of the atlantic council and author of saudi ink. tom: author of the royal family of saudi and how they will respond to this. jonathan: much more still ahead. live from new york city this morning. your equity market is low -- lower. crewed up by 3.5%. good night! hey corporate types. would you stop calling each other rock stars? you're a rock star. you are a rock star. no more calling co-workers rock stars. look, it's great that you use workday to transform your business. but it still doesn't make you a rock star. so unless you work with an actual rock star. hi, i'm ozwald. hello ozwald. pam, you are a rock- i wasn't going to say it.

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jonathan: live from new york city. here is your equity market. backed down by 0.6% following a decent week of gains in the s&p. best week of gains going back to early september on the nasdaq. up 1.75%. it down this morning but up last week even with a major move in the bond market. yields this morning, just a little bit lower by a single basis point. the treasury market is closed after a week where we saw the 10 year climb by more than 20 basis points last week for a fifth straight weekly gain. the 30 year yield higher by more than 60 basis points. tom: we will pick it up tomorrow

with a lot of data and really pick it up in asia tonight. the idea there is a lot of debt out there. there is a ton of debt out there. jonathan: the dollar is stronger. the euro weaker. 105.37. the death toll from the conflict between israel and hamas has topped 1500. antony blinken told cnn they have not seen any evidence

of tehran's involvement. lisa, you noticed of this one from punch bowl news. the senate foreign relations committee will soon notify members that the hearing for the ambassador to israel will be scheduled for wednesday, october 18. lisa: things are accelerating as people tried to set up for something that could become a long, and protracted conflict. israeli government is expecting something that will take a long time also shutting down a natural gas plant run by chevron. it feels like this is a multi-front war and it is happening in a sense that people will be experiencing it for quite a while. jonathan: the national security advisor to the president said it was quiet.

not anymore. now there is a sense of urgency you get in washington that was not there before. tom: i'm glad you brought up jack lew. if jack lew can't get bipartisan support, we just ought to give it up. he is a democrat out of massachusetts. he would take offense that i said that. this is a guy that has massive bipartisan cred. it is a litmus test of a dysfunctional washington. jonathan: we want to get to the business reaction to some of this. a growing number of airlines are suspending flights to israel. some european airlines too. lisa: i believe lufthansa was one of those canceling. a host of others didn't cancel

as a number of israeli born people living in other places were coming back to be conscripted into the army as they called up 300,000 troops. that was this morning. they want that kind of force to be prepared to have some kind of offensive and the data come. jonathan: the airlines may need to deal with higher energy prices as well. conflict and israel could affect the wider middle east. crude coming off of its largest weekly loss since march, but tracing some of those losses since the conflict began. the headline of the wall street journal, the front page was about whether the saudis would increase oil output into next year off the back of a potential pact between them in israel. we are waking up this morning suggesting that is on ice for maybe a long time. lisa: some analysts suggested it may not have been unrelated. this may have been one of the

motivations for the attack. geopolitically, iran did not want to see this agreement come to the fore, which raises the question longer-term about what kind of retaliatory actions there will be with respect to sanctions i the u.s. on iran. you are mentioning the report over the weekend, saying that could be one of the initial responses for the pop in energy prices. jonathan: part of that potential pact, tom, with saudi arabia demanding concessions from israel for the palestinian people based on the actions over the weekend. tom: the violence of the military on both sides is so great that diplomacy is off. we need to do what dr. bremmer was talking about. you mentioned 300,000 called up in israel? that is 10 million in the united states. we don't have scope and scale

here. on the bond market i guess around price down for what it has done shattering your retirement account, we are joined by td securities. there is way too much debt. you nailed the curve inversion. td security has led on that. >> it has become the issue. you're talking about higher oil prices. you have other things, including much better than expected growth momentum over the last couple of months, and this debt issue is not going to go away. this is the overarching theme we have been talking about, but no one has been paying attention to it. tom: including me. i have been guilty of this. >> me as well. tom: we are finally, ok, we are

here, so how do our viewers and listeners adjust? >> get ready for a test of higher interest rates. the events in israel will throw a wrench into what we have been seeing. we will see how this evolves. hopefully, the conflict does die down rather than exley -- escalate. you may actually see an increase in rates that could destabilizing for markets overall. we have been talking about a test of 5%. jonathan: where not far away. >> not at all. we could test a little bit higher. you saw how high we got before the financial crisis. i would not be surprised to see us at least try to get through that level now. jonathan: typically, supply does not matter in downturns. supply matters in expansions. he is suggesting why would

anyone want to take on additional duration in addition to high-yield? the answer to that is not many people want to do that so yields are up across the curve. after the stress test we got this morning, when bad things happen will we still buy treasuries? are we learning this morning that we will? >> we will. you see the treasury market and the reaction in the dollar as well. it is a risk asset. that is not going away anytime soon. if you are an asset manager, you may be allocating more into u.s. treasuries because it is risk off. we are still seeing growth and a lot of supply. should you be allocating? should you be trying to catch that falling knife, effectively before you're certain about where that conflict is going to go next? lisa: the u.s. is going to increase aid to ukraine and

israel. i wonder if that will increase the appetite to borrow more, even though rates are high. how does that factor into your view of?rates -- view of rates going higher? >> what does that do to the economy as a whole? the government will continue to borrow. it is not an issue. it is more what price you can borrow at, rather than whether you can borrow another $50 billion. what does that do to companies who also need to borrow in this market? lisa: companies have adjusted/ what you see are workouts with private debt funds where they have extended and pushed out their maturities so long they are immune. what is that no longer the case? when you see the potential for a risk that has not been priced in? >> with every passing day we

have higher interest rates, it continues to build. when are 10 year yields going back to 4%? that is the big question on everyone's minds. even though they may be immunized, they are still waiting for rates to go down because they have financing needs and they are waiting. when can they no longer wait? is that early next year? the middle of next year? when do you get enough of that tick going where they are forced to step in and borrow? tom: we have been doing so much reading on this terrible war in israel. the bankrate 30 year on friday, i missed it -- 7.93%. that is a jump. jonathan: who is paying it? tom: someone out there is forced to pay it. someone is selling into this. these are the knock on effects.

what is agency paper? what discredit look like? >> cheap. tom: that is pro-talk for price down. >> what makes it richen? if the data weakens, the buyers will step in but the buyers are standing on the sideline asking, "why would we catch this knife?" jonathan: friday was an odd one. bonds search then equities rallied. what do you make of that sitting at the bond desk? >> i was sitting there scratching my head. there's a lot of repositioning on friday. yields went sharply higher than retraced a large chunk of their

move. jonathan: is that something technical? >> there's a lot of short. covering was a lot of people taking off i -- i the table. tom: this is how crazy things are this morning. i don't believe we have mentioned there is some inflation data later this week. jonathan: thursday. ppi data as well. tom: which is arguably more important than the stunning jobs report we saw. jonathan: all week we have talked about the potential of the curve have falling to 3, and now we're talking about the curve rising to 5. looking ahead to cpi what are you and the team looking for?

>> we are looking for deceleration overall. if you look at year ago rates they have continued to slow. oil is the big unknown in our minds. if you are looking at it from the perspective of the fed, they are looking at a lot of the core components slowing down.what will headline inflation do ? what are the pass-throughs from oil to core inflation? jonathan: have we started to hit resistance with gas prices in the past week? >> americans are still going to drive. it is a question of what really is the breaking point. how high do gas prices have to go for folks to cut? i was out on the road this weekend. jonathan: you were hitting the traffic? >> oh yeah. jonathan: traffic and manhattan is brutal. tom: it gets worse every year. jonathan: coming, up next the

atlantic council joining us after the horrific events over the weekend and the horror continues based on some of the brutal imagery we are seeing. lisa: i'm curious to hear from ellen wald given her saudi inc. book to understand what the responsibility is. jonathan: 87.30 on brent. ♪llen wald up next. the biggest ideas inspire new ones. 30 years ago, state street created an etf that inspired the world to invest differently. it still does. what can you do with spy? ♪

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>> when i spoke with prime minister netanyahu this morning, i told him that the people of the united states stand with israel. israel has the right to defend itself and its people,.

jonathan: the president of the united states over the weekend following the tragic events in israel, the events that have -- the attacks that have led to a war in israel. good morning. your mark on the s&p 500 is calling back by 7%. the treasury market is closed today. your german 10 year yield is 2.86. the biggest loss of crude going back to march, crude pulling back by several percentage points. 85.50 is where we are on wti. tom: the key global barometer,, this goes through the safety and ability to transmit the suez canal, and that gets you over the challenges of anyone in that area at war. it goes back to 1973.

in 73 israeli soldiers made it to the suez canal and over the suez canal. that is a bit of history i think people are wide on. this comes down to the geopolitics of the region. ellen wald senior fellow of atlantic council. her book saudi inc. is definitive on hydrocarbons. it is timely to have you with us. how does israel get its oil? are they in some way oil independent? ellen: they're are not really oil independent. israel used to get quite a lot of oil from the curtis stan region -- kurdistan region of iraq.

i don't think israel is particularly concerned about getting oil, or making sure they have enough oil at this point. one interesting point that has just come up his israel asked chevron to shut down the operation of the tamara gas field in the northern part of israel. either they think there could potentially be some sort of terrorist attack on that platform, which potentially either from hamas or hezbollah, which signals to meal widening of the conflict and could be a potential risk to gas markets. the suez canal is not all that far. tom: to take it to saudi arabia and your expertise there, which part of palestine does the

saudi arabian royal family support? >> they are more interested in the families who run the west bank than hamas. they see hamas as a destabilizing element. the saudi monarchy do not like terrorists. terrorists are as much a threat to their stability as they are no other areas. they keep pushing for this regional two state solution, regional peace agreement. they have always said they are recognition of israel depends upon -- their recognition of israel depends upon a two state solution. that is why it hasn't gone very far. that is not something that israel or the u.s. i prepared to pushs for at this point -- is

prepared to push for at this point. will they drop this? they have not quite indicated that, but they have indicated that is a top priority for them, especially on the nuclear front. that says to me maybe they are willing to negotiate on that requirement. jonathan: the likelihood is that we would get crude output increased into next year. as you look across the region now, where will saudi arabia stand on that particular point? what could this mean for iran production and those barrels of oil that find themselves on international markets? ellen: iran has been selling more oil recently, not necessarily because they are avoiding sanctions but because iran has been able to increase their production, so they are selling more with prices up across the markets. iran is able to get more money

for its boiled even if it is still selling it at a discount and even though it has competition from russian oil. if saudi arabia puts out another one million barrels a day than they are right now, that would definitely threaten iran's moneymaking scheme from oil. it would send prices lower. a lot of other things could send prices lower for iran so that is not the only issue here. it is compelling that saudi arabia sees that one million barrels a day as a bargaining chip with the united states. they say "you are going into an election year. we can put one million barrels a day onto the market, if you help us out, if you get us this defense pack before election season, before a new administration comes in." i think that is a compelling chip that saudi arabia has

thrown into the game. lisa: you talked about iran selling more oil, into comes at a time when there is talk about -- and it comes at a time when there was talk about punitive measures if i ran is discovered to be part of planning this attack. what effect could that have on the price of crude and in general to the region and the geopolitics there? ellen: i think any tightening of sanctions is. not really going to have much of an it is hyperbole. enforcing sanctions is a multi-year process. if we were hearing about a blockade of warships, that would be a different story. if the united states are going to use their navy to ensure that iranian ships cannot sell their

oil that would be a huge shift away from the current policy, which is just let's try to enforce sanctions. it takes 3, 4, 5 years to do that. that could cause a major spreading of the geopolitical conflict. lisa: can you say on a broader level then, do you say that any disruption to oil has been overstated, or is there a broader implication as this goes on that you are watching? ellen: the four dollar increase we saw overnight was too much. we have seen regional conflict between israel and gaza before, and gas prices jump a little, and then they come down because than people realize there is no larger impact to oil producers. we are on the verge of a larger

geopolitical regional conflict there. so many other pieces here. the jump in oil prices is anticipating that, anticipating there could be some sort of disruption and that is more likely in this case then it has been in the past. jonathan: we need to diagnose the selloff last week. was that selloff i anticipationn -- selloff in anticipation of booster selloff from saudi? ellen: it is definitely more of a larger demand issue that is coming to light or is finally being realized in the market. i think the news that saudi arabia could increase production starting in 2024, if they get what they want from washington, could definitely be a catalyst, but that did not come out until friday and the selloff started before the. i think it is more based on the

demand issue. jonathan: bad news was dated pretty quickly. thank you. we have said this a couple of times, tom. saudi arabia could be used it off of the back of israeli packed. tom: we each have our own story. i go back to 73 and how i interpreted that. it took me a couple of hours to get to the emotion of "it is there 9/11." i didn't get there right away. neither did the washington journal or any other news organizations. jonathan: $88 on brent. wti just through $86. ron della, the minister of strategic affairs for israel. live in new york, this is bloomberg. ♪

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it's an amazing thing when you show generosity of spirit to someone. and you want people to be saved and to have a better life, then you don't stop. we have been able to reach over 100 million people impacted and affected, and at risk of hiv. the rocket fund takes all of the work that we're doing, all over the world, and looks at the most effective ways, to get resources to them, to get services to them. the idea that we have saved five million people's lives, it's overwhelming. it's everything. >> today the people of israel are under attack, restricted by a terrorist organization, hamas. >> it is incomprehensible, and we're still waking up and hoping it is in this matter. >> this is israel's 9/11, and

israel will do everything to bring our sons and daughters back home. >> we chose the peaceful path to achieve our rights, but israel continued using one force against palestinian -- want force against palestinians rights. >> the u.s. stands with israel. we will never fail to have their back. >> this is bloomberg surveillance with jonathan ferro, tom keene, and lisa abramowicz. tom: good morning. bloomberg surveillance with jonathan ferro, lisa abramowicz and tom keene. this from dr. bremmer -- "the israeli defense minister, i ordered a full siege on the gaza strip, no food, no gas, everything is closed."

that upon 2 million people. jonathan: we are focused on two things, the potential for escalation abroad and the dysfunction at home. on the escalation abroad, the potential that iran will be implicated by israel, and the dysfunction at home. we have no speaker at home, no ambassador to israel, egypt, lebanon, whether this will give congress a sense of urgency to address these things. tom: annmarie hordern joins us here in a moment. these are normal times. we can have our domestic games, but the domestic games slip away given a legitimate war. jonathan: almost immediately based on the reporting we have had this morning, the senate foreign relations committee will soon notify members that jack lew's confirmation hearing is scheduled.

already you see some action. jonathan: the former secretary of treasury -- tom: the former secretary of treasury there. i love the reading you have been doing over the weekend, lisa. egypt was supposed to be the protectorate of gaza until 67, i believe, and then it can move up north towards lebanon. lisa: there was some discussion about fortifying the area with syria but also with lebanon, especially in light of hezbollah. right now this is entering a fragile time for the middle east. it comes at a time where we had been talking about a saudi arabia and deal -- saudi arabian deal normalizing relations with israel. how was iran involved? what do the likes of saudi arabia and qatar have in moving

this forward in a more benign way? tom: i question where that stands now after some of the images we are seeing. i look to your good thoughts here about some form of dialogue but you wonder about the violence to come before there is dialogue. lisa: in conversations we have had, there are a lot of questions about where the intelligence breach happened in israel and in the u.s., what the response will, be like how far this will percolate. there is nervousness. you can feel that this. morning and the tape -- this morning in the tape. tom: the bond market is closed today, that there is a bond proxy. jonathan: german yields coming in,, classic risk aversion textbook stuff classic risk

aversion textbook stuff. s rally -- bond market bids rally. a little bit of a weaker euro, stronger japanese yen, but looking at crude there is the move, up 4% after the biggest selloff going back to march. tom: 12 you on radio and television we have been trying to -- to all of you on radio and television, we have been trying to give you good talk about the war. we will have the former ambassador from israel to the united states coming up in a few minutes. annmarie hordern joins us now. i still can't get use to the modern silliness that we do not have an ambassador to israel. i get it. today's and weeks after an inauguration -- this is juvenile. annmarie: that nomination was announced in september. they have yet to have a hearing

yet. there are a number of steps that go into a nomination, but his story look how long it took the trump administration, the average of time to get things done in the senate has gotten exponentially longer. tom: why? annmarie: there are a number of issues. sometimes it comes down to the specifics on the individual. jack lew has not yet gone through the senate foreign relations confirmation committee. that is the next step after they go through the fbi and irs investigation. some republicans have voiced concerns over an individual like jack lew. he served in the obama administration. if there is any lingering confusion are concerned that a jack lew investor may want a better relationship with iran,

one single senator can have a hold. we are not that year -- we are not there yet with jack lew. they are moving quickly on this. he was. only nominated in september jonathan: november 17, we have a deadline, government shutdown. can you imagine a government shutdown with all imagine a government shutdown? annmarie:. what you hea -- annmarie: i can. what you hear from patrick mchenry is that all he can do is bring together a vote on the house floor for the speaker of the house. house republicans will be back in washington dc along with me this evening, 6:00 p.m. and they will have a dialogue and a discussion as well as tomorrow. wednesday they are supposed to

have a vote within their conference. can they rally behind these individuals2? jordan or steve scalise -- jim jordan or steve scalise? scully's would be the obvious -- scalise would be the obvious individual, but he is dealings with. jonathan: in washington to get a move on. tom: i think there is a sense of urgency but i'm not sure the officials want to do that. joining us is the chief investment officer at -- marta, morningstar owns active and

index funds. let me start with an update on active management has done coming out of the pandemic. >> it is an interesting story because when we look back on active and passive and the narratives around them there has been this view that passive is ascendant and active is on its way out. but it's been interesting that we have seen in the wake of the pandemic is that there has been more opportunities for active to add value. i'm not saying that is the case for all active managers but the sense that the rising tide raises all ships and all you have to do is raise your treasury bonds and then you can call it a day, that has been called into question. qw have our own -- we have air own investment strategys within morningstar investment. we have not been in those traditional big treasury stakes. lisa: there is a real test here. this is something john raised

earlier, about how bonds will factor into portfolios at a time of instability, given that before this weekend we saw that bonds with the source of instability. how much will they act as a haven in this next cycle? the conflict we saw spring up over the weekend -- marta: it is an important question. one of the things that comes to mind for me as we are looking at this tremendous shift in bond yields. there has been a lot of introspection. can we expect treasuries to behave? is that a safe haven status? some of that introspection out in the near term. we could see some folks hiding for the protection there, even though there are these existential questions randy

deficits higher -- questions around deficits. tom: what are the flows on fixed income? i'm talking about retirees scared stiff. what you see in chicago? marta: i can tell you from a flow perspective we still see some dependence on long treasuries, more so than you would expect a given performance, but what i can tell you from anecdotal conversations with financial advisors is there is enormous frustration, in norma's disappointment -- enormous disappointment. psychologically there has been a pullback from what they can depend on from the treasury side of things. jonathan: thank you for your view this morning. a difficult morning to talk about markets. equities our plan back slowly

recovering. we are down half of 1% on the s&p 500. the rally picks up in crude. very close to 88 on brent this morning. tom: i continue to follow singular headlines, late, late afternoon israel. you go into the night. you wonder what military response we will see from both sides here and how that affects oil going into the next morning. jonathan: we are down here by 0.5%. coming up shortly, ron dermot the israeli minister of strategic affairs. that conversation in about five minutes time. jonathan: this guy is the guy wired into the united states and washington for tel aviv and jerusalem. he is the guest this morning. lisa: specially someone who has insight into the agreement that

was getting negotiated between saudi arabia and israel and where that stands. there's a real question about what happens now? where are the pressures? how isolated is iran from saudi arabia as they try to negotiate peace? jonathan: a moment of silence at 9:20 eastern time. s the new york stock exchange extend its deepest sympathies to those killed. we will hold a moment of silence at 9:20 eastern time. let's go through the broader price action of the moment. bonds a rallying. the dollar is stronger in the places you would expect the dollar to be stronger, against the euro, against the yen. in the commodity market, there is your rally up by 4%.

seemingly this comes back to iran every single time. will they be directly implicated? does it take away the incentive to close that deal between saudi arabia and israel? ultimately, does it take away the potential that we will get a boost to output anytime soon? lisa: ellen wald says she does not see any sanctions materially impacting the amount of oil that iran is putting out onto the markets so there are real questions about where the sum of the disruptions will come. jonathan: coming up ron dermer. ♪

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it's possible. with james hardie™. >> the challenge for israel and the challenge for all who support israel and depose horrific acts of terrorism -- oppose horrific acts of

terrorism is to take accountability for what happened and to assure that this does not happen again. that is likely to take some time. is fraught with some difficult decisions for the israelis to make. jonathan: we need to talk about those difficult decisions. that was antony blinken speaking on nbc. tom: why the duration? ron dermer was ambassador of israel to the united states for seven years. his extended period in washington, and his work at warden is noted. his experience is important. jonathan: thank you for being. with us this morning first and foremost we have to extend sympathies to

you and the nation of israel. there are some reports in the media we would like to get a on the record response from youn about. hamas has met with israeli officials to talk about releasing hostages. >> qataris were talking to hamas about it. israel is not negotiating anything. jonathan: have they talk to you about? ron: qataris are talking to hamas. i appreciate the condolence appreciate the condolences. we have not seen anything like this, even in the middle east, which has a lot of brutality and savagery in it. when you have killers, hundreds

of terrorists who invaded israel on saturday morning in trucks with ak-47s mowing down people at a dance festival, went into people's homes, killed whole families, kidnapped children women,, elderly, it is sick and savage. you have a battle between the forces of civil elation on one side and barbarism on the other. civilization has to win. as you heard in my take -- it might take some time, but we will exact such a high price that none of israel's enemies will never think about doing something like this again. the feeling of euphoria on the other side -- israelis of a certain age remember 1973 when a surprise attack was launched against us on a few days. the end of the war looked very

different from the beginning of the war. jonathan: based on what you have just told us, can we assume that for grand invasion is inevitable -- a full, grand invasion is inevitable? ron: we will do whatever we must to ensure that all of the terror organizations and all of the enemies of israel and tehran is the biggest enemy of all. as i speak to you iran is trying to push other people into the theater of war. we will have to send a message to everybody. israel is a tiny country. we are about the size of new jersey. the u.s. has 40 times the population of t israel. that is more than 10 9/11s.

you can imagine the discussed we feel. we can go from strength to vulnerability. people will see the might of israel, and i hope that the wall-to-wall support that we appreciate, that we had today from president biden, the sport on both sides of the aisle in washington, i hope in the days ahead that, that support can continue when israel has to do what it has to do to exact a heavy price from this terror organization so that they do not threaten us or any civilized country around the world. this will inspire terrorists around the world over. the isis caliphate inspired people the world over. we have a force like that right in our bark yard -- backyard. not millions of miles away, a few meters over the order.

they will reuther day two days ago. we -- will rue the day two days ago. we will remember the critical miscalculation hamas made thinking it will be business as usual in israel. the people are outraged. they have woken not a sleeping giant but a sleeping maccabee. jonathan: are you aware of any evidence that iran was directly responsible and help coordinate these attacks over the? -- attacks over the weekend? ron: we know for sure that iran provides 93% of the military budget of hamas. they are trying and have worked to put weapons, not just into gaza, but also into judeo, samaria, the west bank. they support hezbollah on our

northern border. we know that iran has coordinated meetings with all of its terrorist proxies in the region. almost to kind of join operations. it was one question i'm sure you are interested in. did they know about this before hand? initially. we did not think that they did know there is some evidence that they did know about it. we are working to verify that evidence, now that we are looking back at our intel and seeing exactly what the situation is, it is unclear to us. they are working right now to bring more and more terror group's into this fight. it is important not only to stand with israel unequivocally, golfer -- to call for freeing

the hostages, but to stand against iran. the un security council tomorrow, europe, france, britain, germany they can bang security sanctions against iran. iran is exporting a lot of oil, they are getting a lot of money. it is time the world unites against iran. what you are seeing is a tentacle of an iranian octopus. we need to deal with the regime that is sending them. i hope the world will stand with israel in the days and weeks ahead to reverse this and turn it into a victory against barbarism. jonathan: we have some news to work through on our side and i would love to continue this conversation with you. according to the cbs white house reporter 9 americans were killed in israel. this goes beyond the people of israel. the whole world is looking at

this moment. on i ran you mentioned you may have some evidence that implicates iran for the implications that took place over the weekend. can you share with us that evidence? ron: i can't. if i could, i would. we need to look through it. our working assumption is that they have. our working assumption a few days ago was that they did not know about it. we will have to work to verify it. w have toe work through that right now because i want to make sure that when i say that we know with 100% certainty. jonathan: we heard that iranian security officials helped plan hamas' attack at a meeting in beirut last monday according to ceded members of hamas and hezbollah. for you aware of a meeting that took lise last week between iran and the leadership of hamas and has blood? -- hamas and hezbollah?

ron: they have meetings all the time. it is no secret. you can see photos of it. they have had many, many meetings over the last few months. they have worked very hard. iran supports the she a militias in iraq -- shia militias in iraq. they support hezbollah in lebanon, they support both palestinian islamic jihadists. they are trying to put a noose around israel's neck. we have to make sure that we break out of that noose and deliver such a mighty blow that they will not forget it for generations. tom: i want to take your years of experience here. it is outside of your remit, but i cannot get my head around how

israel invades the gaza strip. do you anticipate substantial bombing and air attack, or are we ready for some definitive, original, building to building urban warfare in gaza? ron: because i'm a member of the security cabinet, i will not discuss that. let's say we have a clear goal to cripple the capabilities of hamas and also there will to wage war against us. you will have to interpret that the way you want to. those who doubt israel's capabilities are making a huge mistake. we will do what we have to do in order to achieve that goal. we will achieve that goal first and foremost for israel, but it is for all of our arab partners in the region. some of you may have conversations with officials, from the middle east and they may tell you a very different story about israel than they may

be saying publicly. there have been times in the past where israel has fought with these terrorist organizations. usually the ones fighting first and foremost are those threatened by jihadi forces. they do not want these forces of barbarism to win because they threatened them. just one thing, if i may, this is also very important for the pursuit of peace, eventually because no one will make peace in a week. a strength will -- jonathan: -- tom: for our audience can you help triangulate the focus on gaza and now on the west bank and on a fractious northern border with lebanon? how will israel affect a three front war?

ron: we have to ensure that our structure is done in the certain way that we could deal with threats that materialize. we have issues on the northern border. we had sirens there an hour ago. we had attacks there yesterday. we need to be clear on the northern border that we have all of the capabilities we need to defend ourselves. the u.s. brought a carrier group into the eastern mediterranean. that sends a strong message to deter our enemies and makes it clear that america backs israel. we are grateful to president biden for doing that. it makes the odds of war less likely not more likely. we have to have our eye on a 360 degree radius to deal with all of these changes.

the stronger and faster we act, the more it will send a message of strength and purpose. that message is critical to actually ultimately de-escalate the situation and prevent these things from happening for many, many decades. this is an attack the likes of which have never had happened in the state of israel. we may have lost 1000 people on a single day. lisa: there are a lot of talks around saudi arabia and normalizing relationss. it seems like those are iced in the near term. saudi arabia put out a statement repeating its warnings about the danger of the explosion as a result of the continued occupation and deprivation of the palestinian people. how much do you see this as precluding additional discussions with saudi arabia and making this talk not viable in the near term? ron: that of people were

surprised by the abram accords. people thought that could not possibly happen, but israel proved its military strength, its economic vitality. that is what made those accords possible. whether we will be able to achieve this historic piece with saudi arabia, which puts the israel-arab conflict in a whole other place, the critical factor will be how israel emerges from this fight. do we emerge as a victor we emerge as a victor? . people make peace with the strong/ take all of the diplomatic statements that have been made, put them aside. it is not relevant. there are many arab partners in this region that one day different future, where thinking about what will happen 20, 30 years.

need a partner in israel. they can help their own national prosperity. you saw at the g20 when several countriesm the united states, european countries, india launched this vision of a corridor that would go from india through the arabian peninsula into israel this vision of a corridor that would go from india through the arabian peninsula into israel. . the saudis have great plans for building their country. there are a lot of places in the middle east, no matter what they say publicly, who are rooting for israel to win. they will get exactly what they want. jonathan: just to wrap things up, one final question -- how do you find victory in a moment like this one? ron: you have to cripple their capability and crush their will to do such an action for decades

and decades to come. not just g hard but other terrorist -- jihad other terrorist organizations in the region. have to exercise power and forced to make clear to your enemies that you have the will to fight. our enemies, hamas clearly miscalculated here, because if they think this action that they just took in murdering 1000 israelis and shooting our civilians, and taking scores of people hostage, and having over 3000 people wounded that this will be business as usual, they have no idea who the people of israel are. jonathan: we appreciate your time at a very difficult time for your country. hopefully, we can catch up together soon. the conversation will continue on bloomberg tv -- continue on

bloomberg tv over the next hour. tom: it was wonderful to talk to henry particularly about the openings we have seen in washington. the markets have deteriorated ever so slightly. the vix 19.01. bond market is closed today in the united states. we are seeings german yield come into a lower. swiss franc, a little stronger as well. brent crude 87.77. lisa: the conversation we just had here, do what we will do, these hard words coming from israel as they prepare to retaliate and prepare to send 300,000 troops that they have called up, and really raises questions about how this will evolve in the data come. tom: scheduled, economics and

finance it slips by today given the news we have heard in the last hour from the labonte. that's-- the levant. that extends to mr. erdogan's turkey. mr. erdogan is an interesting voice in this war. i was in istanbul a lot. there was a middle erdogan where he thought he could. be the voice for the region now we have this war. mr. erdogan has made comments. where does his voice fit in in assisting this war? >> he has been in the middle of the pack in the sense that president erdogan has been neutral, just like his foreign ministry so far, calling on both sides in this fighting both israel and the militant group

hamas to and has s -- end hostilities. better than expected from erdogan. he has been kept mum. lisa: he did release a statement where he definitely was very critical of israel and there were some discussions that turkey is housing some of the hamas leaders that were housed -- involved in this attack. how willing assert a want to work with foreign nations to figure out where the head of hamas is operating from? > before saturday's attacks, israel and turkey were in the process of normalizing their relationships. netanyahu after having to postpone his trip to turkey, he was scheduled to visit turkey and discuss a number of issues

including energy cooperation as well as normalization of the relationship between turkey and israel. as four hamas there has not been any new statement from on karen -- ankara. hamas' presence in istanbul has stepped down. we believe if there are any hamas officials left istanbul, the number of them is reduced compared to what was the case until a few months ago. tom: thank you. onur on two short of a visit from a stumble. we will continue to monitor the events that we see. futures deteriorating.

87.73 brent crude. we have not even mentioned the jobs report for one moment in this distracted monday. the moment the numbers came out, i thought of neil data. as you dug deeper into the data, that jobs report showed the optimism, the resiliency of the american economic experiment? >> absolutely. that is the right word, tom, resilience. no jobs report is perfect, so in this case the household survey was a bit weaker than the establishment survey but when you look at the trend in employment this is a strong labor market. we are adding roughly 250,000 jobs a month on average. the household survey is 200,000

a month over that same period. it is consistent. the fomc will have plenty of ammunition to argue that this is consistent with a soft landing. labor force is rising, hourly wages has moderated. the activity numbers are holding up. i think they have everything they need to make the case to skip in november. the market is 30% for a hike at the next fomc meeting. i would take the under. i think the doves will win that battle. that will be the case in december as well, you are going into a new year with the fed not having done the thing at the last three meetings. lisa: we would have been talking about the headline figure and parsing through some of the jobs

data, and then looking ahead to thursday's cpi report, and instead we are talking about the potential for geopolitical violence, geopolitical tensions. at this point how much are you factoring in higher oil prices and what that would do to a situation where we are seeing growth, but it is fragile around the edges? neil: i don't know that growth is as fragile as people are making it out to be. if anything what has been fragile are the consensus forecasts for growth because those have been getting revised up repeatedly. obviously, we are all watching the developments overseas. i'm not a geopolitical analyst, but what i can tell you is that insofar as we are worried about oil prices, a few things to consider -- number one is the u.s.'s position as a major oil producer. that is not something that we have -- we have not been

accustomed to it ever in my career. even though crude prices are rising today, it is important to keep in mind that there is a lot of disinflation in the pipeline at the retail hump. that is coming from motorists over this month. i would not be surprised to see retail gasoline prices declining $.50 in october. i i'm going to continue because of what we saw in wholesale gas prices. lisa: on a broader level people are trying to understand whether the ingredients are in the economy right now for a 1970's type of stagflation given the growth, it also given what an oil shock would do to current economy. neil: i think the way to think about the oil shock so far is that we will likely see more of an investment response then we

will it consumption response. that is typically how it works. when we get a pickup in price, businesses respond first. i would see recount turnarounds more quickly and i would not expect to see consumer spending falling off it all. you talk but the stagflation risk. it is important to remember what the u.s. energy position was, with the nature of the economy was. that does not mean that stagflation can't happen. you can't rule out any scenario, should that be the baseline rhino? -- baseline right now? i'm not sure. jonathan: the vix out 19.19. lisa: two short of a time with neil dutta. i want to have one more question

for you. how not positioned are equity investors or the broader markets to the prospect of higher yields to come? neil: it is important to separate the short run dynamics from the medium to longer run dynamics. talk me into a bullish case for equities. you have seasonality, which tends to be good and the fed is backing off, and the economy is holding up. that is pretty good recipe for the equity markets, at least for trade. i would not say it was a trade to rent. that goes your point about higher interest rates. one of the things i'm struck by is that they are up around the fixed income market. i think a lot of the people who wanted to buy fixed income on the anticipation that yields would decline they have already done so so that kind of leaves

only the sellers left. we have blown through the top end of consensus estimates in terms of rates. the consensus is offsides going into next year. it is flat growth in q1 of 24. tom: neil, i have to leave it there. optimistic on the american economy. coming up the former world bank president. perfectly timed. stay with us on radio and television. this is bloomberg surveillance. good morning. ♪

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likewise they will have to staff this out. jonathan: -- lisa: that was earlier this morning were trying. to parse through what transpired over the weekend with the attack on israel by hamaswe and then the subsequent retaliation that were percolating out. the bond market is closed. we heard earlier that maybe it is helpful that the bond market is closed for the u.s. holiday given the fact that stocks and you can see commodities are trading in a vacuum separate from the yield space. tom: it is a vacuum. there is no question about that. pay attention to bloomberg out of asia, out of hong kong. this evening maybe we get the beginning of a bond market open their. lisa: what we can see with respect to specific stocks moving is a response where

defense contractors are getting a huge leg up with people looking to where money will be flowing. lockheed martin shares are up almost 5%, northrop grumman up 3%, general dynamics up 3.5%. the knee-jerk response is to go into oil and contractors end away from some of the riskier areas. there is a bigger question about what this means for the geopolitical, community tom. how much of what we are seeing is a feature of the world order that we knew and something that looks different -- fissure of the world order that we knew something that looks different? robert, what are your thoughts on what transpired over the weekend? >> this is a very traumatic event for israel as you see in the coverage. it is a war and we have to respect that in addition to the

war between russia and ukraine we have another big one. this much is be a small retaliation by israel. this will be a a problem they have to figure out. lisa: what is your impression of how splintered some of the global order has become over the past couple of years, especially given that the allegiance with respect to ukraine has been splintering. now there is a question of who will work with who during this period of turmoil. >> you have a much more fragmented system. it adds costs. the imf meetings are beginning this week in america. they hope they can pull this off of africa and the developing world, but the external environment is one that creates wider anxiety across markets and frankly the ability to cooperate. tom: across the span of decades you are the single american most wired in to actually operating

institutions and also creating policy with someone like james baker and others. the singular feature i see now is a new isolationism in america. have the jobs you use to appointer vacant -- half the jobs you used to appoint are vacant. we have so many empty desks in our state department and another administration cabinets. robert: that is unfortunate. it hurts in the administration's ability to operate. as for the isolationism, there is a mixed mood on this. the public understands the world internationally, but the dysfunction you have seen on the congressional side makes it harder for the executive branch to operate. the biden administration tried to repair alliance

relationships but some of these countries like the middle east, you can see how this will explode. that is likely to be one of the biggest. tom: help us with iran, and the idea that you and i came out of school at about, the same time and there was that shock of 1979. how do you perceive the present day iran and our ability to firmly negotiate with them, given the fury of israel? robert: i don't mean to be critical, about the past but i have always been skeptical about the idea you will be able to negotiate effectively with this iranian regime. as you know they face great turmoil inside. this is not exactly a stable situation. when people were focusing on nuclear weapons, they were also

focusing on iran's presence in the region. hamas and jihad where the engines of this and, clearly they are cooperating with hezbollah and iran. the biden administration has since wanted to pull out of the middle east. tom: this is a delicate -- lisa: this is a delicate question, but are you critical of the decision to release $6 billion of funds to iran? robert: the administration will have a hard time defending that decision. i understand some of the logic. the administration and israel with the problems going on with the constitutional issues with netanyahu and for iran's own reasons wanted to kick the can down the road, that this issue is firmly on the agenda. lisa: your experiences within

the state department as well as the trade renegotiations department puts you in a fantastic position to discuss where we are in terms of lack of positions filled, including the house speaker, fact that we are dealing with a feeling of dysfunction in the government. what would a government shutdown next month do to the u.s.'s ability to step in in this circumstance? robert: the primary effect would be on the international perceptions of the united states. you used the word dysfunctionality. the u.s. constitution was not created for one branch to be able to run it. it is always a tension between the executive and the white house. the senate is trying to work with the white house, even though there are differences between the parties. what is happened in the houses of a different order. it is partly a carry-on from

some of the changes that trump promoted and some of the styles people have politically where it is better to try and raise their profiles and raise money than to try and govern. we will see. the united states has gone through these types of crises before. usually, it ends up pushing the extremes further away but that depends on what republicans in the house decide to do. jonathan: to take -- tom: to take your illinois as an example, there are a lot of republicans in name only out there. you have represented decades of republicans in name only. what should those people do given the polarities of america? how do we find the middle ground? robert: i don't consider myself in name only. i served in both elections and administrations but i've a fundamental difference with the trump approach on domestic policy, on the constitution, on

the character of treatment, and if people object to what they see going on, they need to participate in the process. they need to vote. they need to be active in terms of their local communities. when you look at the governors around the states, republican and democrat, a lot of these. people are doing serious work you have republicans in new hampshire, in georgia, who are having to work and govern effectively across the range of issues. there is a strength of america, a resilience just as there is on the private economic sid e. tom: thank you so much. he is the former president of the world bank. that was going to be the imf world bank before it went out the window. i loved your conversations today

on the geography of israel. the triangulation here from gaza over to the west bank and up to the northern border with lebanon is frightening. lisa: with a couple of rockets fired over near the northern border, not full hezbollah engagement some of the imagery of the iron domain and how many rockets were fired and exploding -- iron dome and how many rockets were fired and exploding over the city. tom: in tel aviv and jerusalem, it is evening. we will continue with bloomberg coverage here of a war in israel, the war of israel and hamas. we continue our television coverage. mr. farrow on the open -- mr. ferro on the open. please stay with us on radio and television. futures at -28. this bloomberg. ♪

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jonathan: conflict between israel and hamas entering a third day. iran rejecting reports that it was directly involved. israel at war.