Shelling out of southern lebanon, which implies that hezbollah has acted as well. Is iran a part of this attack . Ian the United States government says that there is no evidence as of now that the iranians were behind the attack. Lets be clear, they are not nice people as a government. The iranian Supreme Leader and president for throated lee supported the hamas attacks, have provided not just diplomatic cover but also weapons and Financial Support to hamas directly over the years. I would be very surprised if they were unaware of the attack, but there is a big gap between unaware and orchestrated. I will tell you, life has been going reasonably well for the iranians as of late. Remember, the chinese facilitated diplomatic engagement, breakthrough between iran and saudi arabia in the past months. You will also know the Biden Administration came to an agreement to get five american citizens held hostage by iran back to the United States, and was planning to provide 6 billion of iranian assets on frozen back to the Iranian Regime. The iranians have also allowed in International Inspectors as they have reduced the amount of the heavily enriched uranium stockpiles. None of these are actions by an iranian government that is about to declare war against israel, that would lead to clear reprisals, and mens reprisals by israel, if it was found out by evidence that this was ordered by hamas. I dont have a lot of confidence in the sense that i hardly talk to the iranian leadership but i would be quite surprised if we found out the iranians were directly ordering this. Matt isnt it a surprise that israel, mossad, the cia seemed to have not known about the attack . In 1973, they dismissed intelligence, apparently didnt listen to a bug they had in the office. How could they not have known about this attack . Ian israel does represent the Gold Standard not just on human intelligence and signals intelligence but also on border security. This is not like build the wall in the United States. Their borders are relatively compact. They know how to defend. They know the consequences if they dont. But the issue is, the israelis took their eyes off the ball. Israel has been in the headlines over the past year quite a bit, not about the palestinians. The focus was unprecedented in ministrations in israel, fearing a constitutional crisis with the judicial reform. Netanyahu and his far right government have been pushing. Not only that but an expansion of israeli settlements in the west bank. That has led to palestinian reprisals, and a bunch of the Defense Forces were sent to the west bank. So the bordering region around the west bank had to respond to those reprisals. In terms of domestic instability, intelligence focus, unwillingness for some of the forces to serve if judicial reforms went through, and these expanded settlements, israel was not acting like they had the Gold Standard on defense capabilities, border capabilities, intelligence cap abilities. This is on netanyahu. They have to defend their borders and get their hostages back, fight hamas leadership, but this will be his legacy, the intelligence failure that allowed for the worst attack against jews in the world since the holocaust. That is what we are talking about. Matt how does he respond given the gravity of the situation, how does netanyahu and israel fight back . Ian let me say first of also thing that youll be surprised by. The first way that i think you should respond and i think he is trying to is to create a unity government, emergency wartime government to fight a war for israels existence, for removing the hamas threat. That means that netanyahu would need to bring the Opposition Leader into the government. That would provide much weight legitimacy from a decisionmaking, and the sacrifice, which the israelis will need, and also internationally for the attacks that will clearly bring a significant amount of blowback from those that are not the closest allies of israel. That is the first thing he needs to do. There has been some effort. You were asking really about the military side. There are two urgent priorities, and that is to ensure israels borders are secure once more. The Israeli Government will expect that they are hamas operatives on the ground, inside israel today, preparing for additional terrorist attacks. They need to find them and destroyed them. There is also the matter of the dozens, maybe over 100, im hearing from army sources, hostages the ground in gaza who need to be rescued. That is a dangerous operation. Of course, risks the lives of those israeli citizens, most of whom are civilians at this point. Those are the two biggest priorities. I firmly believe there will be ground operations and warfare to remove hamas leadership, to disarm hamas militants. Whether or not that becomes a longterm occupation is clearly a decision the israelis are not remotely prepared to make. Matt when i saw that we were sending warships to the region, i emulate thought of ukraine. Immediately thought of ukraine. This has to weaken our support, changes the narrative a little bit. How connected are russia and hamas, is that possible . We have seen Russian Hackers really up their attacks on is cybersecurity targets over the weekend, as well. Ian looks like a red herring. I am hearing this organization hit a few israeli companies. Pretty autonomous, lowlevel, trying to get attention for themselves. Unlikely to have been ordered by the russian government. The russians certainly like to see the iranians and hamas doing well in the region, but russia had a reasonable relationship with israel. Israel was not providing weapons to ukraine unlike everybody from nato. This will probably break putins relationship with netanyahu. At least what i saw from the Security Council over the weekend, the russians were uniquely oppositional in blaming israel directly for the attacks. That relationship is gone. In terms of u. S. Support militarily, how you started the question, a week ago Ukraine Support was the biggest thing they were fighting over in washington. By friday, the Biggest Issue was keeping the government open over than mediumterm, avoiding 1 reduction of budget acrosstheboard. As of today, ukraine is in third place after containing the israelpalestine war, not allowing it to become conflagration in the middle east. This is a unique situation for zielinski since the war started. Matt you saw some rightwing republicans essentially throwing mccarthy out because he was not tough enough at reducing demands for additional ukrainian aid. I imagine thats out of the party will be very pro israel, happy to step up aid. Ian agreed. Mccarthy, two months ago, said he was on team biden when it came to ukraine. I cannot imagine two more words that are more problematic for the Freedom Caucus members. At that point, matt gaetz as to be thinking, how do i get rid of this guy . In terms of israel, the level of support that youll see from the u. S. Is unquestioned, and i think from across the political spectrum. Matt i am sure that you are in high demand right now. Appreciate you spending some time with us. Ian bremmer talking to us about the situation in israel and its Geopolitical Impacts around the world. Some headlines coming across the terminal from jefferson, philip jefferson, Federal Reserve vice chair, saying the fed can proceed carefully amid better risk balance, will keep in mind the impact of higher yields. As we heard earlier, this is the passive tightening narrative coming through from a fed that seems to want to hold. Coming up, israeli etfs at their worst day since 2020 as the outbreak of war spooks investors. This is bloomberg. Is it possible to fall in love with your home. Before you even step inside . Discover the Magnolia Home james hardie collection. Available now in siding colors, styles and textures. Curated by joanna gaines. When you automate sales tax with avalara, you dont have to worry about things like changing tax rates or filing returns. Avalarahhh ahhh matt time for the stock of the hour. U. S. Listed etfs with exposure to israel, as you might expect, are falling today. The msci israel etf to cursing the most volume. Joining us now is caroline wilson. We see the Tel Aviv Stock Exchange close higher but these etfs have been down the ones i have looked at since the trading day started here in the u. S. It shows us the difference in the feeling about these assets from american investors versus israeli investors . Caroline what is interesting about u. S. Listed funds tracking emerging markets, we have now hit u. S. Hours and we are now gauging u. S. Trader sentiment. There could be a disconnect between european traders, and as the u. S. Markets digest this, they will respond differently. Eis has fallen more than 8 today, the worst day for the fund since march 2020. Trading volume has absolutely surged. At one time this morning treating 70 times more than typical. 17 shares being treated for one chair being treated through the past 20day average. Matt what are these etfs loaded up with . We tend to think of pharmaceuticals. What is this etf holding . Caroline it will look at a market capweighted is really stock index. That is interesting because the investors in these funds, trading based off of headlines, they are looking at single country exposure. It shows the evolution of the use of etfs, where we see money being withdrawn from these broadbased passive index funds. Not as much interest. Etf investors are more sophisticated, more nervous, so they will exit these broadbased passive funds, heat up volume for single country etfs. Matt outside of israel etfs and oil, treating here is fairly light because of the columbus day holiday, the bond market is closed. Have you been hearing about these traders and these products specifically since saturday night . Caroline these traders do not sleep. We were counting down for the market to open because we knew that trading would surged with the israeli etfs. Matt thanks for joining us, carolina wilson, covering etfs. Looking at the fallout from the attacks on israel with israel etfs coming down. When we come back, kiersten fontan rose joins us on the Geopolitical Impact on the war in ukraine, israel, rising tensions between the u. S. And china, as well. This is bloomberg. sfx stone wheel crafting 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 . Matt lets discuss the geopolitical landscape with kirsten fontenrose, atlantic council, nonresident senior fellow. You have been studying the middle east for what looks like your entire life, have advised national Security Council on policy here. Suffice it to say, you know the region well. What do you make of this surprise attack by hamas, the level of severity . People are saying that we have not seen the president of israel say we have not seen this many jews killed since the holocaust. Kirsten this attack was coordinated for some time. There is some supposition about normalization, and while that is a Collateral Damage piece in this attack, it was not begun after those talks began. This has been going on by the Iranian Regime for over two decades. They have been arming hamas and the other roxy groups proxy groups. Iran likes to spread its wealth, have other people fight its wars. This attack is an expansion of irans Foreign Policy that primarily uses proxy groups to achieve its goals around the region. Matt interesting to me that this comes 50 years after the yom kippur war, a surprise. This seems to have been a surprise, as well. Why do you think intelligence agencies failed . Kirsten we dont know yet that they failed. They are not allowed to speak up for themselves while things are going on like this. We will have to dig into that later. Part of what is being discussed is that some of the intelligence passed to the israelis was given to people by they have people inside hamas, who was passing intelligence onto islamic jihad. That is a Competitive Group for them inside those territories. The israelis were taking out arms arsenals, but they didnt actually belong to hamas. It may have been a situation where that active intelligence was leading them to to believe they have the situation under control. We also saw a recently there was a bit acquired from hamas, allowing over 100,000 gaza residents to come into israel and work. There was a feeling that maybe hamas was seeing the benefit of this quiet to the population they live amongst, but it appears they were using it as cover. Matt some of the crimes perpetrated by hamas over the weekend are simply gruesome, have been captured on video, have horrified the world really. Do you think this changes the narrative in favor of, maybe even driving out the palestinians from what was previously overwhelmingly a two state solution . Kirsten the u. S. Still stands by the two state solution, so that is where we continue to try to lead the conversation. But depending on which Media Outlets you are consuming, you are seeing complete lead different narratives around which side the gruesome attacks at been taking place on. Some of the world is seeing narratives that are saying israel is carrying out aggressive attacks, killing civilians, and this has led to hamas saying that they will start assassinating hostages if israel continues to attack civilian targets. There is a battle of communications, the battle of narratives taking place. It will probably cause greater galvan is asian of opinion on this topic, who you think is really at fault here. The u. S. , europe, stand behind israels right to defend itself, but you are seeing other Media Outlets painting this as is really aggression only. Matt we have sent warships over there. As you mentioned, politically, the u. S. Could not support israel any more than it does. Do we put boots on the ground, do those boots lead up toward lebanon, do they lead east toward iran . Kirsten when we send a Carrier Group, it is one of our greatest tools of deterrence. This is a precedented tactic, repositioning people and equipment, but there is no indication there is any kind of ground presence. It is intended as a deterrent. Remember, a lot of our fighter planes and take off from a ship. We dont need boots on the ground, we dont need to ask for basing rights from partner countries who may not want to be dragged into a conflict. But this Carrier Group is to deter iran from any additional action. For instance, if they have a more coordinated plan looking for success inside gaza, followed by action on any of the other fronts where they are directing proxies, we want to make sure they are getting the message that there will be action taken. Matt the house looks paralyzed right now without a speaker. Is that a problem for the support of israel . Does this whole thing draw even more attention away from ukraine . Kirsten it definitely does both. One thing that often happens in these conflicts, Public Opinion that has been divided comes together, when it is perceived that the attack has been unjustified or extreme. You have some forces in congress saying the attack was not unjustified. They condemned the attack itself, but they say it is provoked. You will have those debates. Even without a functioning Congress Like that, there will still be pretty unanimous support to make sure that israel has what it needs to defend itself from attacks. There could be nuts and bolts discussions about what is a defensive munition, offensive you nation. Munition. We send over armaments and we cannot really control how they are used. There will be those debates but you will see things still moving out the door. Within 48 hours, the u. S. Had additional armaments out the door. To your question about ukraine, there will be complaints about this pulling back with the u. S. Can offer ukraines defense in terms of you nations, resources, Financial Assistance in the fight against russia. You will also see our partners in the persian gulf, arab countries defending themselves against proxy strikes from iran saying, where were you when we were asking for support . This will provide some tough position for the u. S. Matt thanks for joining us, kirsten fontenrose. She has advised the department and national Security Council. This is bloomberg. Place the markets remain on edge. I am romaine bostick. And i and katie greifeld. Taking a look at u. S. Equities right now, we should of early losses. Geopolitical tensions are front and center after hamass surprise attack on israel over the weekend. But markets are closed today for the holiday but etfs continue to trade. Tracking long data treasuries rising today