Not yet off the table. Meanwhile, the Treasury Curve flattens positivity. In fact, a real pullback, a real hesitation to dive into riskier euro stoxx 50 futures down about 7 10 of 1 . Ftse 100 futures right on their tail, down about 4 10 of 1 as well. This really signals this idea that, look, you do not want to be holding risk right now regardless of what part of the world youre on. Even if the United States often serves as a defensive bid today, it absolutely is not. You are seeing underperformance there. Nasdaq 100 futures down about 3 10 of 1 . That dynamic where youre seeing this kind of buy everything, sell everything mentality is absolutely afoot. And that is just the equity picture. I want to take you across. Asset here as well and talk about what is going on in the bond market, because there is a lot of movement there as well. When were talking simply about the changes going on in Monetary Policy pricing, two year yield at about 515, down about one basis point, the ten year yield, 494 is what well call it, just shy of that 5 level. Now, what happens there is when you see those yields come down, the dollar is, in theory, supposed to weaken as following those Interest Rate differentials. That is not what youre seeing this morning. Youre actually seeing the euro weaker as well. So if youre looking for that defensive bid, it looks like its showing up in the market. The biggest weight for the bloomberg dollar index coming from the euro. And of course, brant crude trading at a 93 handle just since the geopolitical headlines broke out in israel. You start to see Oil Prices Higher by over 10 . Thats going to be a theme we dive into throughout the rest of the show. But lets bring it back to our top story this morning. President biden warning that hamas and Russias Vladimir Putin pose parallel threats to us democracy. The president now appealing to americans to support funding for israel, as well as ukraines war efforts ahead of a white house request that congress provides around 100 billion to fund those National Security efforts. Tomorrow, im going to send to congress an urgent budget request to fund americas National Security needs to support our critical partners, including israel and ukraine. Its a smart investment thats going to pay dividends for American Security for generations. Lets get the latest from our reporter on the ground, oliver crook, standing by in tel aviv. Oliver, a rare speech coming out of the oval office from President Biden. What do we take away from it . Thats right, christie. And as you say from the oval office, sort of Hallowed Ground and really a place reserved for more solemn and kind of serious pronouncements, really trying to speak directly to the American People and American People that may have found a bit of fatigue with war, particularly with ukraine. But now with israel. Biden trying to join all of these things together, saying that basically while hamas and putin are different, they pose different threats the way that they are similar is they threaten nearby democracies and that is sort of the groundwork he wanted to lay and he asked rhetorically, why does this why does this matter to america . And that is the question he set out to answer in this speech, saying that basically that the american interests are basically vitally dependent on both of these threats being met. What does that mean in terms of Practical Action . This week . That was the theoretical groundwork today. We expect, as you mentioned, 100 billion request to congress to come from the white house. How is that going to be allocated about . According to our reporting here, its going to be 60 billion for ukraine, 14 billion for israeli defense, 10 billion for humanitarian efforts, including for gaza, 14 billion to secure the southern border and also to combat fentanyl trafficking. And 7 billion for other National Security priorities, including the indopacific and basically the point he made both with putin and both with hamas, is that terrorism and dictatorship need to be met with force. They cannot be compromised with. It only encourages them to go further. And but he also says that he the message to the israelis, which is what we heard from him here in tel aviv, is rage. Rage cannot guide you because this and he talked about nine over 11, the mistakes that the United States made after nine divided by 11. And he said he also spoke with Mahmoud Abbas and he said that because of what hamas has done, this does not forfeit the rights of the palestinian is to be treated fairly and to live freely. President biden there making a very passionate plea, i think, to the American People at a time when all you know this best, its very controversial, not just around the world, how this is all playing out, where american support stands, but even within the american borders. This comes as the state Department Also is issuing a worldwide alert, saying americans anywhere need to be careful about aggression in the fallout of all of this. Which brings us to whats actually happening on the ground. Ali, bring us the latest from tel aviv. So from the military standpoint, there have been continued strikes. The idf has targeted targets in lebanon and hezbollah saying that there has been fire coming from there. Theyve been evacuating civilians around the border with lebanon. And the question is also about aid. Right. So weve been talking about aid for several days. The egyptians saying that theyre ready in principle. Israeli saying theyre ready in principle. The us saying, you know, we sort of created the conditions here, but the aid has not moved yet. We are 14 days into this conflict, the 14th day, two weeks, and the aid is still stuck at the border. The mechanics of everybodys sort of rules around this, whether its the israelis and the egyptians, are very complicated, proving it difficult to get it through the escalation threat in lebanon, which weve just mentioned, but also today, hamas has called for a day of rage. So will we see the same kinds of protests that we saw last week around the arab world . And then the other question is, there is a summit in egypt tomorrow, we understand, being called together by arab leadership. Will we get anything from there, any sort of unified stance on how to proceed from the arab side . A lot to digest here and something that i think a lot of people thought would be escalated during this week. Oliver, it feels like the Us Diplomatic efforts have actually proven to be some sort of deterrent. The question is just for how long . Bloombergs oliver crook live for us in tel aviv. We thank you for your reporting and hope you have a very safe weekend. Lets go to what the markets are pricing in, though, because, look, the big question here, when it comes to the translation of that geopolitical conflict that ali was just talking about, is does the Federal Reserve and some of the other Central Banks around the world hike in the face of those geopolitical tensions in the middle east, especially when you start to see oil prices really hiking higher . Now, we did have some commentary coming out from jay powell. He spoke at the new York Economic Club directly to our very own david westin. And he kind of gave us his take on what he thinks the bond volatility actually means. Take a listen to what he had to say. We certainly have a very resilient economy on our hands. Weve got the economy growing strongly. If you think back a year, many forecasts called for the us economy economy to be in recession this year. Not only has that not happened, growth is now running for this year above its longer run trend. So thats been a surprise. So jay powell, theyre basically saying that the move youve seen in the long end of the curve, its not necessarily a result of the expectations you were seeing of the Federal Reserve. Its actually resilience in the economy over and over again, he says, look, people were expecting this sort of recession, but take a look at what the markets are pricing here because thats not what were seeing. Basically, hes saying that if you look at the 2024 pricing and thats what that blue line on the bottom really is relative to the white line, which shows basically the pricing for 2023. Thats where you have that higher for longer narrative being priced into the market. No cuts in the near term for about the four, three, four months left in this year. But if you look at 2024, youre also not seeing that same kind of reaction. The cut pricing has actually come down a little bit, really showing and emphasizing what jay powell just said that there is strength in this economy, which again, is playing out in the long end of the curve. So what do you actually do with that . If you start to see this move, does it do the work for the fed . Well, jay powell had to take on that, too. Take a listen to his take on the volatility, specifically. Markets have been volatile. Theyve been longer. You know, youve seen the rates moving up and down a lot. I think we have to let this play out and watch it. But, you know, for now, it looks its clearly a tightening in financial conditions. And so well be watching it carefully. Well, its a tightening in financial conditions. Is he not the only fed official to come out and say that, in fact, so many people you have cleveland fed president loretta mester. Youve had lorie logan over at the dallas fed all saying that, well, maybe the bond volatility that youre seeing, its actually doing some of the work for the Federal Reserve thats going to have Ripple Effects. What does that then do for cuts and for how thats being priced into the market . Because if you actually Pay Attention here, the cut pricing is pulling back. Now you are only seeing the market price in about three cuts as the most likely outcome. And thats really where this chart really comes in handy because, look, the market was convinced that convinced six months ago that we were going to see a recession and that the fed would have to act very quickly. Now, in 2024, only three cuts and even those priced on the back end of the year. So again, a lot going on in the markets, but think theyre finally getting the message. What chair powell has been saying all along, higher for longer. And thank you to the markets for doing some of our work. Were going to see how thats all playing out, not just in the us session and the european sessions, but in the asian markets as well, because already you are seeing the fallout there in the bond market and then by extension the equity market as well. Avril hong is standing by in singapore with that fallout. Avril, walk us through standingn singapore with that fallout. Walk us through it. Avril they are hearing powells message loud and clear because the Msci Asia Pacific is headed for another session of losses, on a downward trend, headed for the biggest weekly loss in two months. It is not just the higher for longer narrative what we are seeing in terms of treasury yields in the long end of things. Theres also the middle east conflict and what that means for energy prices, especially with so many economies importing the commodity that is still a key concern here. A lot of the indices in the region are slumping by 1 today. We are seeing the japanese currency hovering near the 150 level. We are on intervention watch. We actually saw a lot of the tenders on the japanese government bonds. We can flip to the next page and take a look at that on the 10 year, hovering near the highest level in a decade. Amid all this, we actually saw the bank of japan Offering Bank loans, fiveyear loans to banks and the idea is to make it easier for them to buy bonds. As our colleagues have pointed out, this may only provide temporary stalling in the fiveyear yield for jgbs, and it might actually cause more curve steepening in the country. Kriti certainly a lot we will be watching but that is just one piece of the equation. Talk to us about China Central bank as well. Avril amid all that concerned about the property crisis in the country, we have been waiting and watching for any form of policy support. Today, the pboc left the loan prime rate unchanged as expected but it did come through with the largest liquidity injection on record for the shortterm monetary tour. That helped some benchmarks to paring losses. That being said into the lunch break, we saw the shanghai composite slipping below the 3000 key psychological level and falling further as traders return from their lunch breaks. We are also getting the sense that given the yield differentials between the u. S. And china, there is very limited policy room for the pboc to maneuver, hence leaving the rates unchanged, especially given the pressure that we are seeing on the offshore yuan hovering at the 7. 34 level now. Kriti technicals in the chinese currency there. Thank you for that update. I want to bring an update on the European Equity picture as well. A system incident halted trading in hundreds of shares on the London Stock Exchange for the final 80 minutes of thursdays session. The outage hit smaller cap equities. The affected stocks did not go through an end of day auction. The stocks on the 250 were not affected the ftse 250 were not affected. We will dive into repercussions throughout the hour. Stick with us. Much more ahead. This is bloomberg. Kriti President Biden has made a direct appeal to the American People to support funding for israels war offense. During the roughly 15 minutes Oval Office Address he warned that hamas and russia host parent post parallel threats to u. S. Democracy. There are crosscurrents and they translate to american politics and how america is viewed by the rest of the world. I went to get an experts opinion. Joining us now is Jane Kinninmont from the european leadership network. A pleasure to have you on this morning. Lets talk about the impact of bidens at 7. 5 hour trip to tel aviv. What did he get out of it . Jane he has been trying to walk a tightrope between showing Firm Solidarity with a u. S. Ally but also trying to call for restraint and work on the humanitarian aid issue. The upshot is the partners in the middle east and the arab world dont appreciate really what he is doing on the restraint side because what they see is gaza still essentially under siege and the prospect of a Ground Invasion and a long debate over 20 trucks of aid for 2. 2 million people. The speech he is making, it plays out very differently in the region than it does in the u. S. Of course, a tricky thing as in the region, he is trying to persuade arab countries to side with ukraine, but when he is making these parallels between russia and hamas, that is not something that they can buy into. It is something very much for domestic consumption inside the United States. Kriti domestic consumption is a very fair point. Lets talk about the other regional players and how they are feeling about this as well. It was surprising to a lot of people that on the news of the attack in the gaza hospital, a lot of arab leaders dropped out of the summit in oman. How serious is american support for israel being taken by saudi arabia, jordan, egypt, etc. . Jane none of these countries are surprised by u. S. Support for israel. They like the u. S. Have largely been taken by surprise by this latest upsurge in violence is specifically and specifically the fact that it came from hamas and gaza attacking israel they did not think they had the capability to do that. These partners have been warning the u. S. For a long time that if there is not some sort of hope for palestinians in general to make some Movement Towards the state that they have been in for so long, there would be some kind of escalation. People do not predict when or where would happen. What the u. S. Diplomats are getting at at the moment is a bit of we told you so and now you want us to fix it. That is not entirely fair, and there is responsibility from the arab states in neglecting the palestinian issue. Clearly, several arab states have mended fences with israel. There was speculation that saudi arabia was about to do that. That may be partly what encouraged hamas think that, by using extreme violence, they could make themselves relevant again. There is a strategic design here on the part of that movement, and we must never forget that these sorts of actions, while being really horrific are not totally irrational. It is a horrible thing to say but there is a strategy behind it that they are trying to make themselves recognized as a political player partly because they feel the arabs have neglected the palestinian issue just as the u. S. Has. Kriti one of the Major Concerns are not just the region specifically but for the entire world is can actually this easy on the surface solution of egypt or jordan lebanon can actually take in the influx of these people, can they actually handle it from an Economic Perspective . Egypt has been struggling. Jordan has as well. What is the appetite and Ripple Effect of that kind of humanitarian exodus . Jane the appetite for refugees is exactly zero. And that reflects that there has been a long history here, and there have been successive waves of palestinians have been displaced and many of them are already hosted in the region. Most of the population of gaza traces their original homes to inside israel. They have been displaced in that sense as well. Jordan, lebanon, syria in the past also took big waves of iraqi refugees. Jordan is hosted a lot of syrians posting a law syrians. These countries are not well off. There was an egyptian official who quoted this week saying to a european, why dont you take one million palestinians . They see hypocrisy especially as europe is not super friendly to refugees from the middle east and north africa at the moment in a variety of ways. It is a political thing and not just economic. It is a concern that if the palestinians are out of gaza, they might not be able to go back in and gaza might cease to be part of any future dream of a palestinian state. So that is what is playing out here. Kriti a really tough situation, jane. I will put you on the spot. A 10 rise in Oil Prices Since the conflict has broken out. Do you see this becoming a longerterm hangover on the Global Economy, 32nd . Jane it depends whether it spreads or has potential to suck in other actors in the middle east. We are talking about hezbollah and people should look at yemen and the potential for this to disrupt the fledgling Peace Process in yemen and the important shipping lanes around that country. Please keep an eye on that. Kriti the communitarian issues in yemen as well have extended for years on end. Jane kinninmont, thank you for your insight this morning. Coming up we will talk about the repercussions for the Global Economy. We will hear from the fed chairman Jerome Powell on the u. S. Central banks rate path and the battle to tame inflation in the face of all this geopolitical risk. Stay with us. This is bloomberg. There is a lot of uncertainty around lags, and one of the reasons why we have slowed down significantly this year is to give Monetary Policy time to work. The truth is though you cant find academic support for different speeds you can find academic support for different speeds and duration of red leg. We have to use our eyes and slow down the pace to make sure we are seeing the full effects. I think, that is part of why we have slowed down this year. We went very quickly in 2022 to catch up to where we need to be, and now we are moving carefully with these decisions. When you spoke back in august of 2020 and laid out the revisions to the framework as it were, you said in terms of anticipating growth, consensus had gone from Something Like 2. 5 to 1. 8 . Where are you now and where do you think the long run growth is . Chair powell it is not something that moves around a lot over time, but my own guess is it is around 2 . The standard mainstream view would be a little bit below 2 , but i would just say to percent real growth over time 2 real growth over time. It is growth in hours worked and growth in productivity. Growth in hours worked is a function of it and many things affect productivity. If you drop in reasonable standard longerterm estimates of hours worked growth and productivity which is output per hour, productivity growth, you get to percent. That is higher you get to percent and that is higher than most other advanced economies. Kriti that was Jerome Powell speaking to david westin. I want to bring you other news from around the world in todays news agenda. We start with american politics. Jim jordan says he will seek a third floor boat and his bid to become House Speaker after he abandoned a backup plan to expand the interim speakers powers and buy him time to get more support for fellow gop lawmakers. He fell short of the votes needed to become a speaker in two rounds this week with objections to his hardball tactics and deep divisions within the party. Shares in loreal fell 2 after shares in north asia uninspected lee fell in the third quarter. They are grappling with a challenging retail environment around the world the Company Posted 11 sales growth thanks to better than expected sales growth performance in north america and europe. Ubs says the board of directors of ubs switzerland and Credit Suisse will be restructured and harmonized as of november 1. Roger von will be appointed chairman of both boards. Meanwhile, Financial News is reporting that ubs is set to start the next wave of job cuts november 6, targeting 10 of their staff. Risk, compliance, and marketing roles will most likely be impacted. Ubs declined to comment. Washington and brussels have yet youre probably not easily persuaded to switch mobile providers for your business. But what if we told you its possible that comcast business mobile can save you up to 75 a year on your wireless bill versus the big three carriers . Have we piqued your interest . You can get two unlimited lines for just 30 each a month. There are no Term Contracts or line activation fees. 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I have people come up to me all the time and ask me, does it really work . And all i have to say is, here i am. It works. My advice for everyone is to go with golo. It will release your fat and it will release you. Kriti good morning and welcome to daybreak europe. Lets get the top stories that set your agenda. Pradhan President Biden adding that hamas and russian president Vladimir Putin pose threats to democracy. Jay powell suggests that the fed is inclined to hold at its next meeting as the bond market volatility plays out. Future hikes not yet off the table, creating quite the move and markets which brings me to the Treasury Curve flattening as investors weigh how much risk is Worth Holding into the weekend. A quick check on those markets here. Its already starting to see a fallout. If you look at futures trading, you will see red on the screen. Down five tense of 1 . Theres a couple of reasons for this. One will be the geopolitics around the world. Its not just about whats going on in the middle east get the issues in ukraine, the alliance is being formed between china and russia. This weekend will be rife with headlines. A lot of risk being taken off the table. Nasdaq 100 futures taking a breather as well. That tells you the defensive bid for u. S. Assets isnt there in todays trade. Lets go over to the asian trading session. Same story when you look at whats going on there. They are not just pricing in the geopolitical turmoil, they are pricing in hawkish from the fed. Even in the face of the pboc offering record cash infusion to keep rates low, further stimulus which isnt being met with a great reception. To the point that you are seeing the hang seng down 4 10 of 1 . Whats interesting is the currency story. Dollaryen right on the cusp of that 150 level. Thats been the level for currency intervention in the past. Dollar yuan hitting a technical level very close to 734. Thats the watch we are on for the currency space. Asian markets digesting some of that hawkish commentary from chair powell. I would argue the bond market isnt doing the same. Thats where you see some of the pairing of the move ahead of jay powells comments. You saw that selloff in the bond market. U. S. Two year yield. 10 year yield pulling back from that 5 level. Its not about the terminal rate anymore. Its about the cuts that are being priced in going into the back half of next year and beyond. 106. One 05 but we will call it 106 because you can see that roundup. The yield move is moving against the dollar. The euro is the biggest mover to the bloomberg dollar index. Brent crude trading shy of a 94 handle. Higher by nine tense of 1 . Lets go to our top story again. Geopolitical risk is baked into the narrative. Joe biden is warning that hamas and Vladimir Putin. Appealing directly to the American Public to gather support for funding for not just israel but ukraines were efforts as well. Lets get the latest from all over croke and tel aviv. Bring us the latest. Oliver President Biden speaking from the oval office. A space that is reserved for the most solemn of occasions, the most important messages that he wants to deliver directly to the American People ahead of what we understand as a request to congress. The point that he made is that hamas and putin, they are united in one way. They are trying to destroy neighboring democracies. He asked, why should the American People care about this . Its a National Security concern. If they are not met with they cannot be reasoned with. Terrorism and dictatorship will go further and further if they are not met. In order to meet that, biden will put forward a 100 billion request from congress. Lets break down what that will include. 60 billion of that for ukraine. 10 billion for humanitarian efforts including gaza, 14 billion for efforts to secure the southern border and combat fentanyl trafficking. 7 billion for other National Security priorities including the indo pacific and taiwan. His warning to the israelis was, do not be guided by rage. He cited 9 11 and United States that sought justice after that and the mistakes they made. He said he spoke to the palestinians, saying they havent forgotten the palestinians. Because of what hamas has done, they have not forfeited the rights of the palestinians to try to preserve their rights more broadly. That brings us neatly to the question of aid which is not a neat question at all. The mechanics of getting this aid into gaza have proven unsurmountable. 14 days into this. That only ratchets up the risk. The risk weve seen expanding with more skirmishes with lebanon. Weve seen the israelis are pulling more civilians away from the lebanese border. Again, this comes after bidens visit to jordan with erin leaders was cancer arab leaders was canceled. There will be a summit on saturday in egypt where we might get some sort of consensus. Kriti its a really interesting dynamic, to see how the perception is. Its being received in europe and we should tell our audience that this comes as the state department has issued a warning to americans across the world of the dangers and aggression following this conflict. Thank you for your reporting. Not just this morning but in the last two weeks as well. A part of that reception is where the European Union comes in as well. They are not just dealing with the geopolitics of it. They are dealing with terrorists. They have yet to reach a deal on steel and aluminum ahead of the summit in washington. Initially seen as a bilateral summit to discuss geopolitics. Now theres been new urgency injected into the gathering. For more, we go to our european correspondent standing by in brussels. A summit under the focus of geopolitics. What do we expect out of it . Maria european delegation in d. C. Its led by the head of the commission bond or line but also the head of the council and the top european diplomat. Already, the fact that the top diplomat has come along tells you so much about this trip. This was supposed to be about trade and business. At this point, im not sure if its engulfed by the geopolitics. Both israel and ukraine. Overnight, the head of the Commission Also made that linkage between hamas and russia, saying essentially what they do, what they aim for is the same. Thats a very similar tone to that of President Biden. We can expect the European Union will reiterate that they dont want to see regional escalation. Also, the humanitarian perspective of this. Getting people out, evacuations. All eyes are on egypt. It comes down to business. Remember, there are two issues here. One is steel and aluminum. A possible deal on critical minerals. When it comes to steel and aluminum, you have to go back in time. President trump put tariffs on them. The European Union retaliated. Would biden got into office, they suspended those pending a review. The idea was that in the summit today, the European Union and the United States would announce a deal on steel and aluminum. Bloomberg has reported that the two sides are not there yet. We may get a situation where there is no deal to announce. The politics aligned when it comes to trade. Perhaps not so much. On diplomacy, they are close but there is still friction between made in america and made in europe. Kriti theres a lot to digest here. A lot of people were expecting some of these tariffs and tensions to abate at this point. They were held mostly by the trump administration. That doesnt seem to be the case anymore. Im curious what happens going into post 2024 election in the u. S. Thank you for your analysis. Theres a lot to digest. Weve got you covered. Stick with us. This is bloomberg. Kriti theres a lot going on in the Global Economy right now. On the one hand, Jerome Powell signaling that the fed may hold in november. You have the geopolitical risk of war. A lot of questions are, what does that look like when you have this geopolitical risk that could easily tip inflation in the other direction . Lets get an experts voice on this. Anna bilotta joins the program this morning. One of the big fears on the geopolitics is how quickly and how scarily this could turn into a broader regional conflict coming out of israel and hamas. Walk us through what effect that has on the globe on the Global Economy and the worst Case Scenario . Ana clearly, we dont have this as a baseline scenario for now. 20 to the downside scenario. Clearly that would mean higher oil prices. We can expect oil prices to go up from 90 per barrel to 140, even 120 on average next year. We understand that Central Banks will be much more into the wait and see mode before they cut. Obviously, inflation rates will be much higher. Think about the u. S. It will reach 3 or more next year. Not going back to the 2 that everybody is watching for. If you think about germany or the u. K. , it will be 4 . Clearly at the global level, we can talk about inflation at 5 . One percentage point above what they were expecting before the conflict or baseline scenario. This has an impact on growth. Today, we are in a very low growth environment. We are not growing for six quarters in europe. We are not growing for three in u. S. Clearly that could shift us into the recession scenario that some would have expected anyhow in the baseline scenario. Overall, we would have Global Growth at 2 in 2024. Clearly thats half a point lower than the baseline scenario. We are getting closer to that threshold of the Global Economy switching to a broadbased recession. In this environment, it would be very tough for Central Banks to cut Interest Rates. Theyve been fighting for so long. Probably they will start to envisage some modest rate cuts at the end of next year if that materializes. In the baseline scenario, they will not start to cut rates before autumn next year already. Kriti you are seeing that priced into the markets. We are seeing this extremely slow growth for six quarters in europe. Its a similar story in the United States where you are seeing deceleration. Something he said to david westin really stuck out to me. He said, with the bond volatility you are seeing right now, it has to do with the resilience of the economy as opposed to fet expectations in the long term. Hes talking about 30 year maturities here. If we are talking about oil prices crossing 100 per barrel on this conflict, how quickly does that turn inflation on its head . Ana the effects are are slow. Clearly, the passthrough would take three to six months. In any case, we are in the midst of the passthrough of the past rate hikes lets not forget. Even if the fed doesnt increase Interest Rates in november, we will still see the increase intimate 2024 into mid2024. We see that the transmission is between 12 to 18 months. Clearly we have not yet reached the peak of the transmission. Everybody is focused on the data as of today. We are convinced that the data is going to decelerate even further and the labor markets will continue to rebalance. We start to see that already. Clearly, that will bring a bit less of this hawkishness in the bond yields market. Thats doing the job for the fed. Investors are doing the job for the fed. One of the concerns of the economists, and we remember it very well, is the remake of the 2012 sovereign crisis in europe. That only europe. Even the u. S. Is very exposed to the increasing interest payments. Nobody has clear plans in adjusting finances. Everybody tries to make it through because everybody understands that the cost of doing that would be a clearcut recession. At the same time, the sovereign risk have increased. Thats a reality. Real Interest Rates are much higher than gross. Kriti to your point, you are 100 right. Sadly we have to leave it there. Thank you for joining the program. Deep dive into the different scenarios that could play out in the middle east if the conflict spills over. This is bloomberg. At ameriprise financial, our advice is personalized, based on your goals, whatever they may be. All that planning has paid off. Looks like you can make this work. We can make this work. And the feeling of confidence that comes from our advice . I can make this work. That seems to be universal. I can make this work. I can make this work. No wonder more than 9 out of 10 clients are likely to recommend us. Because advice worth listening to is advice worth talking about. Ameriprise financial. Kriti the conflict between hamas and israel has claimed close to 5000 lives. There are growing fears of a regional escalation. Bloomberg takes a look at the potential fallout. The human cost of the conflict between palestinians and israel are already high. Thousands of casualties since the attack and hostagetaking. The horrifying scenes raise a prospect, the possibility of a wider conflict that takes more lives. Sharper escalation could rattle a world struggling with the war in ukraine and the pandemic. Higher oil prices, accelerating inflation, and slowing growth will be felt in the middle east but it will spill over to the rest of the world. The possibility of a global recession would affect the most vulnerable. The october 7 attack was a particular shock for israel because it involved a ground attack, hamas attack theres attackers. More than 1000 people were killed. It was the worst single day attack in israels history. Israel responded with an airstrike that inflicted a heavy death toll. Three main scenarios could stem from the turmoil. The least likely is the worst case, a fullscale war between regional powers. We can imagine a direct conflict between iran and israel. If this escalates into a direct conflict, the applications will be big for the region. They will be big in terms of human costs. Iran is believed to fund and support hamas which is designated a terrorist organization by the eu and the u. S. Iran has denied direct involvement but its clear that there has been support for the group in the past. If there is direct evidence of a rainy in this attack, if israel or other countries can come up with that direct link, it does to this conflict into a more dangerous phase because that would open the possibility of a direct israel around more. Iran war. There is some buffer. Saudi arabia and the uae. In the case of a direct war between them, this capacity may not be able to leave the region because it has to go through the strait of hormuz. Its a very narrow Shipping Point between the Arabian Peninsula and iran. They have threatened in the past to block shipments and block it which would completely upend global shipping. Estimates show how severe an impact the loss of this conduit could have on oil and global trade. In the case of a direct conflict, all oil prices could raise to 150 per barrel. That would raise global inflation to 6. 7 . That would have an impact on Global Growth and slow it down by 1 , the slowest in four decades. That will take off that 1 trillion of global output next year. That could tip the Global Economy into a recession. The impact would be higher inflation, eroding peoples spending power. It could mean people being laid off their jobs. It could mean a real economic crunch. It could ripple through the economy. Secondary effects are not top of mind but they risk exacerbating the human toll. Another possibility is a more limited conflict, a proxy war. That would see the conflict widening but not too wide. It will see an expansion of the conflict from between israel and gaza to the wider region, perhaps involving military groups in lebanon and syria. Iran has several groups which it is close to in the region. Hezbollah in lebanon is being drawn into the conflict between israel and hamas. There are militia in iraq and groups and syria which could be drawn and gradually. Theres also a group in yemen which is backed by iran. A proxy war would lift oil prices but the question is how by much. By how much. Oil prices would rise to the mid90s. That would lift inflation. That will impact Global Growth and slow it by 0. 3 percentage points. That will take it to the lowest growth rate since the early 1990s, excluding the Global Financial crisis. The final scenario which is the most likely one. A conflict thats confined to gaza strip and israel, where we are already having a large human toll. This scenario would be larger scale to what happened in 2014 when there was a war in the gaza strip. 2000 people died then. The impact on the Global Economy was limited. The impact on the regional economy was devastating. But the Global Economy made it despite the hard human toll. I think the economic spillover and the human impacts are quite closely linked. The more this spreads, the more casualties that come from the conflict, the bigger the economic impact. The Global Economy is already coming out of many recent shocks. From the pandemic to the war in ukraine to rising Interest Rates, to high inflation, to slowing chinese growth. The Global Economy is already slowing. Inflation is just coming down right now. Interest rates are already high. You had conflict on top of this and this will exacerbate these problems. In tel aviv, hopes of a more stable middle east are in tatters. As it morphs into a geopolitical per crisis, the shockwaves will reverberate globally. Kriti a lot of crosscurrents there. You can see our reporters around the world talking about these three scenarios and how this plays out not just in the economy but the markets as well. We will keep you apprised. Stick with us. Markets today begins right now. This is bloomberg