Bloomberg Surveillance TV: October 12th, 2026

Bloomberg Audio Studios. Podcasts.

Radio. News.

This is the Bloomberg Surveillance Podcast. I'm Jonathan Farrow, along with Lisa Abramowitz and Anne-Marie Hordern. Join us each day for insight from the best in markets, economics and geopolitics. From our global headquarters in New York City, we are live on Bloomberg Television weekday mornings from 6 to 9 a.m.

Eastern.

Subscribe to the podcast on Apple, Spotify or anywhere else you listen. And as always, on the Bloomberg Terminal and the Bloomberg Business App. President Donald Trump now considering U.S. military support for Saudi Arabia following a series of strikes, deadly attacks on Riyadh. The former senior U.S. intelligence official Norman Rule joins us now for more. Norman, welcome to the program. This is a very complicated issue. We all understand that. Could you explain to us what the Saudis need right now to contain the threat posed by Houthi militants?

Good morning.

Well, to begin, the Saudi air defense forces are capable and they're quite experienced, and they routinely prevent multiple Houthi attacks on their cities and energy infrastructure from succeeding. No air defense will be perfect, no matter what support is provided, but the Saudi air defenses obviously always can improve. The question becomes what exactly the U.S. should provide that the Saudis don't have. Targeting is not strategy and additional air defense equipment does not fix the situation. So no doubt there are consultations going on right now to say what exact equipment, technology, intelligence, guidance do the Saudis need from the United States government, as well as the private sector,

which has multiple counter drone, counter cyber and other defensive technologies.

Capabilities to offer the kingdom.

These conversations have been ongoing for some time, but will intensify. However, in the end of the day, you can shoot down the arrows, but you do want to aim for the archer. And the question therefore becomes, do the Saudis have what they need to neutralize all of the firing in Yemen, a large, complicated topography, or do we need to involve the United States? What we don't want to do is turn a war that is essentially between the Yemeni government and the Houthis, the Yemeni government supported by the Saudis, into a U.S.-Yemen conflict. So the White House will want to balance support against involving the United States. And the reason that's important is Iran wants us to be involved in Yemen.

Norm, when I hear you speak, it sounds very defensive in nature in terms of what the U.S. might be willing to provide.

Do you think the.

United States would come to help the Saudis in terms of directly striking Houthi targets?

It is increasingly likely.

However, the question becomes, what does that achieve that the Saudis can't do? And again, if you're Iran, you want the United States embroiled in another regional conflict because it distracts U.S. forces, it weakens U.S. forces that Iran itself would face. So Iran's external strategy in Iraq, as well as in Yemen, is to push regional partners into those conflicts because it weakens their focus on Iran itself.

What about Pakistan?

Didn't they just sign a strategic mutual defense agreement with Saudi Arabia months ago?

And that is true.

And there's also the Mecca Agreement that involves the Turks as well. Integrating these other forces, their aircraft, into this system.

Will be complicated.

It's not only that they come in with aircraft that can conduct attacks, but you're going to want to integrate them into the electronic targeting systems and to the intelligence flow that allow those attacks to take place. That involves integration with the United States essentially as well because of what we're doing between CENTCOM and and the Saudi government.

So this is more complicated than just planes showing up.

However, these countries could provide support in other parts of the kingdom that would allow the Saudis to free up forces to move against Yemen, the Yemeni Houthi threat.

We've heard from a number of sources that members of the Saudi leadership are pretty upset that the U.S. hasn't gotten more involved and come to the defense more directly, even in a statement saying that, yes, they will get more intricately involved. What's your sense of what it will do to the alliance between the U.S. and Saudi Arabia if the U.S. continues to provide intelligence and sort of peripheral aspects rather than a true military force?

Well, again, it depends upon what the Saudi leadership and our leadership believe we can do that the Saudis themselves can't do. And the Saudis understand that Iran is the main target. So I've read the same reports. But my understanding, which is informed, is that the relationship between the United States and military and the Saudi military is superb. It's actually closer than it's ever been. And that's common throughout the Gulf. Now, again, if you're involving the United States in the conflict, the question becomes, what does that actually achieve and where is that going? And for the United States, that is a serious consideration. But for the Saudis as well, they're going to want something that changes the situation, not.

Just that exacerbates it. So it's complicated.

But at the same time, we must provide additional support to the kingdom right now. And we need to be public about it so that we can show that the relationship is important.

We were noting earlier that oil prices aren't responding as significantly to this as you might assume if there was this fear of a broadening out of the conflict. Is this a correct interpretation that there won't be some sort of broader regional warfare that's going to further damage oil supplies?

For now, correct, for several reasons. First, we have to look at the Houthis in the Red Sea. The Yemeni government, supported by the Saudis, have pushed back the Houthis from a number of areas. And even Param Island, which the Houthis had taken in the middle of the Red Sea, is now contested.

So the Houthis, who never would.

Have stopped the Red Sea flow because of Russian and Chinese influence, shipping, which they would support. The Houthis are not in a position right now to contest the Red Sea as extensively as the past. And likewise, the Saudi system is enormous. They have storage abroad. They have shipping that's holding oil in the Arabian Sea. So the East-West pipeline, the various entities the kingdom have got are part of a bigger system. So you've got to look, is the system going to operate or is it just one element is all we're going to talk about.

There are two wars ongoing at the moment. There is one in the Middle East. There is another in Ukraine, Russia. We understand Russia's direct involvement in Ukraine.

That is obvious.

Can you help us understand just a little bit more how involved they are in this situation in the Middle East? There were reports several months ago that they helped the Iranians with targeting of U.S.

Troops.

What do we know about where things stand now?

It's about the same.

And in fact, Russia has a political and reportedly a military agreement with the Houthis as well, which is why the Houthis have not attacked Russian shipping in the Red Sea for at least two years. And we need to keep in mind that Russia sends a significant amount of its oil to India and Asia through the Red Sea. China, similarly, receives about 11 to 12 percent, the numbers vary, of its energy from the Red Sea from Saudi Arabia, Egypt, Libya, a variety of sources. And the Houthis have not attacked those actors as well. Russia and China are not significant players in the region. Their goal is that Iran survives, but it does not win. And you've had each of these countries provide some support to Iran while also calling

for a general containment. But words are cheap, actions are expensive. And Russia and China have been essentially irrelevant in this conflict.

Stay with us.

More Bloomberg surveillance coming up after this. joining us now to build on this. Amrita Sen of Energy Aspects joins us now for more. Amrita, thank you very much for making time for us. We can spend some time on the latest on Russia. I want to start with where you are in Saudi Arabia. Can you share with us what it was like to land in Saudi Arabia, given the strikes we've all seen play out over the weekend?

Hey, thanks for having me.

I think what we have seen is absolutely remarkable resilience from Saudi authorities. We've had a lot of disruptions in travel, but particularly the Saudi energy ministry, what they've done in terms of getting everybody over, whether it's required different planes or over land routes. But yeah, the gathering is still going ahead. Lots and lots of ministers and CEOs still here.

I'm here, my team's here. And yes, the disruptions did cause a lot of headache. I myself traveled overnight, up all night to get here. But I will say that it is also very, very clear how important it is to gather at times like these because this is when important decisions and important information sharing is needed. happening and it needs to continue.

Amrita, we thank you for your time as you talk about this difficult journey to get to the WPC. The Energy Minister, Prince Abdulaziz, talked about energy resilience beyond barrels of spare capacities of pipelines of gigawatts of generation. What did you take away from his opening remarks of the conference?

Yeah, I mean, you know, we had the IEF ministerial meeting yesterday as well, even before today's opening. I was chairing a session there, and something he mentioned there is that Riyadh is actually the energy security capital of the world. And I think that really resonated with me. And you had a few CEOs making comments around that as well, that, look, you need to build the resilience. you can build a lot of tanks and pipelines and ships, etc. But ultimately, there needs to be clarity, and particularly from governments around the world. We've seen too much seesawing in a lot of government policies around the world. And I think the lack of investment, and by the way, we're not talking about lack of investment in upstream, right? Like, look at

what's going on in diesel prices today. We can talk about crude futures being $ 100, but diesel is $ 200, something we've been hammering home for a while. Look at shipping, where rates are. And I think that's one of the big, big takeaways. from the talks we've had yesterday and what Prince Abdulaziz said today as well, is that that resilience and that investment needs to be all the way along the supply chain. And I think the markets kind of ended up focusing too much on, oh, we have enough oil supplies, oil demand is peaking. We've seen those narratives change over the years. But the real thing or the real test now is around that downstream and the shipping more than anything else.

That brings us to what happened in terms of Russia with the U.S. president in terms of more Russian diesel getting to the market.

Is this going to make any difference?

Firstly, I think you guys note as well, this is a ceasefire, which both sides are apparently not aware of. I think something very similar happened in September, where President Trump had said there was an energy ceasefire, which.

Then wasn't the case.

And it got unraveled very quickly because Ukrainian attacks on Russian refineries continued. More specifically, what I found interesting in this one is that the proposal is that it is a refinery-only ceasefire, i.e. other infrastructure can continue to be attacked. Why would Ukraine even accept that, given it has only one functioning refinery, right? So, firstly, I would basically say that this is not good. This is not a ceasefire that we expect to hold or that's not even in place, to be clear. Secondly, the volumes that were announced on Friday by President Trump that Russia is going to bring to the market makes no difference. It's about two million barrels for October. And we did the calculations. Even if

Russia does supply whatever they've promised in October and November, you know, these are exactly the same volumes Russia supplied to the market in September. It's just that these volumes go to the neighboring countries, some government bilaterals they have, for instance, in Mongolia. That is exactly where these volumes are.

It's about 130,000 barrels, but it is tiny. It makes no difference. And we've already seen some of the traders, some of the U.S. traders talking about placing these barrels in Southeast Asia, not even bringing it to the U.S. So these are extremely desperate measures to get the oil price down. But ultimately, What fundamentally is driving diesel is a lack of refining capacity. Obviously, the Ukrainian attacks on Russia, but also Middle East, the amount of Middle Eastern refineries that are not operating because you can't get the product out.

That's a big, big part of this rally in diesel. And I just don't see that cooling off.

Is there anything that you think that could bring down the price of diesel in the next, say, four weeks?

Four weeks is a tough one, you know, because I think if you did see more SPR come out from Europe, there'll be a little bit of a temporary relief. But again, I want to stress that, you know, we've been talking about super El Nino. And again, I'm not a big weather believer. And everybody keeps telling me we're going to have a super warm winter.

We might.

That might save us. But a warm winter hope cannot be a strategy. And we've seen some very early snow in Europe. I saw some pictures and I was like, I'm actually glad I'm not there. But I think that's, again, going to rattle the markets because suddenly you are going to need gas and gas stocks are super low in Europe.

And I think that's one of the big reasons why European governments have been holding back on releasing diesel prematurely because they might actually need to release this in the winter. So I don't see in this kind of a scenario, you're going to, get a big relief in diesel prices in the next four weeks. I think over time, the biggest challenge or the biggest downside to diesel actually becomes an economic recession. None of us want that, but I think that becomes the second half of the 2027 story.

Stay with us. More Bloomberg surveillance coming up after this.

The final major read of inflation before the October Fed decision coming this week. We'll also get comments from Fed Chair Kevin Walsh in the days ahead. This is a take from Torsten Slocke of Apollo. He writes the following recently. High rates choke off construction, which pushes rents and inflation up and keeps rates high. A problem for the Fed, given that owner's equivalent rent is roughly a quarter.

Of CPI. Torsten joins us now for more. Torsten, good morning.

Morning.

It might not be the cure, it might be the problem.

Well, the issue is that, of course, when you raise interest rates, you lower supply of housing. When you lower supply of housing, rents start going up, and that's exactly what we're seeing in a large part of the country. Namely, that rent inflation is beginning to accelerate, And if that comes around, then we have this really somewhat perverse situation where, on the one hand, rates going higher should be slowing the economy, but now rates going higher is slowing the supply of homes, and as a result of that, increasing rent for homes.

We often talk about negative feedback loops. Are we about to enter a positive feedback loop of higher interest rates?

Well, the risk, of course, is now that if this continues for too long, then we will have a risk that we will see much more upward pressure on inflation if we really have a shrinkage in the housing part of the economy. And on top of that, we also have the other part of the economy is also interest rate sensitive. And let's not forget, we normally talk about AI as the insensitive part of the economy. But remember also the employment report. We have strong job growth in health care, strong job growth also in education, which are also not very interest rate sensitive sectors. So the overall setup is that there's strong growth, which is not very strong for employment, but strong for GDP growth in the

AI world. And there's also strong growth in employment in education and healthcare. So both those two setups and components result in a situation where rates higher is just not slowing things down the way that they normally would.

We just had a conversation about the bank stocks and potential slowdown in the upcoming pipeline for AI-related financing and how the IPOs of Anthropic and OpenAI are hanging over the whole market.

Do you not buy that?

Do you not see any signs of a slowdown?

I do think that that's a very important part of the debate, but that really has very little to do with interest rates and has much more to do with the debate of when is the AI payoff coming, what is the magnitude of the payoff in AI, and what is the size.

And the speed of that payoff.

Because if that revenue increase that's expected to come in the trillions of dollars as a result of AI is not arriving quick enough, then that will certainly have implications for a lot of valuations today, including also in public markets.

So you don't think it's a rate story and that that's tied to a question about companies willing to take the leap and invest in AI because their businesses are doing so well and they see this prospect rather than doubling down and cutting spending in the face of adversity when it comes to consumers?

No, I actually think that's more a token story. That in the beginning of the year, companies paid a lot of money for tokens. Now companies realize that tokens are very expensive on their budgets. So now companies, of course, are being more reluctant to pay for tokens. As a result of that, token spending has started to flatten out because token prices have gone down, demand has gone up.

So the conclusion is that, yes, there's two things going on. There's both that rates are going up, but there's also this very important story living its own life Namely, that's what's going on with token prices, compute, how people think about the trillions of dollars that should be coming in the future, whether that's happening or not.

Your piece on an agentic bank run sparked a lot of interest. Do you think that's going to make all these banks a lot more competitive?

Well, I think that the key issue, of course, is that when news came out and, of course, also similar personal agents, a lot of attention were paid to what can this do to subscriptions that we may be having that could be canceled easily. But I think the discussion now is moving more towards, well, what about a world where where you certainly could have that deposits could be swiped in and out much more quickly than what they can today. And, of course, that raises a number of issues around how, of course, the bank funding model works, that banks are funded on deposits, which are very short-term, and then lend that out in the very long-term. And that mismatch in liabilities is, of course, the key challenge

that's now coming from agentic AI. So, no, I don't think we'll get an agentic bank run, but I think that this continues to be a very important part of the conversation, because especially as we get more on-chain and more deposits that are moving into the tech world, then this could become a much more important debate.

It was a provocative piece. Thank you for it, because we chewed over it for weeks after you published it. Provocative piece is one of the journal this morning with the Cleveland Fed President, Beth Hammack, on the degree of restraint in this economy. I suggest everyone go and have a read of it if you get the chance. Have you read that piece this morning?

Yeah, I have.

What did you think of it?

Well, I think she's very good because she actually goes out and asks consumers. The Cleveland Fed is very far ahead of a lot of people in terms of understanding not only actual measures of inflation, but also inflation expectations. And what she has done so well, not only in this piece, but also she spoke about this also in Jackson Hole. This was indeed also a bigger discussion around, well, what are companies actually thinking in terms of inflation? And given we have inflationary pressures at the moment coming from energy prices, we still have delayed effects of tariffs, according to New York Fed surveys, and we also have restrictions on immigration, putting upward pressure on wage inflation, especially for

the groups where unauthorized immigrants work, namely construction, agriculture, hotels, and restaurants. So those sources of inflation, when she goes and asks businesses, she's basically telling us what she's hearing on the ground, and we should take those anecdotes very seriously.

She doesn't see restraint. She doesn't see restraint, and she's said this several times now. Now, this is one Fed official, I think an increasingly important voice on the FOMC. We're trying to work out where the rest of the committee is. How far are they willing to take things? Is that spread between the two-year and the policy rate? Are we baking too much in, or is that a decent guess right now of where this committee might be heading?

Well, what's really interesting about FedSpeak at the moment is that they're a little bit unwilling to debate it in the framework of what's interest rate sensitive, what's not interest rate sensitive. Because this discussion is ultimately about putting up on the scale what's interest rate sensitive. And it's very clear housing is not in good shape, autos are not in good shape. But it's also very clear that AI and also education and also healthcare is actually in great shape.

So that's why up on the scale, the Fed has to consider which of these things are most important So far, GDP growth has been driven mainly by the AI boom is adding in our calculation about one percentage point to GDP growth at the moment. GDP is normally two, so now roughly half of GDP growth comes because of AI.

But as we continue to look ahead, if those sectors of the economy that are most interest rate sensitive, if they become more heavy, if they come a bigger track, and at the same time, the token issue begins to slow down, we could have that slowdown in 2027, which could become very important for the Fed debate today. But this is a very, very difficult conversation for FOMC members to have in their speeches, because that goes into individual sectors and talking about interest rate sensitivity and this debate around, well, is it the case that AI is completely insensitive to interest rates or not?

As is, unless you have one of those exogenous situations where oil prices come in or inflation naturally disinflates. Do you think that the Fed officials would have to torpedo the US economy? and send it into recession to get inflation down to 2% in the next couple of years.

Yeah, so the real nightmare scenario, if we just think into 2027, is now that the interest rate sensitive sectors of the economy begin to slow down. And at the same time, AI begins to slow down because of token prices, token spending also going down. And at the same time, all the prices also go down because then you would both have growth going down, inflation going down. And if that's the case, the Fed will certainly not hike the three times that's priced into markets at the moment.

This is the Bloomberg Surveillance Podcast, bringing you the best in markets, economics and geopolitics. You can watch the show live on Bloomberg TV, weekday mornings from 6am to 9am Eastern. Subscribe to the podcast on Apple, Spotify or anywhere else you listen. And as always, on the Bloomberg Terminal and the Bloomberg Business App.

Bloomberg Surveillance TV: October 12th, 2026

Kapitelklicken springt direkt hin

Shownotes

Transkriptvom Podcast bereitgestellt · Zeitmarken springen hin