Gaza Strikes Dent Mideast Peace Prospects; Trump Reduces US-South Korea Drills

**SPEAKER_1** (0:02)
Bloomberg Audio Studios, Podcasts, Radio, News.

**Nathan Hager** (0:10)
Good morning, I'm Nathan Hager.

**Karen Moskow** (0:11)
And I'm Karen Moskow. Here are the stories we're following today.

**Nathan Hager** (0:15)
Karen, we begin with the latest from the Middle East. Israel has carried out new attacks on Lebanon as the US prepares fresh economic sanctions on Iran. The Israeli military says it killed Senior Hezbollah Commander Abu Hassan Alaa in retaliation for a strike that injured three Israeli soldiers on Saturday. We get more from Bloomberg Middle East correspondent Abir Abu Omar in Dubai.

**Abir Abu Omar** (0:38)
These are the deadliest strikes against the southern part of Lebanon since that MOU was reached in June, which the expiry date for that, if you were to hold it into account, given the latest escalations we've seen in the region, mean anything, that deadline is due later today. We don't know what exactly is going to happen once it expires.

**Nathan Hager** (0:58)
Bloomberg's Zabir Abu-Omar reports Treasury Secretary Scott Besant is promising to roll out an economic isolation plan against Iran this week. Robert Harward is a former deputy commander for US Central Command.

**Robert Harward** (1:10)
The pressure will be increased on Iran. The negotiations, the MOUs, the ceasefires have gone nowhere, as anything has with Iran in the last 47 years. So in this case, they really go ratchet up the economic sanctions, which is a very sound strategy.

**Nathan Hager** (1:26)
Former CENTCOM deputy commander Robert Harward was a guest on Bloomberg this weekend, heard each Saturday and Sunday on Bloomberg Radio and Television. Meanwhile, The Wall Street Journal is reporting that Iran has used the recent lull in fighting to prepare for an even broader confrontation. The report says it has given the Islamic Revolutionary Guard Corps greater influence over the military, accelerated missile and drone production, and strengthened coordination with proxy militias.

**Karen Moskow** (1:53)
And Nathan, as the confrontation continues with Iran, the US may be looking to scale back in the Asia-Pacific. President Trump said he's told the Pentagon to substantially reduce joint military exercises with South Korea. Thus, his 10-day drill with some 18,000 South Korean troops is set to kick off today.
We get more from Bloomberg Chief Asia correspondent Rosalind Matheson.

**Rosalind Matheson** (2:17)
It's a bit of a mystery as to why. Perhaps someone just mentioned this in passing to him, that these drills were kicking off, and they are quite large in scale. And that got his attention, and therefore, his eye are over the level of the US military commitment to these drills, which is not small in scale.

**Karen Moskow** (2:36)
Bloomberg's Ros Matheson reports the president posted the announcement on social media saying the drills are too costly and sent an inappropriate signal to North Korea. He cited his quote, very good relationship with leader Kim Jong-un.
South Korea has declined to get involved in the US war with Iran, but it says this week's joined drills will go on as planned.

**Nathan Hager** (2:58)
Let's turn to markets now, Karen. Futures are mixed with tech stocks leading the way as we kick off a new trading week. Documents seen by Bloomberg News show that Anthropic is telling its prospective investors second quarter revenue jumped at least 14-fold compared to the same period a year ago.

**Karen Moskow** (3:16)
Nathan, the dollar is dropping for a third day. As traders reduce bets on Federal Reserve interest rate hikes following weaker than expected US economic data last week, there is a less than 30% chance that the Fed will raise its policy rate in September. That's down from about 70% odds at the end of last month. Meanwhile, Goldman Sachs says market bets on rate hikes are still too aggressive given that inflation and the world's biggest economy is cooling.

**Nathan Hager** (3:44)
And this week, Karen, earnings are going to be in focus. We hear from several big retailers this week, including Walmart, Home Depot and Target. Let's get a preview from Bloomberg's Charlie Pellett.

**Charlie Pellett** (3:55)
Consumers are still spending, albeit more prudently, in the face of higher energy costs, cooling wage growth, and a softer jobs market. Tuesday, we hear from Home Depot. Bloomberg Intelligence says same-store sales should rise for a fifth straight quarter, defying a housing slowdown and anemic DIY demand. Wednesday, it's Target. Citigroup says the retailer could raise 2026 guidance on a potential second-quarter beat. And then Thursday, we hear from Walmart. Citi says Walmart will likely score an earnings beat for the quarter and keep its full-year profit outlook unchanged. In New York, Charlie Pellett, Bloomberg Radio.

**Karen Moskow** (4:33)
All right, Charlie, thank you. In Asia, China's economy got off to a sluggish start. In the second half, industrial output rose 4.5% from a year earlier. Missing forecasts, while retail sales growth slowed to 6.5%.