Iran Officials Pessimistic About US Deal Before Midterms

SPEAKER_1 (0:02)

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This is Bloomberg Businessweek Daily, reporting from the magazine that helps global leaders stay ahead, with insight on the people, companies, and trends shaping today's complex economy. Plus, global business, finance, and tech news as it happens. The Bloomberg Businessweek Daily podcast with Carol Massar and Tim Stenovec.

Carol Massar (0:32)

Let's get to geopolitics that is definitely impacting the US yield curve.

Tim Stenovec (0:35)

Iranian officials have privately expressed pessimism about reaching a deal to end hostilities with Washington and reopen the Strait of Hormuz before US midterm elections in November. That's according to people familiar with the matter. At the same time, Iran and the US appeared far apart on a new ceasefire deal or the reopening of the strait. Tehran's saying it's sticking to a proposal that President Trump has rejected.

Carol Massar (0:55)

Yeah, there's a lot going back and forth as typical and usual. Patrick Murphy was the 32nd undersecretary of the Army. He was also former acting secretary of the Army, both under President Obama. He is a former US congressman, Democrat from the state of Pennsylvania. He is currently executive director, geopolitical advisor at Hillco Global. It's a diversified financial services company. So he basically is talking to senior execs, he's talking to boards about geopolitical risks, cross-border strategy and enterprise transformation, all of which are coming at the C-suite and boards of companies right now.

Patrick, good to have you here with Tim and me. A deal before the midterms, is that even on the table in your view?

Patrick Murphy (1:38)

I think with 33 days to go, Carol, it doesn't look very promising, especially because what Iran just proposed, that basically a seven-day roadmap, which was similar to the agreement that we had a few months ago, that was obviously dissolved pretty immediately.

I don't see this happening. And we just got done the largest buildup of US forces. As you and Tim know, Carol, we lost 18 American service members. Gas is up over $1.20 more than it was two years ago. Diesel up over $3 more a gallon. I mean, just 20% of the world's oil comes from the Strait of Hormuz and people hurting out there.

Tim Stenovec (2:22)

Yeah, no question. I mean, and politically, we see that changing with the polling. We see a change with prediction markets, with what things will look like for Democrats versus Republicans come midterms. Yeah, there's still a few more weeks to go there. The politics of this aside, though, I'm curious about what you see as a reasonable timeline for things in the Strait of Hormuz to actually go back to normal.

Patrick Murphy (2:46)

Yeah, well, Tim, I think part of it is, is that you know I served in Iraq over 20 years ago and the reality of this is that the saying is, is that America might have a watch, but we have the time. They're trying to make sure that they're not going to come to an agreement that they don't want and giving them more power now in the Strait of Hormuz is not good for anybody. So I am hopeful that it's before the end of this year.

And you know, so obviously after the midterms, I mean, I hope it happens this week, but if you're asking my honest opinion, it's going to work several months away.

Carol Massar (3:28)

Yeah. I mean, what do executives that you speak to, companies, boards, what do they most want to know? Where do they want your advice in terms of reading the tea leaves of this White House and this administration?

Patrick Murphy (3:42)

Yeah, Carol, I mean, this used to be geopolitics was kind of like a cocktail-hour conversation. And now it's baited into the balance sheets because, and it's not just the gas prices, but you're talking about supply lines that are choked off the ear, talking about shipping cost, you're talking about tariffs.

So the American small businesses out there and corporations have been really tailing on the chin when it comes to these tariffs, when it comes to increase in energy prices. And also, not just corporate America, but also American families, as you know, electricity prices have raised 18 percent the last two years. So we need to do a better job at making it more affordable for everyday Americans and small businesses out there. And I don't think Washington's getting that memo, unfortunately.

Carol Massar (4:33)

All right, you're talking small businesses, but what about big businesses? I'm not quite sure who your clients are and so forth. But having said that, I mean, so what are CEOs willing to do? Share the profits, share, cut their salaries? I'm not disagreeing with you and Tim and I spend a lot of time talking about the K-shaped economy and spreading wealth and trying to understand some of the political backdrop here and understanding more of our economy.