Iran, U.S. Trade Threats After Peace Talks Collapse

SPEAKER_1 (0:03)

Data is everywhere. When orchestrated properly, it sings. At Morningstar, we analyze and enrich data, making it actionable and powerful for you. Morningstar, where data speaks.

Luke Vargas (0:19)

The US threatens to blockade the Strait of Hormuz, setting up a new showdown with Iran, plus oil surges and economists warn of higher inflation and slowing US growth as hopes for a quick end to the war fade and Trump ally Viktor Orban loses Hungary's election in a historic landslide.

Matthew Luxmoore (0:38)

It's really been seen as a race between the choice of Europe on one hand and Russia on the other.

Luke Vargas (0:47)

It's Monday, April 13th. I'm Luke Vargas for The Wall Street Journal. And here is the AM Edition of What's News, the top headlines and business stories moving your world today. A US blockade of the Strait of Hormuz is due to take effect this morning at 10 a.m. Eastern.

Benoit Foucault (1:05)

Donald Trump has said that all exports and all vessels coming out of Iranian ports for one week would be blocked. Iran cannot export crude oil, which it has continued to do. And that could involve, as well, deliveries of food.

Luke Vargas (1:21)

That's journal correspondent Benoit Foucault. The blockade comes after peace talks between the US and Iran this weekend stalled, with Trump saying that he doesn't care whether Tehran returns for another round of negotiations.

Benoit Foucault (1:32)

So basically, the talks between the US and Iran to end the war effectively collapsed because of very different demands on both sides. The US wants a long term abandonment and dismantling of the Iran nuclear enrichment facilities because they see it as a gateway towards building a nuclear weapon. Iran knows it can't and reach right now because its facilities are damaged or they're buried underground under rubble. But Iran wants to be able to resume within a few years.

Luke Vargas (2:05)

Less than a week into the ceasefire, Trump is reportedly considering limited strikes on Iran, saying that its water and electric plants would be easy to hit. In response, Iran's armed forces warned that if the Strait of Hormuz is threatened, no port in the Persian Gulf and the Sea of Oman will be safe. And Benoit says the blockade would be considered an escalation of the conflict.

Benoit Foucault (2:26)

Because there's such a large US. WSJ presence in the region, how will Iran respond? That's really the question mark. Will there be an outright war between both sides at sea?

Luke Vargas (2:37)

In an interview on Fox News' Sunday Morning Futures, President Trump tried to clear up some of those question marks, but he didn't exactly call market jitters in this exchange with Maria Bartiromo.

Donald Trump (2:48)

I just have the greatest economy ever, everything's going along, and I say, I'm sorry, I tell my economic advisors, I say, I'm sorry, fellas, we're in great shape, we have to go and take a little journey down to Iran, and we have to stop them from having a nuclear weapon. They all said, we agree.

Maria Bartiromo (3:08)

So do you believe the price of oil and gas will be lower before the midterm elections?

Donald Trump (3:13)

I hope so. I mean, I think so. It could be. It could be or the same, or maybe a little bit higher. But it should be around the same.

Luke Vargas (3:20)

Oil prices are surging in the wake of the breakdown in talks, crossing back above the $100 a barrel mark. Journal editor Anthony DeBarros oversees our quarterly survey of economists, the most recent of which dropped over the weekend and said the conflict is driving an increasingly cloudy economic outlook.

Anthony DeBarros (3:36)

One reason is they see persistent inflationary pressure, in part from rising energy costs as a result of the Iran War, which we saw reflected in Friday's inflation data from the federal government. But they also say the recent Supreme Court ruling that invalidated the Trump administration's reciprocal tariffs won't offer much relief on prices either. Their consensus calls for inflation to remain above 3% through the year.

Luke Vargas (4:06)

Economists have also lowered their yearly US growth forecast to 2% from a prior 2.2 and predict a weakening hiring landscape. Though Anthony said that most don't think the war will actually knock the economy off its rails.

Anthony DeBarros (4:20)

Over the past few years, consumers have shown a surprising ability to keep on shopping even though prices keep rising. And what worries economists now is that additional price increases caused by the war could finally be the straw that breaks the camel's back and forces consumers to tighten their budgets. But other economists point to continued massive spending on AI infrastructure and also resilience among wealthy consumers that is going to help the economy avoid a major downturn.