US Readies Isolation Plan for Iran; Trump Tariffs on Drones

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

**Nathan Hager** (0:09)
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 on the war with Iran. The US is preparing for unprecedented economic isolation measures against Tehran. Treasury Secretary Scott Bessent says it's part of the Trump administration's effort to squeeze the regime's finances.

**Scott Bessent** (0:30)
The Kinetic War ended after several weeks, and we went from epic fury to economic fury. And at the president's orders, we have raised the level even again, and watch this space for more announcements coming next week, because we are going to apply measures like have never been seen in the history of economic isolation on a country.

**Nathan Hager** (0:58)
And Treasury Secretary Scott Bessent told Newsmax the economic pressure will be part of a one-two punch that includes the continued blockade of Iran's ports. The Iranian economy has taken a major hit, industrial capacity is damaged, and crude oil exports have been severely curtailed by the blockade.

**Karen Moskow** (1:15)
Well, oil rose, Nathan, after the US threatened to impose the economic measures against Iran. And checking prices, now NYMEX crude oil is up one and a half percent at $82.49 a barrel. Brent is up one percent at $87.92. Francisco Blanch, head of commodity research at Bank of America, says dwindling inventories are a concern.

**Francisco Blanch** (1:36)
The last six months, right, we've had this massive negative supply shock in oil.
And many people are surprised that it hasn't created a collapse in economic activity. But part of the reason is we have very high inventories. We've lost about 12 to 1300 million barrels of oil as a result of the Iran War. About two-thirds of that gap has been met by inventories, which means GDP growth has only come down maybe 30, 40 basis points globally, as opposed to one, two, three percent. So we can play that game for a little longer, but we're getting close to the end of the rope.

**Karen Moskow** (2:06)
And Bank of America, as Francisco Blanch's comments come, as Bloomberg reports, supertankers are going dark for longer to get oil through the Strait of Hormuz and the Bob Elmondeb Strait, doubling down on tactics honed in the early days of the Iran War.

**Nathan Hager** (2:21)
And staying with geopolitics, Karen, the Trump administration is now imposing tariffs of up to 100 percent on imported drones and drone components, as it seeks to reduce reliance on foreign suppliers. Smaller drones will face a 25 percent duty, while even lower rates will apply to some trading partners, including the European Union, Japan and the UK.
The move risks accelerating a decoupling with China. It is the world's biggest drone maker, and US drone exports from China have been cut in half in the first half of this year.

**Karen Moskow** (2:50)
Well, let's turn to bonds now, Nathan. There was a decent demand from buyers, as the US sold 30-year government debt yesterday. But the Treasury had to offer a yield above 5.2 percent to sell 25 billion dollars of bonds. That's the highest rate since 2001 Bloomberg Intelligence's chief US interest rate strategist, Anirajersey, says years of elevated inflation and deficit-fueled spending add to the strain on government finances.

**Anirajersey** (3:13)
The US Treasury now is competing with other countries worldwide, whereas for the better part of two decades, we were the highest-yielding developed market, liquid bond market in the world. That's just not the case anymore. There is competition.

**Karen Moskow** (3:26)
Anirajersey with Bloomberg Intelligence says concerns over paying down government debt will grow as debt-to-GDP rises. The US spent close to 1.2 trillion dollars in debt interest so far this fiscal year of 15% from a year ago.

**Nathan Hager** (3:40)
And Karen, global stocks are headed for a third straight weekly gain. Amid optimism over the AI trade and cooling inflation, bolstering bets the Fed won't have to raise interest rates. But some officials are raising the alarm about sticky inflation. Cleveland Fed President Beth Hammack, one of the three dissenters at last month's meeting, doesn't have confidence that recent signs of an inflation slowdown will continue.

**Beth Hammack** (4:03)
We've gotten two recent reports on the inflation side that are definitely better than the earlier five months that we had this year. And so it's welcome. I love to see that those numbers are coming in lower. That's a good thing.
But I don't have confidence that we're going to continue to see that or that we're going to see them low enough that it's going to bring us back down to that 2% number.

**Nathan Hager** (4:24)