So to help us break this down, we've got Becca Wasser. She's Bloomberg economics defense lead.

And Chris Kennedy, he is the lead for economic statecraft. Becca, I wanna start with you

because I know you've been covering, the stockpile and its depletion and and where we are

with these numbers. How real is the concern over the defensive missile supply for The US?

It seems interesting if these reports are accurate that The US is now prescribing policy based

on, the integrity of the supply.

Yeah. I think we're at a really interesting inflection point where right now in the course

of the conflict, there is a huge strain on US air defense interceptors. That's not to

say that The US does not have any left, but rather that there's a clear strain

on the existing stockpiles which are running low after, you know, this extended conflict with Iran.

In part because of the sheer need, not only from The United States, is trying to

protect bases and troops and some US allies in the region, but also the allies themselves

who have depleted most of their, air defense, stockpiles and have been asking The United States

for more. So at the end of the day, it's a pretty stark, place to be

in, but it's not necessarily the only thing that is dictating US military policy. We've seen

this song and dance before where president Trump has threatened high escalation only to step back

at the last moment to leave some room for diplomacy. We've also seen president Trump enter

into feints in the past where he said that there will be no strikes only to

go ahead with that large operation. However, from my experience, if I'm looking at things right

now, The US does not have sufficient defenses to weather the blowback that would likely, come

from Iran if The US were to rapidly and extremely ramp up this conflict.

I get to Chris Kennedy here in just a minute. But, Becca, one more question to

you as I look at your most recent piece for for Bloomberg on all of this.

You write, The US lacks the munitions depth to bomb Iran in perpetuity. The bigger risk

is The US may run low of the right kinds of missiles. Help me understand what

we know and what we don't know. My understanding is the the size and scale of

these arsenals is is classified. We have some sense of what The US has. How how

blind are we when it comes to kind of assessing what The US has at its

disposal?

We're pretty blind, but I think there are a few different rules of thumb that we

can always rely on. We've seen, at least in the initial fighting during operation epic fury,

US officials said that there were over 13,000 munitions that were expended, and most of those

were some of these higher end long range missiles that are in demand all over the

globe. And so The US is likely, having wound down some of its stockpiles for those

critical munitions, which means that it is either likely going to need to pull some of

those missiles from other regions like the Indo Pacific, which could leave a potential gap for

others to exploit, or try and find ways to bolster the production of munitions, which The

US is doing, but that's a slow moving effort. We are talking months, if not years,

to try and just produce a few more of some of those most advanced missiles and

munitions.

Wow. Chris Kennedy, thank you for hanging in there. We do wanna ask you more about

the economic impact of all this because oil hit a $100 a barrel for the first

time in weeks. We now have concerns not only about what's going on in the strait

as it seems to drag on and just the cost of doing business with this level

of instability. But now you have these threats from the Houthis, which is compromising exports not

only in the Red Sea, but possibly production, within Saudi Arabia. You know, they can and

have before hit, refineries and facilities there. What is your take on that second front and

if we're gonna see that, if we have seen that start to price in in the

markets?

Yeah. So, it's it's definitely a challenge. So the Red Sea is now, you know, been

the subject of several different attacks by the Houthis. Looking at I just looked at the

recent, tanker traffic through, through the Red Sea, and it is dropping over the past few

days. Of course, many ships might be traveling without their transponders on, so it'll take a

few days to really see what the impact has been on traffic, but we are getting

anecdotal reports about ships turning around, having to traverse the Cape Of Good Hope at the

Southern tip of Africa, and that just adds time to get oil to market. You know,

on top of the the Middle East conflict, we've also seen Ukraine ramp up its attacks

on Russian oil export infrastructure tankers. And so that's another bit of pressure that's been growing

in the background as this conflict has continued.

Becca, you gamed out sort of what the president and his team might be thinking about

when it comes to the future of of this war, and you came up with three

options. The US could continue to bomb Iran, could intensify the blockade and guidance of ships,

or could launch an operation to forcibly reopen the Strait Of Of Hormuz. I wonder if

you could kind of put those in order of likelihood as as you see it, maybe

order of difficulty, as well and where you think the the administration might be might be

headed right now.

I think the administration is firmly in that first bucket. They're looking at ways to potentially

intensify the air war to launch additional air and missile strikes against Iran because that's the

playbook that the president has relied upon. But at this juncture in the conflict, the president

is starting to feel pressure where he probably needs to do something different in part because

some of those economic pressures that Chris has mentioned. So if that's the case, there's, you

know, the two additional options. One would be to try and enforce the blockade even further.

But, really, with that, try and make it so that The US can get more ships

through the Strait Of Hormuz, which is becoming even more of a choke point than it

already was. That means that the US military would need to shift to a direct escort

mission, which is something that is incredibly resource intensive and may and may not necessarily be

on the table at this point in time. And then the last one is a operation

to open the straight, and that requires putting boots on the ground in Iranian soil. It

is high risk. It is resource intensive. And once that happens, the escalation in this conflict

is likely to go sky high. And that's where the conversation that we've been having about

air defense interceptors is so important because those troops would need to be protected as best

possible as well as other US forces and allies across the region. In addition to that,

The US could also potentially look at entering the fray in the Red Sea, that would

further overstretch US forces and assets, particularly some of those air defense missiles too.

Chris, we also have another front that is really impacting, the price of oil, and that's

the war in Ukraine and the conflict in Russia and how Ukrainian drones are penetrating, Russian

defenses and getting to hit these manufacturing and and refining facilities. But now also you have

reports potentially of Ukraine going after an Iranian vessel in the Caspian Sea. Everything is connected

when you look at global economies, but also when you look at politics. And as the

economic statecraft lead, those seem to fold in nicely together. What is your take on how

these two conflicts are antagonizing each other and working together to kind of make it at

a hard time for oil prices kind of even more difficult? Where do you see this

going?

Well, yeah, as you mentioned, the Iranians did not respond well to, Ukraine's, you know, targeting

of this particular ship, which should I believe Ukraine said that it was involved in the

transfer of weapons between the two countries, Russia and Iran. I do think what we're seeing

is this this pressure building on the global energy system. So just stepping back, you know,

The US publishes weekly updates on energy inventories, oil inventories. We're probably gonna see a sixteenth

straight week of, oil stocks falling in The United States. We had a little bit of

respite from this MOU period. We saw commercial, stockpiles rise a little bit, but these, releases

from the strategic petroleum reserve have continued unabated. So we're estimating that those releases will essentially

run out by October. It's possible The US could offer another release, but these these stocks

are limited. And so the additional pressure you know, Russia has, banned the export of diesel

because of these attacks. Russia historically has provided about 10% of the global, exported diesel supply,

so that's a pretty significant hit. It hits the real economy everywhere. You know, another unknown

is how long China can continue to effectively pause many of its oil imports. And we

don't really know what's going on in China, but they've certainly helped to act as a

buffer for the global energy system over the past five months, by by essentially dropping off,

you know, 40% of their imports from the from from the world. So, you know, there

are all of these different variables. Some are uncertain. Many of them are outside of the

control of this president, certainly, and they're going to be adding pressure, to his decision making.

Becca, as I'm listening to Chris, I'm still stuck on something you said, which is about

The US kind of engaging with with the Houthis, and my mind wanders back to April

of of twenty twenty five when we saw The US do that. And there was that

moment when I think a super hornet fell off the USS Harry Truman into the ocean.

Was a difficult fight that they were waging there, and I wonder sort of what that

portends about The US kind of reengaging in in that way. How difficult would it be

for The US to to fight the Houthis who have kind of reared their heads here

several months into this conflict?

That's a great question. Let's think about what happened last time. You mentioned that there were

aircraft that rolled off the deck of a carrier and were lost at sea. But there

was also over a thousand US air strikes on Yemen at that time, which ate into

munition stockpiles. Additionally, US air and naval forces shot down over 480 Houthi drones, and that

left stockpiles pretty low for some of the important air defense interceptors as well with US

Navy officials saying that they cost in the billions of dollars and that stockpiles were nearly

depleted. And that was just from some of these one off attacks from the Houthis during

that time period. Right now, if The US were to enter the fray, it would be

like that once again. But that also means that that's occurring at the same time that

The US is prosecuting a blockade in the Strait Of Hormuz and using munitions and equipment

and readiness to, you know, conduct that as well as continuing its air campaign against Iran,

which has been paused for two nights but could pick up at any moment, which, again,

is depleting critical readiness using US forces and using up some of the most important munitions

that The US might need in a potential future conflict.

And, Chris, it's not just complicating supplies of munitions and oil, but other commodities as well.

I see you retweeting, from the show, Stephen who we had on, yesterday, him talking about

LNG. He said a global fight for LNG is brewing, and Europe is losing. Europe's strategy

of delaying LNG purchases until Hormuz reopens is backfiring threatening efforts to refill storage for winter.

What is going on there, and how critical is this?

This is a really serious issue for Europe. Of course, The US is in pretty good

shape for LNG. And if we could, you know, export more, but we're really capped out

at how much we can export right now and help to backfill for Europe and other

economies. I think the challenge right now is that Europe is competing with Asian economies that

are also trying to ensure that they have sufficient supplies of LNG, which goes into everything

from power generation to petrochemical, manufacturing. So, you know, Europe is is in a position where

they need to start, you know, resupplying their stocks before the winter. They can't count on

Russia, of course, and there's limited amounts of export from The US. So, you know, if

this conflict doesn't resolve, if we don't get these LNG, you know, supplies coming out of

The Gulf again, that's gonna it's gonna cause some some pain in Europe. And I'll also

note that we saw early in the war that Iran targeted some of Qatar's LNG facilities,

and these are very sensitive facilities. And if they are subject to significant, you know, kinetic

attacks, that could cause, you know, long periods of, of them being offline. So that's, I

think, one of the bigger risks of further escalation at this point.

Chris, have a couple seconds. But before we go, is it we can't export more because

we lack the trains or the facilities to convert it into a movable quantity, or is

it shipping, or where is the where is the rub there?

It sees export facilities, these ex LNG export terminals. So between now and the next five

years, we're expecting to be able to double our export capacity. But right now, The US

is drowning in LNG, and we just can't get it out fast enough.