Power Lunch - Israel-Iran Conflict 6/13/25

Episode Date: June 13, 2025

CNBC’s Brian Sullivan and Kelly Evans take you through the heart of the business day bringing you the latest developments and instant analysis on the stocks and stories driving the day’s agenda. “Power Lunch” delves into the economy, markets, politics, real estate, media, technology and more. The show sits at the intersection of power and money. “Power Lunch” gives viewers a full plate of CNBC’s award-winning business news coverage, plus a healthy dose of personality from the show’s anchors and the network’s top-notch roster of reporters and digital journalists. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

The global community is on edge. Welcome to Power Lunch, everybody, alongside Kelly Evans. I'm Brian Sullivan. Israel hitting Iran with the largest preemptive strike in decades. Israel hitting Iranian nuclear facilities, some of which, and taken out Iran's top military commanders, Iran threatening retaliation. The Dow is back near session highs, but there are concerns it can get worse and then spill over oil, having one of its biggest weekly jumps ever. And though crude is higher right now, it is not even Kelly's.

at the high for the year. So why aren't oil prices even higher? We'll dig in to that. And for his role, the president telling Iran they must, quote, make a deal before there is nothing left, Brian, and save what was once known as the Iranian Empire, no more death, no more destruction, just do it before it is too late. Again, that's from the president. And as Brian just mentioned, stocks are firmly in the red right now. We're kind of drifting back towards session lows today, even as we were just a day ago, a stones throw away from session highs. By the way, Visa, Adobe, and Sherwin Williams are some of the names leading the declines. Obviously not geopolitically related. We'll explain what's driving those moves shortly. While the defense names are higher,

lockheed up 3 percent RTX at an all-time high. And since we're about to close out the week, here's a look at some of the laggards overall, which include United Smucker and PG&E, Brian. All right. There was a lot to do this hour. How much could the U.S. be at risk for any Iranian retaliation? Well, it depends on how much Iran believes the United States may have been involved. President Trump calling the strike, quote, excellent. But Secretary of St. Marker Rubio distancing the U.S. from the attack. Megan Kassella has more from the D.C. side of the story. Hey, Brian, that's absolutely right.

A lot of reaction coming out of Washington today and not always exactly on the same page. So I want to say first, we've been hearing a lot from the president this morning and this afternoon, saying things like he was highlighting the Israel's use of American military equipment. He was praising the attacks on Iran, calling them very successful. that the U.S. knew everything about these planned attacks before they happened. But that's slightly different from what we were hearing initially from the administration overnight. The first and only reaction we had for some time was from Secretary of State Marco Rubio representing the administration, saying that Israel was acting unilaterally,

acting alone in this, and that the U.S. was not involved in the strikes. Now, a couple of reasons, guys, that this distinction really does matter. You touched on one of those just in the intro. But the other thing is that Israeli officials have said today that they're going for complete and total annihilation of Iran's nuclear weapons capabilities in these strikes that they won't stop until they get that done. So it has long been thought by military experts that the U.S. would have to be involved in order to get to that complete and total annihilation, especially given how much of it is underground.

So one question still with the president aligning Washington so closely today to Israel on this is whether and how far the U.S. is willing to help facilitate these attention. to make that happen. We just don't know that yet. We don't know just how hawkish Washington will be or how far the White House is willing to go on this. One final thing that I do want to flag for you guys is that the president has been talking about a second chance today for Iran to strike a deal, saying that even after this initial round of attacks, that there is still time for Iran to come back to the negotiating table. But I will say just in the last few hours, Iranian state media now reporting that Iranian officials will not be participating in what was

supposed to be the scheduled sixth round of talks this weekend in Oman. So severely undercutting there what the president has long said was his preferred path forward on this, which would have been to get back to the negotiating negotiating table and to not have to use force as the way forward. As we watch Megan for any potential counterattack by the Iranians, I guess there was a, what just happened on Israeli TV just a few moments ago? Do we know if there's something ongoing at the moment? I don't believe it's ongoing at the moment.

trying to get this video ready for you. I don't know that we have it yet. We do not have that video, but what was happening was the Israeli military spokesperson was giving a briefing and talking about the attacks and any potential retaliation, talking about it. Then you hear a voice in Hebrew coming over the speaker, and Reuters is saying that it was the live feed was cut short due to an incoming Iranian attack on central Israel. It kind of highlights guys just how much, how quickly things are moving and how even Even as one briefing is going on, it's getting cut short because of incoming attacks. So we've heard reports of those sorts of incoming attacks so far today.

So far, it seems like many of them have been fended off, but still many more hours left in this and much more to go before we know exactly what's going on. All right, Megan, thanks very much. Megan Kisela. Let's turn now to Michael O'Hanlon. He's Director of Foreign Policy Research at the Brookings Institution, Michael. And so we are hearing from different analysts that they think this could actually be rather drawn out a fair. That's going to kind of put that on one side of the equation. On the other side are those pointing out that the market reaction here is not outsized.

In other words, it's not huge. So is there a sense that even if this is a drawn-out conflict with multiple more chapters to it, that it doesn't have a direct impact, at least a further direct downside impact to U.S. markets? It's a great question, Kelly. I don't know if I can make that kind of a confident prediction because we have to think of also what is Iran's recourse going to be? And is Iran content to do something similar to what it's done in the past when it was angry with Israel or the United States? Or are they going to feel the need to really do something dramatic? And until we know the answer to that, it may be weeks or months before we

really get the answer, then I think markets may stabilize for a while and then may take another hit down the road. And then the other big question, longer term, will Iran agree to go to some kind of a new nuclear deal? And I would have to guess today the answer is it's going to to be hard or unlikely. But in that event, how long do you really think it'll be until Iran does get the bomb? And how long does this wind up setting back Iranian nuclear production or capabilities? Maybe it even winds up being the deciding final factor as Iran pursues the bomb, which they hadn't quite decided to do perhaps until today. Iran has had, Michael, Iran has had 60 days to make some kind of a deal. This was actually day 61 of a 60-day pause or sort of semi-remon.

warning that came from President Trump and Israel about a nuclear deal. So they've been kind of sitting there waiting. There's a 60-day period. Today was day 61, so Israel struck. The ball is now in Iran's court. What do you think Iran may do? And more importantly, what do you think Iran is capable of doing? Well, first of all, of course, the ball is still in Israel's court because they say they have a 14-day attack plan. see if they really mean it, and we'll see what else is involved besides just dropping bombs from airplanes and, you know, sneaking drones into the country in advance, because if they really want

to take out the foredo site, I think they may need some kind of ground operation. And presumably, that's going to be very difficult now that Iran knows it's under attack. If you're going to do a special forces raid, you probably would have started with that, not do it on day 10. So there still are a lot of choices Israel has to make. And then perhaps choices the United States has to make, depending on how Iran might retaliate. But to your point, we know that Iran was thinking about trying to assassinate some of the people in the chain of command in the United States that killed Soleimani five years ago. And thankfully, they have not succeeded. And President Trump took away the security detail for some of the folks who had been protected. Luckily, those people are still safe,

but Iran has already indicated it's willing to try to play the assassination game. So that's one thing they could try to do. And it wouldn't have to be on Israel proper. It could be around the world, Israeli diplomats, what have you. So that's one set of options. Another is to revert back to their sort of old-fashioned mass casualty, civilian target terrorism. And it wouldn't have to be on Israeli soil again. It could be like in the 1990s in Argentina at a synagogue. So those are the kinds of things Iran may consider and they may have to decide whether to attack American military bases in the broader Middle East as well. Those are the kinds of questions, I think, before them right now. We have to wait and see what happens as we talked about with Megan

Casela, a TV news station went off the air. There are reports, Kelly, that there are Iranian missiles heading toward Israel. Again, unconfirmed reports. Although, as you heard, Baker Cassella report, we do know that something has occurred. So kind of waiting to get more clarity on that. I didn't mean the ball is in Iran's court. What I meant was that they have threatened retaliation. And I told Khomeini went out on social media and basically said, you know, we're going to retaliate.

But let's be clear. Iran just lost pretty much its entire. top military leadership, and it appears that every time they pop their head up, Israel comes calling and hitting them where it hurts or maybe some of their proxies where it hurts. The ultimate question is how much does this spiral up? What do you see as a best and worst case scenario from here, Michael? Thank you. And I got your earlier point, and I think it's a very valid one. All parties have a lot of choices to make going forward. But in terms of best and worst cases, the best case is the best case, is, let's say, Iran does shoot through some more missiles and drones, and one or two of them

hit, let's say, an important military facility, hopefully when no one's there, very low casualties, but something that is valuable to Israel, and Iran can claim or at least bluster and pretend that that was payback enough, and then decide they're better off de-escalating. So some kind of a hit where Iran can claim, because it's a new threshold, but still hopefully not too good. gory, not too damaging, not too bloody, then that's payback. A worst case scenario, of course, is that they go for the bomb and in the meantime carry out some big acts of terrorism, get a nuclear weapon by 2030-ish, and then feel emboldened as they've maybe rebuilt Hezbollah by then to launch a new wave of aggression against Western and Israeli interests in the broader Middle East. That plays

out over a longer period of time. It may play out after President Trump's term in office, But that to me is a worst case, a completely unconstrained Iranian nuclear weapons program that then at some point in the future makes Iran feel like the ball is back in their court. They really can do big things because they're protected with a nuclear weapons deterrent. And then they get aggressive again as they have in the past. No, I think that's well said. And then the pragmatic kind of point in the near term, Michael, does it on any level right now reveal an Iranian weakness in terms of the response or capability? and does it invite perhaps a deal driven by desperation? Yeah, Kelly, it's a great way to put it because I think Iran is feeling like, you know,

they're on the wrong side of momentum in these last couple of years. And certainly if they keep firing drones and missiles at Israel and they all get intercepted yet again, then it starts to look like they're fairly toothless. So that's why I say a best case may not be. complete 100% interception of all those incoming threats, maybe it's better if one or two get through and damage physical infrastructure, not so much human lives, but physical infrastructure in Israel. So Iran can say to itself and claim to the world, that's enough. Now we've retaliated. Now we can move on. Again, that to me is sort of a best case coming out of this.

All right. Michael, for now, we'll leave it there. And thanks again for joining us this afternoon. Michael O'Hanlon of the Brookings Institution. Or let's take a little deeper into the market response, exactly what is moving today and why. Obviously, Dom Chu, welcome. This is the news, as it should be, it's dominating the world and financial news programs. But there's also a lot happening in the market. There is. And a lot of it is tied directly to the knock-on effects of what's happening right now, not just with higher oil prices, but the geopolitical tensions as well.

One of the places that you're seeing, the upside moves, as Kelly pointed out at the top, is in those defense stocks. Now, I would also point out, you know, when Michael O'Hanlon talked a little bit about the best and worst case scenarios, this is a market that has dealt with best and worst case scenarios out of the Middle East for the balance of the last seven years with big, big events, Kassam Soleimani's assassination and everything else. And by the way, the markets have been not desensitized to it, but they've learned that nobody really goes career long or career short in any one of these situations. What does that mean? It means nobody wants to go head first and buy everything in the world right now because of, you know, a dip.

And nobody wants to sell everything and short everything because they think the world is going to come to an end. That's what's playing out right now. I wouldn't be short oil heading into the weekend or any defense stocks. Not at all. Not at all. So oil is where you're seeing the epicenter of it. Where you are not necessarily seeing some of the bigger aspects play out. Okay. Dom, I need to cut you. I apologize. It's not you. Sit tight. We've got word from Israel that there are incoming missiles. This is a live view of incoming ira are those yeah let's that that graphic guys is wrong let's let's take that red sticky

off because i believe that this is in israel correct okay so we're going to remove that that graphic was erroneous these are missiles from iran into israel where it is about nine 14 p.m. it just got dark and that is the Israeli defense response the so-called iron dome shooting anti-missile rockets into the air to intercept and hopefully knock out the incoming Iranian missile. Remember, just a short time ago, the Israeli military had told the public to enter a protected space and remain there until further notice. So they were aware that this was coming. There was a TV broadcast also that was interrupted. The military said they were working on intercepting launches from Iran, and I believe what we're seeing here is them doing exactly that. We've heard air raid sirens sounding in Tel Aviv and in Jerusalem as this is underway.

This is the second time we've seen this, of course, in recent months. There was that very similar barrage of missiles from Iran over Israel months ago that were also largely intercepted. And as you just heard Michael O'Hanlon describe, the success of this interception will go a long way towards figuring out what further response Iran might feel that it needs in order to show its strength and its response and the caliber of what it's ready to do, contra Israel, which launched that surprise attack on Iranian assets last night. think this would be a surprise to Israel. I think Israel knew that Iran would be, as Michael O'Hanlin said, sort of forced to respond if anything Kelly just a safe face, because let's be honest, the Iranian people, they were humiliated. I mean, the Iranian leadership, not people, the Iranian leadership were by this attack. They lured the defense ministers and all the military into a fake meeting and took them out via missile. They hit people in their homes. They hit

nuclear sites as well. No oil infrastructure, which is why the price of oil is up. but it's not up 13% like it was this morning. But Domchu, that is a live look right now at Tel Aviv, where hopefully the Iranian attack on Israel is indeed ending over. All right. So as we watch the video right now, might be Hebron, not Tel-Ivieve. I'm going to help narrate what the market overlay is, if you will,

over what we're seeing in terms of live shots out of Israel. We are moving towards session lows. Okay. We're not going to show the chart. We're going to keep this graphic up here right. now the video. The Dow is down about 720 points, which would represent probably near the lowest the point of the session so far. The other point that's interesting to make in all of this, vis-a-vis the conversation that we just had with Michael O'Hanlon, is just where you are not seeing

some of the more market reactions. They're typically in these scenarios situations where you see a flight to safety for the U.S. dollar. The dollar index would go higher. One of the reasons why is people go to the safety of treasuries. You buy treasuries with U.S. dollars. What we are seeing, right now, believe it or not, in the 10-year yield, is still a tick higher than what it was before the actual airstrikes happened earlier in the day. Commentators, Mohamed El-Aryan and others are pointing out that's highly unusual. Highly unusual. And I would also point out... Normal tuition yields should be falling, 10 basis points or something that's not...

And they did, and they did, and they bounced back up again. I would also point out just the gold trade. That's another one of those safe havens that typically moves decently to the upside. It is still up one and a half percent gold prices, But you would expect them to be up markedly more so in this kind of a scenario. Let's go. This is, folks, and we're all getting this real time, that is Tel Aviv, where you saw an incoming strike of Iranian missiles that were, looks like, hopefully, all or almost all of them, were intercepted by Israeli defense, and that's so-called Iron Dome.

There's a lot of smoke, not exactly sure what is causing that. But we do know that the market is reacting to Dom's point. Oil closes, and I hate to even talk about the market in a time like this. This is, though, what we do. This is why you're watching and listening right now, folks. Let's tell the price. We're going to put that up or keep that up. The price of oil has spiked back up. It is not where it was this morning, Kelly, but it was up 6%. About 10 minutes ago, it is now up almost 8% or $5 to $7.3.27. Brent crude is up about 7.5% natural gas, up 2%. And the stock market has I don't want to say sold off. No, it's moved back towards session low.

Absolutely fair. I mean, the hope is always that what we've seen is contained. And every time there's now a new round is the Iranian response over, is it successfully intercepted or not? Of course, we're waiting to see further headlines about what exactly has happened over Tel Aviv and some of the other cities where these explosions

have been heard and the public has been told to shelter in place. So the market is doing what it does. It's going to discount now the ongoing rounds into the weekend and beyond. We've heard from Macron weighing in on this, bevy of global leaders who are more or less saying that they understand what Israel is doing here, but they still wish for peace. Yes, and I've got a statement from the IDF, Israeli defense force

that is coming from NBC reporter Yarden Segev, and I'm going to read it, so you'll forgive me for looking down on my computer folks. A short while ago, the IDF identified missiles launched from Iran toward the territory of the state of Israel. Defense systems are ongoing and operating to intercept the threat. The public is instructed to enter a protected space and remain there to further notice, leaving the protected space is only permitted following an explicit directive continue to follow the instructions of the Home Front Command. So that is a live look at Tel Aviv following an Iranian missile attack on. We know that Tel Aviv, as you just saw, was attacked. We believe Jerusalem was also attacked as well, but that is a live look at Tel Aviv. I actually

spoke last night to a gentleman, Kelly, at dinner, whose wife and four-year-old daughter are in Tel Aviv, there for a sister's high school graduation. They're scared. The airspace is closed. People are afraid, probably also afraid in Tehran as well, because they're now being hit for what their leadership, the Ayatollah Khomeini and some of the top military rulers, which do not reflect most of the views of the people that I know who are originally from Iran.

I think it's also worth going back to the last similar skirmish like this that broke out several months ago in which the attack and the response was basically all there was to the story. and that could be one reason why, despite somewhat of a market response, a lot of people are trying to look past this and say, can it remain contained to a regional conflict that doesn't have to, you know, turn into something much bigger. If this is different, what happens after right now will be the point at which we find out whether it is going to be a lot different than what we saw in the past.

Yeah, and Dom, again, to Kelly's point, I think this is really critical what she's saying, which is that on October 1st of last year, Iran attacked Israel. Israel then on October 27th fired back. We saw oil move up. We saw markets move down. We've actually reversed since then. Oil is now lower than it was then. Obviously, the horrific attacks of October 7th, 2023.

You go back to the October 2020, I think it was killing, of the Iranian leader Soleimani, to which to this day, former Secretary of State Michael Pompeo effectively has to move houses every couple days because the Iranians have said they're going to kill him and his family. basically a fatball for the rest of his life. I bring those up because this is a market. I don't want to say that's become inured.

Desensitized. Better word. Yes, yeah. Thank you. And we'll react according or not react accordingly. No, I choose to think that the reason why you're seeing some of this action now is because there are more data points to factor in. So that all of a sudden.

So what all of those things that you see? said, with every subsequent precedent that is set, there is a new set of, I guess, constructs that are developed. The desensitizing, if you want to call it that, it comes because there are now more examples that you can draw from. I would also point out that if you're talking about things like what's happening with treasuries, there are now, in the last six to nine months, way more catalysts on that treasury. Now, the safety trade is front and center right now, but we have not yet forgotten or traders haven't, are still trying to handicap. what's happening with the deficit issues in America, the fiscal situation and whatnot.

So if you have all of those things pushing and pulling at the same time, that may be one of the reasons why you're seeing not as much of a reaction in the traditional sense of what we would normally see in the 10-year yield and everything else. So those are the types of things that I think the market is handicapping in real time, which is why you're not seeing the massive volatility in the macro trade that you normally would at this. You're a former mutual fund. We can talk to you about this. You're a former mutual fund portfolio manager.

Which is, and we've got Michael O'Hanland, I know on the phone, we've got a lot more to do, folks. Which is, we also have a Federal Reserve, which I think, which has resisted calls by the White House so far to lower rates, saying it's just not warranted right now. There's an inflationary aspect to this, which we'll talk about later on on the show with Torsten Slok. But is this also, do you think, Dom, and I'm asking you get editorialized, Paul? that this is a market that will sort of know that the Federal Reserve might have its collective back? Yes, that's a factor for sure. And we're saying this on the eve-ish of a big interest rate decision that's coming up, right, in the next few days, in the next week or so. The idea, though, is, and I hate to use this word because it has such a negative connotation in the markets, but is it transitory, right? If the Federal Reserve is looking at the inflationary threat of what's happening with rising crude prices,

rising crude prices have been there for geopolitical concerns in the past, and as we've seen over the medium to longer term, have still been heavy drifting to the downside. To your point, Brian, even with the spike right now, we are still below some of those levels that we've seen over the course of the past year when there have been massive geopolitical responses. That's, of course, the product of a lot of variables, supply and demand dynamics, mostly the supply side of things right now. That's a big question. If that is, in fact, the case, maybe oil becomes, yes, a relatively insulated part of the market that reacts directly. But the

rest of the stuff that happens is not as much. And by the way, when you see rockets flying and missiles flying, as we just did. So what I want to see in real time. In real time. What I would like to see a little bit more and maybe analyze a little bit more is just how much those defense contracting stocks are reacting to this. We had seen a move off the highs of the session for many of those major defense contractors, those primes, so to speak. Let's put them up. Yeah, if we can. I don't know if we have. We're kind of producing, folks, you're watching and listening as we also produce real time. There we got. Great job, guys. Thank you. Northrop Lockheed. Look at that 3% moves on all of them. During Squawk box this morning, some of those names, those defense primes, were up higher than they are right now.

So it was oil. So it was oil. Right. So we've come off the best levels of the session right now. And when you see general dynamics or names like that only, and I say only tongue and cheek, relatively speaking, up 2% as opposed to the 4% or 5% that we saw for some of these names earlier, does that then mean that we are still trying to figure out whether or not this thing is contained as much as it is as much as it can be for this time being? They're just going to point out Bitcoin's lower.

So if you were looking for it to confirm gold as the new safe. Pave and trade. It's under a little bit of pressure. I don't want to make too much of it. Just want to add as well, the Iranian State News Agency has confirmed that their response has begun. They said Iran's response to Israel has begun. Hundreds of ballistic missiles have been launched, as we saw there on the screen, of course, appears that Israel already has intercepted many of them. There are no reports yet of any casualties. We're hearing from the UK's leader as well, saying he spoke to Trump, emphasized the importance of de-escalating conflict, echoing what we've heard from Macron and other European leaders, and that he respects Israel's right to self-defense. And Macron was, I think, the first France was the first foreign country leader to come out and expressly say, we will support Israel in this.

I think when you look at a, and let's throw the price of oil up if we can as well, folks. The OPEC meeting just ended. There is a big OPEC seminar on July 9th and 10th. Maybe we will be there now, but we don't know. It's not a meeting, but it does have the ability for them to get into a room. And the diplomacy that can happen, I've watched it happen in real. life in real time, the diplomats that can happen when the Iranians, the Emirates, the Saudis, the Russians, everybody gets into the same room to talk about a common goal is kind of amazing

to watch. And it can, this could actually help, I don't say solve this, but mitigate it. Let's not forget some of the earlier missiles that were shot down were done so over Jordanian territory and other Arab countries in the region. We are hearing from Iran's leader Haminae as well, who says that Israel won't be allowed to do a hit-and-run attack. This was in a recorded statement. He said that Israel started the strikes and initiated a war. Again, that's Iran's supreme leader there, recorded statement that is now being released to the public,

as the country itself confirms what we all could tell by watching there, that its response to Israel has been. And if you're just joining us now, and I know that a lot of you are, because this is happening real time, I believe we do have a replay. So I want to be clear, this is a replay. play a few minutes ago of Israeli defense missiles intercepting missiles from Iran over Tel Aviv, and it looks like the majority, let's hope all of them, Dom, were indeed hit their target. It is something to watch this in real time. And let's not forget there are millions of people who are living children, the elderly,

underneath that watching and listening to this in real time. But the view right now, Brian and Kelly, to your point, is that, again, it's not that we want to put this from a market perspective. It is the reason why we're telling you this right now is because we are trying to put the market moves in context for what is going on right now on the ground in Israel. Yep. We are moving towards. By the way, that's why people watch and listen to it.

Sure. Can we call this session most? We're down almost 800. It is for the Dow. It is for the Dow. out right now. I am not, I think we're close to there for the S&P 500. The S&P is currently down just about 1%, I want to say. So we are kind of getting towards those session lows, but we are not there yet. For the NASDAQ composite, we are not at session lows either. We saw those earlier on

today. Oh, that's a good point. So if you put the VIX up there, again, the volatility index has nuances about the way that it tracks and the number that it comes out there. It measures option spreads, not pure risk, but it measures the risk. through options effectively. Over the kind of recent market history, the long-term average has been roughly around 18 to 20. I want to say it's just around 21 right now. So it is elevated, as we can see here, especially over the course of just the last couple of hours. It was 80 a few weeks ago.

Correct. And that's on the tariff. You took the words right out of my mouth. If you put up a longer-term chart over the course of the last month, the last five months, the last six months, the last year, this is nowhere even close. to some of the volatility that we've seen that hasn't been geopolitically driven by rockets, missiles, and the possible loss of human life. And so if you look at the CBO volatility index, remember, just in the last year, we've seen numerous times where things have gotten much worse in terms of volatility. Indeed.

Still 16% pop there. Amon Javers is in Washington with some more reporting on this for us. Aymn? Kelly, I want to go back to that video that you guys just showed because I think it's significant. And what you're watching here is the city of Tel Aviv, and you're watching Israeli defense missiles launching from Tel Aviv into the air to intercept Iranian targets. What you see is largely what looks like a successful effort by the Israelis, but you can see to the right of your screen here, it does appear that one of the Iranian missiles moves directly

down and strikes causing an explosion in the center of downtown Tel Aviv. Now, it's always dangerous to do bomb damage assessment by civilians in real time. We're non-experts here at what we're looking at. So I defer to people who have done this for a living. But it does appear to the untrained eye here that what you're seeing is a defense of Tel Aviv by the Israeli military, the so-called Iron Dome missile system, which has had tremendous success. And it does look like there we see one Iranian missile toward the lower right side of that screen impacting. in downtown Tel Aviv. We're going to wait for officials from Israel to confirm

whatever may have just happened in Tel Aviv and give us a sense of whether there was any damage or any loss of life in this incident. But you're looking at real-time aerial remote combat here over a major, obviously, Israeli city guys, as we're watching this in real time, and you can see the missiles there continuing to launch as these. Israeli government has said that they are facing an Iranian retaliatory attack. Siren sounded in areas across Israel. The authorities in Israel advised people to go to positions of safety. And we have a statement here from the Israeli military.

I think we can put that up on the screen, guys. This is an Israeli Defense Force statement saying the defense is not hermetic. Therefore, it is essential to continue following the instructions of the Homefront Command. do as you're told, folks. This is a serious situation. Get to your shelters, get to your safe places, and hunker down in place until you get further word from authorities here. So this is striking stuff to watch in real time, Brian.

And we do not know, Amon, if it is indeed over. It is about five hours ahead, so it's 9.32 p.m. in Israel right now. The IDF has just said that Iran has launched more missiles. So that is breaking right now. This is not what we just watched. Iran also, Kelly is saying that missiles have been launched. According to Iran's second wave of missiles has been launched against Israel, it's a little tough for us to tell whether we've already shown those images

or whether we are going to be waiting and watching once again for what we saw moments ago to now be breaking out a second time around. And there is something very interesting here, and we've got Amen, we're not going to go to break, I assume, which is great. We should not. By the way, markets right at session lows. Oil just closed. Closing up right around five bucks. It's kind of settling in right now to 72.93 here. The VIX, as we noted, is up. But well, well off its tariff highs of just a couple of weeks ago. There is Aman, when we look at geo-dipelmacy, it is very interesting that Iran is saying, you just heard Kelly report, they're coming out and saying

online and social media, we just launched more missiles, as if there's, alerting Israel that missiles are incoming. How do we read that? I think one of the ways to read that is it's just practical reality that Israel probably has the technological capacity to sense those missiles once they're launched. And so the Israelis will know. And a lot of what we're seeing here is not just the military war, but also a propaganda war. Some of this is for domestic consumption in Iran, the Iranian regime will have an interest in letting their domestic population know that they're fighting back here. But they're giving Israel time.

They're saying to somebody, I'm going to hit you. I'm going to hit you. They're giving somebody time to assess the defensive posture. Yeah, and Israel did the same thing, right? I mean, we saw the president of the United States out well before, hours and hours before this attack saying Israel is contemplating doing this, right? So this has been a war of slow telegraph strikes, but also stealth and deception. And so, you know, I think you have to take all of these statements with a grain of salt

because we don't exactly know what's going on, and there is a fog of war here. And there could be an intent to deceive or misdirect. And there could be, you know, a propaganda component to this as well, to let Israel know this is coming, to instill terror in the Israeli populace because they don't know where it's going to land and who's under a attack exactly. And so you've got an entire country now hunkering down. Yep. Amin, if we could ask you to sit there, Dominic, too, thank you everybody for just being flexible on the fly. We're bringing in Bob McNally. He is founder and president of Rapidan Energy as well. And Bob, we plan to have you on. Thank you very much for joining

us. Obviously, this missile attack from Iran onto Israel happening real time. And a second missile strike is on the way. Hopefully that one will also be mostly or entirely interstate. The price of oil was up 13% this morning. It popped a little bit on this latest attack that we just saw. But no Iranian oil or energy other than nuclear infrastructure was hit. So looking at what was done in Iran, what is your take on Israel's goal, but also Israel's sense and maybe guidance from our White House on the U.S. and global. energy complex. Right, Brian. So Israel's attacks, while audacious and sprawling, were limited to military targets, personnel,

new facilities, air defense, missiles, et cetera, no energy, not even domestic energy in Iran, like refineries and so forth. If Iran's retaliation is similarly limited and we avoid mass casualties, God willing, we avoid mass casualties in Israel from what we're watching here on the screen, then I'm I can see a lot of this premium that really started to get built into crude even before the attacks. There were indicators and warnings. I can see that dissipating early next week. If this is just the third but bigger instance of sort of Iranian kind of air punches, where there's exchanges, they're telegraphed,

but as you say, no energy facilities are damaged, no attacks on shipping in the Gulf, et cetera. So, Brian, for me, whether or not we leg up again in crude depends on three possible triggers. One, will Iran cause mass casualties in Israel? God, we hope not. Number two, will Iran attack U.S. military vessels, bases, personnel? And number three, will they attack Gulf energy, critical Gulf energy infrastructure and flows? Like in September of 2019 when they hit Abkhake. Those are the three tripwires. If Iran stops short of that, even this goes on for days, I can think we're using words like

inured and desensitized. I think that's right. I think the market has seen this before and could sell off afterwards. So it really depends on Iran's punchback here. All right. And Bob, the market kind of going towards session lows and being a little bit skittish about that probably just tells you it's going to be a long weekend. It sure is. And a lot can happen by the Sunday open. Absolutely. And Israel, you know, there is a risk Israel could start targeting Iranian oil infrastructure, but more likely refining domestic facilities, gas stations, and so forth, maybe even cyber attacks. But the key thing for markets, and again, we saw this in September 19th, biggest open ever on the Sunday open after the Iranians attacked

Abcake. It reversed. Russia invaded Ukraine, $5 gasoline, record gasoline prices, crude roof to 120. It reversed. Two attacks Israel and Iran directly on each other last year. Brian was just recounting. They reversed. So we have a pattern here. And I think as long as the violence can be contained to military targets without mass casualties, there's a good chance President Trump still wants a deal. I mean, talks aren't going to happen. But there's a possibility that we escape major violence here. He gave, and Israel gave Iran 60 days to make a deal. This was, as we said at the top of the show, day 61, and Israel struck. You're referring just quickly, you're referring to Abcake. What that is, folks, is that was a 2019 attack from Iran using drones on two Saudi refineries. That was the most serious attack that we have seen since then.

It's about six years' time. This was the largest strike by Israel inside of Iran in about 30 years. Again, let's all hope and pray. This does not escalate, but I'm going to ask you to speculate, Bob, if Israel, it's a huge if, but if Israel was to attack, let's say, Carg Island. Carg Island is where 90% of Iranian oil exports originate. It's an island basically made for oil, and the supertankers come there. They fill up with oil, and they go out of the Persian Gulf through the Strait of Hormuz.

If that were to be attacked in any form, what would happen at the price of oil? It would roof. If Iran has said and promised, and I believe this is credible, if they can't export oil, nobody will export oil. And here's another thing, Brian. If you look at the second Gulf War, you look at the first Gulf War, you look at Operation Praying Mantis when we sank half the Iranian surface fleet in an afternoon in April of 1988, all three instances, the U.S. military removed the threat in hours to days. It won't be like this. If the Israeli torch card and Iran can't export a million and a half barrels a day, I believe they will interdict shipping and Hormuz and possibly attack infrastructure.

And it will not be a cakewalk. We'll prevail, but Iran has invested in thousands and thousands of munitions and missiles and electronic warfare devices. Look at the Houthis are doing, inferior to Iran. And you can't get through Babamandup. So if it gets there, we will measure the increments in crude by the $10 a barrel until we hit recessionary levels, probably in the low one-hundred. If it gets there, God forbid. Bob and Galley of Rapid Energy, Bob, we're going to say goodbye. Thank you very much.

We're going to let folks, this is the second wave of Iranian missiles coming into Tel Aviv. You could see them start to come in. Iran said they were launched. Israel knew they were launched. Kelly talked about that earlier. Not sure where they're headed, but let's hope these are intercepted as well, Kelly. Right. There have been one, you know, have a couple made it down. Yes. Are there any reported casualties so far? No. Of course, this is all happening in the dark. And with the public had been told they had been alerted to get to safe places and out of any place that might be considered to be a target.

So the missiles will continue flying as Iran warned that they would in the second wave of attacks that they've now launched in retaliation to Israel's strikes in Iran that Bob was just discussing last night. Stocks are kind of discounting this. They're moving a little bit lower as we head into the last couple of hours of trade here. The Dow was down about 850 points. It's about a 2% drop. We actually had been recovering and much of the afternoon as things seemed a little bit quieter. Now with this, of course, it's a bit of a different story. Dow is the worst performer of the major three with its 2%

drop. So it's capturing most of this where the S&P and the NASDAQ, those are also pretty much at or near session lows. Those declines a little bit more modest by about 1%. Tel Aviv is a massive city, about 4.5 million people. It's about one and a half times the size of Chicago, it's a little bit smaller. Yeah. The New York City, but you can see a little bit of the size and scale there again. It looked like there was that one Iranian missile that was potentially coming in. There is some leftover smoke.

You heard Damon Jabbers talk about earlier about how it appears that one, maybe two missiles did get through that Iron Dome. And if you listen, and I'm going to stop talking, you can hear the sirens and the air sirens. Listen for a couple seconds. The panorama of the Tel Aviv skyline tonight will continue to monitor the story and any further development. We're going to seek in a quick break, and we'll be back in just a couple of minutes with much, much more here on Power Lunch. All right. Welcome back to Power Lunch and CNBC. The Dow down right now, 824 points, just about 2%. As you might have just seen, or if you are just joining us, there was a retaliatory strike from Iran on Tel Aviv. Maybe two strikes. The first strike coming in with missiles, it looked like Israel successfully defended shot down. the majority, hopefully all of the incoming missiles. Amin Javers, as you heard, report said it looked like one might have gotten through.

There is some smoke haze there. That is a live look at the skyline of Tel Aviv, or it is 946 at night. Iran has said they have launched another strike. Israel confirmed that. Luckily, we have not seen that yet. Let's hope this does not happen. Either way, the Dow is down and oil is up. And let's bring in Torsten Slok.

and chief economist at Apollo. And Torsten, don't worry, we're not going to ask you to pine on any of the geopolitical stuff. Your job as an economist is to factor in all the costs that we see and establish a conclusion. Here's the reality about the price of oil. We think about the price of oil when it comes to gasoline. And that's true. About half of a barrel of oil goes into gasoline. But oil goes into a lot of things.

Plastics, natural gas, by the way, goes into things like pharmaceuticals. This is, at least for now, somewhat at. inflationary, how do you believe the Federal Reserve and economists like yourself will look at what is happening right now? How do we model any of this? Yeah, that's exactly right, Brian. So if you look at the Fed's own models for the U.S. economy at Ferbis, if you simulate what does it mean when all the prices go up by $10 as they've done in the last 10 days? It will tell you that GDP growth will be 0.4% lower and inflation, exactly as you're highlighting, will be 0% for 4% higher. So that means that it is absolutely inflationary for the Fed going into next meeting.

And this comes on the back of what we already are trying to deal with in the U.S. economy, maybe tariffs are also inflationary. And on top of that, restrictions on immigration, as we saw in the Employment Report last Friday, are also inflationary. So it really is a set of shocks that are hitting the economy now that are putting upward pressure on inflation. And that's, of course, complicating the communication and the trajectory for the Fed next week. Are you advocating for rate increases? Well, this is the important discussion

because it happens to be the case that all these three things, high oil prices, the tariffs, and also, of course, restrictions on immigration, they also lower GDP growth. If you raise oil prices by $10, obviously, we will all be buying marginally less gas and of course less energy.

Likewise, tariffs, if prices go up, of course, you will also begin to see some downward pressure on sales and ultimately on GDP. And finally, also with the restrictions on immigration, that is also something that ultimately is a risk of slowing GDP growth. So the weird combination that the Fed is looking at at the moment is a situation where you have inflation going up because of these shocks and GDP growth going down.

So what would the Fed do? When inflation goes up, the Fed should be hiking. If growth is slowing down, the Fed should be cutting. So which one is it? Does the Fed like apples do they like oranges? Where in the dual mandate will they put the weight? So far, they put a lot of weight on inflation, but we will have to wait and see next week what the communication is

because it's very clear that the Fed's forecast after what happened to all the prices today is that inflation will be higher than what they had in their original scenario. Torsten, it's Dom. You know, we had talked earlier about this idea that many traders are trying to handicap the situation right now, and this is a scenario that's developing

where you have to kind of put scenario analyses in place, right? A certain set of circumstances happens. This is the expected outcome. As an economist, I use the word transitory. It's not a great word these days. We know that the Fed has made it maybe not the greatest word in the markets right. now, but if you look at the price of oil and you look at the lack of real movement anywhere else

within Safe Haven assets, if you're an economist trying to model out what the impact will be, can you make any kind of a real high-confidence conclusion about whether or not this is going to be medium to longer-term inflationary, or is this going to be, as it has in the past over the last seven, eight years, again, don't want to use the word, but I can't think of a better one, transitory in nature. No, you're right, Dom. And as you talked about earlier, also, the overall market reaction here is very interesting, namely what's happening to dollar at the same time and what's happening to rates also going up at the same time.

The challenge for the Fed is that they do have a meeting next Wednesday. So yes, of course, if the shock is only temporary, if it only lasts, say, a few days, of course, it will be different in nature of relative to if it lasts a longer time. But the answer to your question is that if there is indeed a meeting on Wednesday, the Fed will need in some way or another to incorporate this. and incorporating this will, adding to the other factors that are putting up our pressure on inflation, implying they will have higher inflation going forward. Sorry to jump in here, Tors.

We just want to get back to Washington, where our Eamon Jabbers, who brings us the very latest on the situation in Israel this evening. Aman? Kelly, we've got a statement now here from the Iranian side, from the Iranian Revolutionary Guard Corps. They are confirming that they launch strikes against the Iranian side. They say that they have launched their crushing and precise response. They say that the Iranian Revolutionary Guard Corps, defensive and offensive arm of the Iranian nation, relying on divine power, the wise leadership

of the commander-in-chief, and the unified demand and support of the noble Iranian people has launched its crushing and precise response. The operation titled True Promise 3 was executed against dozens of targets, military centers, and airbases belonging to the usurping Zionist regime in the occupied territories under the sacred code phrase. And they give a phrase here. So confirming now from the Iranian side that they have, launched this attack on what they say are dozens of targets in Israel. Meanwhile, we have a statement from the IDF, and this is interesting, guys, because we've just been watching these live pictures. You're seeing pictures now coming in from Israel of what appears to be damage on the ground.

The IDF Israeli defense forces are saying in a statement just a few moments ago, the attack is ongoing. Dozens of additional missiles were launched toward the state of Israel. To the people of Israel, you are requested to continue to follow the instructions of the Homefront Command and the instructions sent to you. The explosions you are hearing are from interceptions or fallen projectiles. The IDF repeats and emphasizes not to publish and share the locations and footage of hits. So guys, we were looking at that live video a short time ago. It did appear, again, to our untrained eyes, that one of the Iranian missiles did get through the Israeli defenses and impact in downtown Tel Aviv. The Israeli defense forces saying that explosions are the result of fragments of missiles.

And so we'll wait for clarification and official confirmation of whether there were any strikes that were successful from the Iranian side in downtown Tel Aviv. But one of the problems that you have when you have an anti-missile system is that when you're striking missiles that are incoming with your outbound missiles, both of those missiles will explode, right? and that leaves a lot of metal in the sky, and that metal's got to come down somewhere. So all of that shrapnel, if you don't strike the incoming missile far enough away from populated areas, all of that shrapnel is coming down somewhere, and that can be very dangerous,

even if the warhead itself is destroyed in the interception. You've got a lot of hot metal coming in at high velocity into a potentially populated area. And so that's the concern now in addition to weather. Amen, sorry to cut you off. watching live video guys here. So the concern here is every time you see one of these interceptors take out an Iranian missile, you are also seeing a lot of shrapnel coming down on what is a very populated area there. We're going to stop talking for a second. And this is the Israeli defense against Iranian missiles. Incredible footage there. Second time around in the past hour or so

that we've seen now Iran's response against Israel and Israel trying to intercept those missiles, of course, in real time. Thanks. We appreciate it very much. Our thanks to Torsten Slocke and to Amon, who's standing by in D.C. With more. Speaking of D.C., Mick Mulvaney is here. He's the former acting White House chief of staff. That was during President Trump's first term, co-chair of Actum now. Mick, your thoughts, please on, look, a lot of people were saying that the president kind of intentionally, like he knew about this days ago, didn't sing anything to the Iranians. We've seen now what that has meant. What more do you expect of the Iranian response? A bunch of different questions there.

What to expect of the Iranian response? It's hard to say. It's hard to know what they still have available to them. I guess you could sort of work through your head and make a case for they need to do as much as they possibly can as quickly as they possibly can because they don't control their own skies. They're very exposed to the Israeli forces. And you have to expect the Israelis are going to continue to try and pound the Iranians on their own soil. So I guess there's sort of a motivation for the Iranians to use what they have now before. they lose it. You talk about the American role in this. It's really hard to say. I think we'll know more

in the coming days and years, I guess, about the planning that went into this and whether or not the Trump administration was sort of a diversion to try and lull the Iranians into a false sense of security, at least until the meetings on Sunday. So some fascinating series of events here. I think everybody who watches Washington very closely, folks in the media, I actually talked to Amon very briefly yesterday, knew that something had to be up. The President of the United States went to Marl, went to Camp David last week from Bedminster. That never happens. Okay. He does go to, he goes to Camp David, but he doesn't go from Bedminster and he doesn't meet with generals, which is what he did when he was there, along with being with Marco Rubio. So he also took a question

during an impromptu presser during the week about a potential Israeli attack, and he said he thought it might be, you know, imminent, that type of thing. So the signs were there that something is going to happen. I think sort of everybody from the outside looking in was surprised it happened when it did. We can say what we want. Marco Rubio is out there trying to distance the United States from these attacks. People are going to have all kinds of ideas and opinions about what or what not the White House may have known. Does that even, does that even matter, Mick, at this point? Does it, Does it matter if the United States gave the green light to Israel? Israel ultimately is a sovereign nation that will do what it wants to protect its own people, I think.

I don't think the only people it really matters to, I suppose, would be the Iranians. And it doesn't matter to them, right? They believe that we're involved. So their perception is the reality when it comes to that type of thing. Again, the real question is what can the Iranians do about it at this point? But the State Department can say whatever they want to. the White House can say whatever they want to, which you can pretty much bank on the fact the Iranians believe that we were involved. So to your point, I don't think it really matters

from an outside looking in perspective, from a geopolitical sort of standpoint. Everybody's going to assume that we were at least told that we probably signed off on it and folks are wondering whether or not we cooperated with it. So look, Israel is one of our best friends. It would make sense that we would be involved in some fashion. In fact, the real news that would be made here, Brian, be if the Israelis did it without any heads up whatsoever. But I just don't see that happening. And Mick, that goes back also to what we should expect from the U.S. So if their president's goal is still for there to be some kind of deal between the U.S. and Iran,

it will there be? What about Israel's hopes for zero enrichment that it sounds like wasn't clear if the U.S. was totally on board with needing to deprive them of all of that in order for them to strike a successful deal? I'm just trying to think through now, kind of the leverage on both sides here. Yeah, and of course what we're all trying to deal with is what data are we getting that is accurate. For example, I'm seeing reports on Twitter and out of the Middle East that the Iranians have already announced. They're not going to the meetings on Sunday. So there's any difference if the United States wants to do it, that they've pulled out of that.

You also have to imagine when it comes to the Iranian nuclear capabilities. Again, seeing reports that maybe there was not as serious damage to the Iranian operation as was originally suspected overnight. So that raises the question of what the Israelis will continue to do. I think there's a couple of clear points here. So when you go through this sort of guessing game and this fog of war, what do you keep coming back to, some of the basic principles? And Donald Trump has said a bunch of different things. He wants Iran to be friends with us.

He wants to do deals. You know, he would like to try and come to some sort of understanding. But again and again and again, he said one very simple thing. Iranian cannot have a nuclear weapon. Period. End of story. I think that's one of the anchor points here. And I think the Israelis are on the same page.

So you have to watch over the course of the next couple of weeks what happens inside Iran to deny them the ability to produce a nuclear weapon. I think that's what this is all about. I don't think that's making any particularly groundbreaking statements. But this is about depriving them of that nuclear capability. And that's probably going to happen here before things are over. Yeah, this was day 61 of a 60-day warning about getting a deal done. Mick Mulvaney, former White House chief of staff, Mick, we'd love to talk to.

you more. Show's ending. We're going to wrap it. We're going to say goodbye. Very quickly, we got about 35 seconds up to the show, Dom Chu. Thank you for your patience. Your take on what financial investors do over the weekend. This is one of those situations where, you know, in a prior paradigm, you would have said, let's sell, right? Let's sell, let's flatten out positions for the weekend and then wait for things to settle out and we'll come back to play, not to play, to engage on Monday. You're not seeing a lot of that right now. The last hour of trading, I think, is going to be key. That's going to be one to watch for me. Yeah. I think that's well said. We're watching. Of course, VIX is spiking, oil is spiking as

well, and there's still a lot more to come. So we saw this hour. Iran's response to Israel there. Thanks for watching, Power Lunch. And closing bell, and that critical hour starts now.