Bloomberg Surveillance TV: October 12th, 2026

Norman Roule · Center for Strategic and International Studies (CSIS)

Houthis can't currently disrupt Red Sea oil flows, and Saudi storage and shipping make the system resilient.

Roule argues that the Houthis are not in a position to contest the Red Sea as extensively as in the past. Yemen's government, backed by Saudi Arabia, has pushed the Houthis back from several areas, and Paramiland, which the Houthis had taken in the middle of the Red Sea, is now contested. Since Russian and Chinese shipping is protected by the Houthis, they could not realistically halt Red Sea flows. He adds that the Saudi oil system is enormous, with storage abroad and tankers holding oil in the Arabian Sea, and the East-West pipeline is part of a bigger system. Together these explain why oil prices are not pricing a broader regional war, at least for now.

“The Houthis are not in a position right now to contest the Red Sea as extensively as the past. And likewise, the Saudi system is enormous.”at 6:49

Amrita Sen · Energy Aspects

Diesel rally is driven by refining shortages; Russian barrel offers are too small to cool prices soon.

Sen says the Russian supply announcement makes no difference: the promised volume is about 2 million barrels for October, roughly 130,000 barrels per day, which is the same volume Russia already supplied in September, now routed to neighbouring countries under bilateral deals. Some US traders are even talking about placing these barrels in Southeast Asia rather than the US, which she sees as a desperate measure. The real driver is a lack of refining capacity, from Ukrainian attacks on Russian refineries and Middle Eastern refineries that cannot get product out. She argues the Russian-Ukraine 'ceasefire' covers only refineries, is unlikely to hold, and does not change the picture. She expects no big relief in diesel over the next four weeks, and that European governments are holding back SPR releases because gas stocks are low and they may need diesel in winter. She also argues the markets wrongly focused on oil supply sufficiency rather than downstream refining and shipping.

“what fundamentally is driving diesel is a lack of refining capacity... and I just don't see that cooling off.”at 14:20

Amrita Sen · Energy Aspects

Economic recession is the biggest long-run downside for diesel, likely a second half 2027 story.

Sen expects diesel's main downside over time to come from an economic recession rather than from supply relief. Her reasoning is that tight diesel supply and the expected need for European gas and diesel releases in winter keep prices elevated near term, while over time demand weakness would be the bigger force bringing prices down. She places that recession risk in the second half of 2027.

“I think over time, the biggest challenge or the biggest downside to diesel actually becomes [an] economic recession... I think that becomes a second half twenty twenty seven story.”at 15:21

Torsten Slok · Apollo Global Management

Higher rates are cutting housing supply, pushing rents up and feeding inflation, a perverse feedback loop.

Slok argues that when rates rise, construction slows and housing supply shrinks. With less supply, rents climb, and rent inflation is already accelerating in a large part of the country. Owners' equivalent rent is roughly a quarter of CPI, so this is a problem for the Fed: rates that should slow the economy are instead restricting housing supply and pushing up inflation. He frames this as a possible positive feedback loop, where a prolonged shrinkage in housing could add upward pressure on inflation.

“when you raise interest rates, you lower supply of housing. When you lower supply of housing, rents start going up, and that's exactly what we're seeing in a large part of the country.”at 18:02

Torsten Slok · Apollo Global Management

Companies are cutting token spending as costs bite, so token spending is flattening out.

Slok argues that companies paid heavily for tokens at the start of the year but now find them very expensive relative to their budgets, so they are reluctant to keep paying. Token prices have fallen while demand has risen, and as a result token spending has started to flatten out. He treats this as a separate driver from interest rates, one that affects the broader AI story and expectations for future AI revenue.

“No. I actually think that's more a token story that in the beginning of the year, companies paid a lot of money for tokens. Now companies realize that tokens are very expensive on their budget. So now companies, of course, are being more reluctant to pay for tokens.”at 19:57

Torsten Slok · Apollo Global Management

Slower AI revenue payoff would hit valuations, including public-market valuations, not just rates.

Slok says the main question is when the AI payoff arrives and how large and fast it is. Companies expect AI to generate revenue increases in the trillions of dollars. If that revenue does not arrive quickly enough, it will have implications for many valuations today, including in public markets. He frames the current AI financing slowdown debate as being about this payoff timeline rather than about interest rates.

“if that revenue increase that's expected to come in the trillions of dollars as a result of AI is not arriving quick enough, then that will certainly have implications for a lot of valuations today, including also in public markets.”at 19:57

Torsten Slok · Apollo Global Management

Agentic AI could speed deposit outflows and expose bank funding mismatches, though a bank run is unlikely.

Slok argues that agentic AI could let deposits be moved in and out far more quickly than today. That threatens the basic bank funding model, where short-term deposits fund long-term lending, so the liability mismatch is the key challenge agentic AI poses to banks. He does not expect an agentic bank run to happen, but he thinks the issue will remain an important part of the conversation, especially as more deposits move on-chain and into the tech world.

“that mismatch in liabilities is, of course, the key challenge that's now coming from [agentic] AI. So I know I don't think we'll get an [agentic] bank run, but I think that this continues to be a very important part of the conversation.”at 21:05

Torsten Slok · Apollo Global Management

Energy prices, delayed tariff effects and immigration limits keep US inflation pressures elevated.

Slok argues the Cleveland Fed's Hammack is right that the economy lacks restraint, because the sources of inflation are real. Energy prices are creating inflationary pressure. New York Fed surveys show tariffs still feeding through to prices. Restrictions on immigration are pushing up wage inflation in sectors that rely on unauthorised immigrant workers, such as construction, agriculture, hotels and restaurants. He says the business anecdotes gathered by Fed officials on the ground should be taken seriously.

“given we have inflationary pressures at the moment coming from energy prices, we still have delayed effects of tariffs according to New York Fed surveys, and we also have restrictions on immigration putting upward pressure on wage inflation”at 22:20

Torsten Slok · Apollo Global Management

AI investment is supplying roughly half of US GDP growth, a dependence that could unwind in 2027.

Slok's calculation is that the AI boom adds about one percentage point to US GDP growth, against a normal trend of about two percent, so roughly half of growth now comes from AI. He notes that interest-rate-sensitive sectors like housing and autos are weak while AI, healthcare and education are strong, which is why higher rates are not slowing the economy as they normally would. If rate-sensitive sectors grow heavier and token spending slows, he sees a possible slowdown in 2027 that could matter for the Fed debate.

“So far GDP growth has been driven mainly by the AI boom is adding in our calculation about one percentage point to GDP growth at the moment. GDP is normally two, so now roughly half of GDP growth comes because of AI.”at 23:03

Torsten Slok · Apollo Global Management

Rates aren't slowing growth; a recession-driven slowdown would stop the three priced Fed hikes.

Slok argues rates are not slowing the economy in the usual way. Housing and autos are rate-sensitive and weak, but AI, healthcare and education are strong and largely insensitive to rates, so higher rates are not restraining growth as expected. He frames the nightmare scenario for 2027: rate-sensitive sectors slow, AI slows as token prices and spending fall, and prices also fall, so both growth and inflation decline. In that case, he says the Fed will certainly not hike the three times markets currently price in.

“So the real nightmare scenario, if we just think into 2027, is now that the interest rate sensitive sectors of the economy begin to slow down... the Fed will certainly not hike the three times that's priced into markets at the moment.”at 24:36