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Oil at three-week high as US-Iran peace talks stall; China blocks Meta’s takeover of AI agent Manus – business live | Business
Oil at three-week high as US-Iran peace talks stall
Good morning, and welcome to our rolling coverage of business, the financial markets, and the world economy.
The new week begins with the oil price rising, again, as the stalled US-Iran peace talks threaten to extend disruption to crude supplies from the Middle East.
Brent crude has jumped about 2% this morning to a high of $107.97 a barrel, the highest level since the two sides agreed a ceasefire on 7 April.
Prices rose after Donald Trump cancelled his plan to send US envoys Steve Witkoff and Jared Kushner for ceasefire talks in Pakistan on Saturday, saying “too much time” has been “wasted on travelling”.
The US president then doubled down on this position, telling Fox News:
“If they want to talk, they can come to us, or they can call us. You know, there is a telephone. We have nice, secure lines.”
However, there are signs of positive developments… Axios are reporting that Tehran has given the US a new proposal to reopen the strait of Hormuz, and end the war, with nuclear negotiations postponed for a later date.
So, geopolitics will continue to dominate the markets, at the start of a big week, with several big central banks taking interest rates decisions in the days ahead.
As Mohit Kumar, economist at Jefferies, explains:
Talks have stalled between US and Iran as Iran has stated that it will not negotiate till the US blockade remains in place, while US has stated that it doesn’t know who it is negotiating with.
Our base case remains that we are moving towards a deal but tail risk of short term escalation remains. It is not in the interest of either parties to escalate further. The latest Iran proposal shows the wiliness of Iran to negotiate, while Trump already wants a deal. Hence, we believe that we will eventually move towards a deal, but with some speed bumps along the way.
The agenda
Key events
Pound at one-week high against the dollar
The pound has hit its highest level against the US dollar in just over a week.
Sterling has gained 0.2% against the dollar to $1.355 this morning, its highest level since Friday 17 April.
The dollar has dropped this morning, as investors anticipate change at the top of the US Federal Reserve.
Yesterday, Republican Senator Thom Tillis said he will allow Federal Reserve chair nominee Kevin Warsh to face a vote in the Senate. That should clear the way for Donald Trump’s choice of Fed chair to take control of the US central bank.
Tillis dropped his opposition to a vote on Warsh after the Department of Justice said on Friday that it would drop its criminal investigation into current Fed chair Jay Powell, whose term ends next month.
German chemicals giant BASF is raising some of its prices for the second time since the Iran war began.
Bloomberg has the details:
The German manufacturer’s customers will see prices go up by an additional 25% on products in its antioxidant, process stabilizer and light stabilizer portfolio for plastic applications, BASF said Monday. The increase comes on top of a 20% hike announced on March 4 and is effective immediately.
BASF cited “substantial” gains in raw material, energy and logistic costs due to the Middle East conflict.
Emerging markets at record high, but can risk rally last?
Emerging market stocks have hit record highs today, as optimism over the AI sector drove stocks higher in Asia.
MSCI’s gauge of global emerging market shares has risen by 1.3%, having already risen in the previous four weeks.
That underlines how the markets have bounced back from their initial slump when the Iran war began – with the US and Japanese markets also at record highs – even though the conflict is not resolved.
Capital Economics has suggested that the current risk rally is on borrowed time while the strait of Hormuz remains closed
The chief markets economist, Jonas Goltermann, says:
If the diplomatic and military stalemate between the US and Iran continues, and the strait of Hormuz remain largely closed, policymakers and market participants will find it increasingly difficult to keep “looking through” the crisis.
The widespread assumption that the ongoing disruption to energy supply will generate only limited economic damage can probably sustain investors’ optimism for a while yet. But at some point the situation on the ground needs to actually improve, or that optimism will presumably start to fade.
China blocks Meta’s $2bn acquisition of AI startup Manus
Newsflash: Beijing has decided to block Meta Platforms from aquiring agentic AI startup Manus in a $2bn deal.
China’s state planner has prohibited foreign acquisition of Chinese artificial intelligence startup Manus, ordering involved parties to cancel the transaction, the National Development and Reform Commission said on Monday (via Reuters).
The deal had caused controversy in China, sparking claims that it was an attempt to hollow out the country’s technology base,
Last year, Forbes called Manus’s product “a revolutionary AI agent capable of independent thought and action”, saying:
Manus is not just another chatbot, nor is it merely an improved search engine dressed in futuristic branding. It is the world’s first fully autonomous AI agent, a system that doesn’t just assist humans — it replaces them.
Adidas shares jump after London marathon
Shares in athletic apparel and footwear company Adidas have jumped by almost 1.75% in early trading after three of its athletes shone at the London Marathon yesterday.
Sabastian Sawe and Yomif Kejelcha both smashed the two-hour barrier in the men’s marathon race, and Tigist Assefa set a women-only world record in the women’s race.
All were wearing Adidas’s Adizero Adios Pro Evo 3 shoe, and the company will be hoping for a sales boost from runners looking to lower their own times.
Patrick Nava, general manager at adidas Running, says:
The adidas family is incredibly proud of Sabastian and Tigist’s historic achievements, marking the fastest times humans have ever run in a marathon.
This is a testament to the years of hard work and dedication they have made, alongside our innovation team, who have built a supershoe which breaks new ground in the Adizero Adios Pro Evo 3.”
Shares in Adidas have risen to €138.55, up €2.30 this morning.
Unicredit also have a note out on the oil market this morning, in which they warn:
The Iran war has triggered one of the largest disruptions to physical oil supply in modern history. While de‑escalation could ease some geopolitical risk premiums, the damage to production, exports and logistics means markets are unlikely to quickly return to pre‑war conditions.
Goldman Sachs raises oil price forecast as war disruption hits production
The deadlock in the Middle East confict has prompted Goldman Sachs to raise its oil price forecast.
Goldman Sachs now estimate that Brent crude will trade at about $90 a barrrel in the last quarter of this year, up from an earlier projection of $80. US crude is forecast to average $83 in October-December, up from $75 before.
Goldman blames “lower Persian Gulf production” for the upgrade, telling clients:
We now assume a normalisation in Gulf exports by end-June (v mid-May prior) and a slower Gulf production recovery. The economic risks are larger than our crude base case alone suggests because of the net upside risks to oil prices, unusually high refined product prices, products shortages risks, and the unprecedented scale of the shock.
Goldman’s analysts estimate that 14.5m barrels a day of Persian Gulf crude production has been lost, leading to a record drawdown of global oil inventories of 11m-12m barrels a day this month.
The jump in oil prices will lead to ‘softer demand’, they explain:
We assume that global oil demand falls on a year-over-year basis by 1.7mb/d in 2026Q2 and 0.1mb/d in 2026 given the jump in refined product prices. Because extreme inventory draws are not sustainable, even sharper demand losses could be required if the supply shock persists longer.
Goldman also warns that the risks to its forecasts are to the upsides, and lay out three scenarios for how events could unfold:
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Adverse scenario: Brent 2026Q4 would average just over $100 assuming Gulf exports only normalise by end-July.
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Severely adverse scenario: Brent 2026Q4 would average at nearly $120 assuming Gulf exports normalise by end-July and 2.5mb/d of persistent reduction to Gulf capacity. This 2.5mb/d of scarring is equivalent to Hormuz flows not recovering above 70% (till pipeline capacity is expanded).
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Benign scenario: Brent 2026Q4 would average just under $80 assuming Gulf exports normalise by mid-June, no capacity reduction, and stronger US and core OPEC supply responses.
[Goldman had previously trimmed their forecast for the oil price earlier this month, after the US-Iran ceasefire was announced]
Supermarket chain J Sainsbury is the top faller on the FTSE 100 in early trading, after a broker downgrade.
Goldman Sachs have cut their rating in Sainsbury’s from ‘buy’ to ‘sell’, lowering their share price forecast to 335p from 390p.
In response, Sainsbury’s shares are down 3.4% to 333p.
European stock markets have opened modestly higher, as investors try to assess the situation in the Middle East.
Axios’s report that Iran has given the US a new proposal to reopen the strait of Hormuz may have brightened the mood a little.
Germany’s Dax index is up 0.4% in early trading, with France’s CAC 40 up 0.25%.
The UK’s FTSE 100 index is flat, though.
This week is going to be extremely busy for financial news.
Jim Reid, market strategist at Deutsche Bank, explains:
Looking ahead, with central bank meetings for every G7 country this week — alongside 44% of the S&P 500 reporting by market capitalisation, including five of the Mag 7 — it is shaping up to be a blockbuster week, even before factoring in ongoing Iranian war newsflow.
The Bank of Japan meets tomorrow, followed by the Fed and the Bank of Canada on Wednesday. Thursday then brings decisions from the ECB and the Bank of England. All are expected to remain on hold, but the key question will be how each central bank’s reaction function is shaped by the conflict and the associated stagflation risks.
European gas prices are rising a little at the start of trading.
The month-ahead UK gas contract is up 0.8% at 112.8p a therm – up from 80p before the Iran war began but below the high of 180p hit in mid-March.
Continential European gas is up a similar amount; the next-month Dutch TTF Natural Gas Futures contract has risen to €45.21 a megawatt hour.
Japan’s Nikkei hits record high over 60,000 points on peace talk hopes
Hopes of a breakthrough to end the Middle East conflict have pushed Japan’s stock market to a new record high.
The Nikkei 225 index has ended the day at a new closing high, up almost 1.4% to hit 60,537 points.
Stocks jumped after Axios reported that Iran has given the US a new proposal to end their war, which helped to calm nerves after President Trump cancelled his envoys’ trip to Pakistan for peace talks.
Ipek Ozkardeskaya, senior analyst at Swissquote, says:
The mood is slightly better this morning than it was into the weekend, as Iran reportedly offered the US a proposal to reopen the strait of Hormuz — a move that could pave the way for the continuation of peace talks between the two parties.
Predicted house price growth in UK halved due to Middle East conflict
UK estate agent Knight Frank has halved its house price growth predictions for this year, citing the economic shocks caused by the Iran conflict.
Knight Frank now expects UK house price growth of 1.5% this year, down from a forecast of 3% last September. Growth is then expected to rise to 3% in 2027, down from 4% before.
Tom Bill, head of UK residential research at Knight Frank, says:
The Middle East conflict has pushed mortgage rates higher, dampened buyer sentiment and fuelled speculation about how the government will respond to the resulting economic shock.
This hat-trick of headwinds means we have revised down our near-term house price forecasts.
Oil at three-week high as US-Iran peace talks stall
Good morning, and welcome to our rolling coverage of business, the financial markets, and the world economy.
The new week begins with the oil price rising, again, as the stalled US-Iran peace talks threaten to extend disruption to crude supplies from the Middle East.
Brent crude has jumped about 2% this morning to a high of $107.97 a barrel, the highest level since the two sides agreed a ceasefire on 7 April.
Prices rose after Donald Trump cancelled his plan to send US envoys Steve Witkoff and Jared Kushner for ceasefire talks in Pakistan on Saturday, saying “too much time” has been “wasted on travelling”.
The US president then doubled down on this position, telling Fox News:
“If they want to talk, they can come to us, or they can call us. You know, there is a telephone. We have nice, secure lines.”
However, there are signs of positive developments… Axios are reporting that Tehran has given the US a new proposal to reopen the strait of Hormuz, and end the war, with nuclear negotiations postponed for a later date.
So, geopolitics will continue to dominate the markets, at the start of a big week, with several big central banks taking interest rates decisions in the days ahead.
As Mohit Kumar, economist at Jefferies, explains:
Talks have stalled between US and Iran as Iran has stated that it will not negotiate till the US blockade remains in place, while US has stated that it doesn’t know who it is negotiating with.
Our base case remains that we are moving towards a deal but tail risk of short term escalation remains. It is not in the interest of either parties to escalate further. The latest Iran proposal shows the wiliness of Iran to negotiate, while Trump already wants a deal. Hence, we believe that we will eventually move towards a deal, but with some speed bumps along the way.
The agenda
Key events
Greg Wood
Gosden and O’Brien rivalry crackles in Gold Cup
The rivalry between top trainers John Gosden and Aidan O’Brien is a long way short of a feud – “Aidan and I are big rivals”, Gosden said on Wednesday, “but we get on and we tease each other a lot. There’s no harm in that and it’s a little bit of banter.”
But it still makes for an interesting undercurrent as Gosden’s Trawlerman, bidding to become only the second eight-year-old winner since 1900, takes on the up-and-coming Scandinavia, last year’s St Leger winner, in the feature event of the week.
Gosden’s “teasing” has included frequent references to the big teams of runners that Ballydoyle sends to many Group Ones, and when O’Brien suggested last autumn that he would love to see Ombudsman, the winner of Wednesday’s Prince of Wales’s Stakes, line up for the Irish Champion Stakes, Gosden responded that his stable star would not “appreciate running against multiple entries from one stable on a track with a short straight.”
The possibility that Ballydoyle was employing “team tactics” with its runners was also highlighted after Tuesday’s St James’s Palace Stakes, when Christophe Soumillon, on the O’Brien second-string, Puerto Rico, picked up an eight-day ban for riding “in a manner to benefit” his stable companion and second-favourite, Gstaad.
There is little chance of a dust-up over tactics in the Gold Cup, however, as Scandinavia is O’Brien’s only runner in the race and Trawlerman is likely to make his own running. The regular to-and-fro between the two trainers, though, will add extra spice to the closing stages if Trawlerman and Scandinavia are duking it out in the final furlong.
Greg Wood
6.10 BUCKINGHAM PALACE STAKES HANDICAP preview
The money is all for runners in high-numbered stalls in the finale, and that’s hardly surprising given the way that races on the straight course have been unfolding this week. Jack Channon’s Mezcala, in stall 30, is currently a narrow favourite and remains feasibly handicapped dropping back to seven furlongs from a mile, while Cosi Bello (26) was a bit better than his narrow winning margin might imply at Haydock last time and also has form in a big field on this course. Elerak, highest of all in 31, is also attracting support to give Billy Loughnane another winner at the meeting, while Blue Brother, unraced since suffering all manner of bad luck when fancied for the Hunt Cup here last summer, is another fascinating contender from stall 28.
Timeform top-rated: Dance In The Storm
SELECTION: BLUE BROTHER
Greg Wood
5.35 HAMPTON COURT STAKES preview
Not the loftiest event on the Royal Ascot schedule by any means, but still an interesting contest for three-year-olds that are just below the top rung, for the moment at least, and it occasionally highlights a colt on the way to better things. Endorsement, the Aidan O’Brien-trained favourite, was still engaged in the Derby until quite late in the day, and drops back to 10 furlongs having skated up in a Listed race over a mile-and-a-half just a fortnight ago. Maho Bay too was seen as a possible for a run in the Derby until blotting his copy book by finishing fourth behind Maltese Cross in the Lingfield Derby Trial, but the winner there went on to finish second at Epsom and so the form may well be better than it seems. The list of Derby trial disappointments also includes Morshdi, fifth in the Dante, while Oxagon, the Craven Stakes winner in April, has failed to build on that in two runs since, though the latest was admittedly a Classic as he finished 12th of 16 in the French Derby at Chantilly. Generic, meanwhile, was seven lengths behind Constitution River – surely the best three-year-old colt seen out this year – in the Dee Stakes at Chester, having only started his racing career in March, and will also be bang there on that form with only marginal improvement.
Timeform top-rated: Endorsement.
SELECTION: GENERIC
Greg Wood
4.50 BRITANNIA STAKES preview
This straight-mile handicap for three-year-olds is, for me at least, the toughest Royal Ascot test of them all from a betting point of view – looking down the list of previous winners, I’m fairly sure that Perotto, in 2021, is the only winner I’ve had this century – and this year’s renewal looks as competitive as always. It looks as though I’ve managed to find the favourite, though, as David Marnane’s Jamestown has attracted plenty of support this morning, and has both the high draw and the run style that you need to be looking for on the straight course this week. A list of dangerous opponents is effectively everything else – even the 80-1 shot Winding Stream is within 7lb of the top-rated horse on Timeform’s numbers and was racing in Group company last time – but We’re Goosers is sure to be popular as a result of his nine-and-a-half length win last time, and so too Organise, from the John & Thady Gosden yard, who was touched off in a well-run race last time and sports first-time cheekpieces today. Moonfall, an eye-catcher at Chester in May, and Exclusive Code, the winner of a big-field maiden at Newbury, are also on the short-list, but frankly, your guess is as good as mine.
Timeform top-rated: We’re Goosers.
SELECTION: JAMESTOWN
An inaugural “Royal Ascot colour of the year” has been introduced this year, and on Gold Cup day guests were encouraged to wear their best “bright tomato” shade as part of the dress code. This chap got the memo.
Oddschecker market movers
Greg Wood
4.15 GOLD CUP preview
The staying division is currently missing a truly “public” horse like the three-time winner, Stradivarius, but Trawlerman, last year’s winner, will be a stern test for the posse of four-year-olds in this year’s Gold Cup field that could conceivably run up a sequence over the next few years if all goes well. The list is headed by Aidan O’Brien’s Scandinavia, last year’s St Leger winner, who arrives in Berkshire looking for a sixth straight success, while Rahiebb and Carmers, second and fifth at Doncaster, are also looking to establish themselves as Cup horses with a win in the most prestigious staying event of them all. Other live runners include Al Riffa, last season’s Irish St Leger winner, for the Joseph O’Brien stable, and George Scott’s Caballo De Mar, a Group One winner over two miles in France last time out. My idea of the best bet in the race, though, is Carmers, on the basis that Trawlerman missed his intended prep race in May and may be slightly short of his best, while Paddy Twomey’s runner – who beat both Scandinavia and Rahiebb in the Queen’s Vase here last summer – has as much chance as either of his fellow four-year-olds of finding the necessary improvement stepping up to two-and-a-half miles.
Timeform top-rated: Trawlerman
SELECTION: CARMERS
Royal Ascot Procession List
1st Carriage
The King
The Queen
The Earl of Snowdon
Ms Isabelle de la Bruyère
2nd Carriage
The Princess Royal
Vice Admiral Sir Tim Laurence
The Duke of Edinburgh
The Duchess of Edinburgh
3rd Carriage
Princess Zahra Aga Khan
HH Sheikh Hamad bin Abdullah al-Thani
Mrs Zara Tindall
Mr Willie Mullins
4th Carriage
Lord Cavendish
Lady Cavendish
Mr Stanley Tucci
Ms Felicity Blunt
Stanley Tucci is in the carriages today. An acclaimed actor, of course, he’s also well known for his cooking so perhaps he helped with luncheon at Windsor Castle to which the carriage guests are invited before their trip down the track. Now you know why the racing doesn’t start till 2.30pm!
Andrew is innocent!
I know you would miss the regular royal spot ahead of the Royal Procession list announcement at noon if we didn’t share some and today’s concerns Lady Victoria Hervey who has arrived at the races today. For those unawarer she’s a British socialite and former model who dated Prince Andrew (now Andrew Mountbatten-Windsor) briefly in 1999. Throughout the fallout from his associations with Jeffrey Epstein, she has remained one of the prince’s most vocal defenders. In an interview with LBC in February, not only did she admit to being named in the Epstein files herself, but branded anyone who wasn’t as a “loser”. With friends like this …
Greg Wood
3.40 RIBBLESDALE STAKES preview
Sound the stat klaxon, it’s time for the one about Oaks runners in the Ribblesdale as Legacy Link attempts to win Ascot’s Group Two for three-year-old fillies having run in the Epsom Classic last time out. A total of 33 fillies have lined up for this race after running in the Oaks since 2010 and just two have won, with the list of beaten runners including three favourites and seven more that set off at 5-1 or shorter. It is a big ask, in other words, and Legacy Link, the Epsom runner-up behind impressive winner Thundering On, will deserve huge credit if she can pull it off on what will be her third start in just over a month. Earth Shot and French challenger Gilded Prize are the likeliest opponents to give her something to think about, and while neither managed to win last time out, both look sure to blossom over this trip. And there is a royal runner to look out for too, although Golden Orbit, a home-bred daughter of Sea The Stars who was a beaten favourite last time, is friendless in the market at 33-1 and the first-time blinkers will need to spark serious improvement.
Timeform top-rated: Legacy Link
SELECTION: EARTH SHOT
Greg Wood
3.05 KING GEORGE V STAKES HANDICAP preview
Plenty of future Group-race winners have won this handicap for three-year-olds in the past, and plenty have been beaten in it too, as it is a race that generally throws up a hard luck story or three. All but a handful of the 19 runners have shown enough promise already to be credible winners if they continue to progress, with Charlie Appleby’s Into the Light,Heyzoom (Owen Burrows) and Tierra Del Toro (Ralph Beckett) probably the most obvious names to note, alongside Joseph O’Brien’s Enceladus, with Ryan Moore booked to ride in the absence of a runner from the trainer’s dad’s stable. O’Brien jnr is having a stormer of a meeting so far, and was tied with O’Brien snr on three winners at the top of the trainers’ table after day two, and Enceladus is one of four from the stable in this race, including Cannes, the favourite, who got off the mark at the third attempt at Leopardstown in May. Heyzoom posted an excellent winning time when successful over 10 furlongs at Newbury last time, while Into The Light has been narrowly beaten on his last two starts but was given a lot to do by William Buick over a two-furlong shorter trip last time.
Timeform top-rated: Heyzoom.
SELECTION: HEYZOOM
2.30 CHESHAM STAKES preview
Aidan O’Brien’s first chance of the afternoon to get the one winner he needs to be the first trainer to a century at Royal Ascot comes via his colts Aix La Chapelle and second-string South Dakota, in a race that he has won five times in the last decade. Aix La Chapelle looked very rough around the edges on his debut at the Curragh just a fortnight ago but still ran out an easy winner and should find plenty for the experience. He is drawn in stall five, though, which is less than ideal on the evidence from the straight course over the first two days. Another leading Irish-trained runner, Fozzy Stack’s Nola Soul, also overcame greenness to win on debut and could give the favourite plenty to think about, while George Scott’s Sea Venture found all the trouble going on her first start over six furlongs before showing a smart turn of foot to win with plenty to spare. As a daughter of the Derby winner, Sea The Stars, she looks certain to improve for the extra furlong today.
Timeform top-rated: Aix La Chapelle
SELECTION: SEA VENTURE
Going to start putting up some previews of the day’s action from our racing correspondent and tipster Greg Wood, who is currently leading the national press challenge in the Racing Post.
Good morning. It was overcast this morning but no precipitation so the going for day three of Royal Ascot is: Good to Firm and there’s very little between the different sides of the track.
GoingStick readings at 8.30am:
Stands’ side: 8.8
Centre: 8.7
Far side: 8.7
Round course: 7.5
We have one non-runners so far so cross this off your list of possible wagers …
4.50pm Britannia Stakes: 16 Bobby McGee (vet’s certificate – temperature)
Preamble
Good morning from Ascot on the third morning of the Royal meeting 2026 – Gold Cup day – where Aidan O’Brien is poised to become the first trainer to saddle a century of winners at Flat racing’s showpiece event, having moved to 99 with a winner in the first race on Wednesday.
There are more races to aim at these days than there were in the era when the late Sir Henry Cecil racked up what was, at the time, a record 75 winners, and while the Sir Michael Stoute was active well into the five-day Ascot era and had saddled 82 by the time of his recent retirement, O’Brien’s record is still an astonishing achievement, even by the standards of the pre-eminent trainer of the last 25 years.
He has a total of seven runners on today’s card as he looks to reach three figures, including Scandinavia, the somewhat uneasy favourite, in the Gold Cup at 4.15 and opening up with Aix La Chapelle in the Chesham Stakes at 2.30.
Scandinavia’s main Gold Cup rival, according to the betting at least, is last year’s winner, Trawlerman, and there is now less than a point between them in the betting. Elsewhere on the day three card, the Oaks form gets an early test as Legacy Link, the Epsom runner-up, lines up for the Ribblesdale Stakes (3.40) just two weeks on from her big run in the Classic, while the Britannia Handicap at 4.50 could well turn out to be the most competitive event of the entire meeting – just two of the 30 runners are currently on offer at single-figure odds.
Another 5mm of water was applied overnight to maintain the going at good-to-firm, thoughts on possible winners are here, and the action is underway at 2.30 on what could be a historic day at Royal Ascot. One hundred is only a number, but it’s an impressive number all the same.
The Bank last cut interest rates in December but upheaval in the Middle East has stalled any further reductions.
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US to review benefits of having troops in Europe with ‘era of free-riding’ over – Europe live | World news
US to conduct a review of forces in Europe
Hegseth says the US will be “doubling down” on its efforts to get allies to spend what they need to spend.
He says his department will conduct a six-month review of US forces in Europe.
He says it will look at actual benefits of having US military in Europe – and will be a real review.
“It will be designed to ensure that Nato is moving fast and irreversibly toward Europe leading, stepping up to take primary responsibility for the defence of Europe.”
He then goes further to say that the US dues to the Nato budget will be contingent on other countries meeting their defence spending targets.
“Where other allies do not spend with urgency, our dues, contributions will go down. Nato will be a two-way street.”
He adds:
“America cannot care for or pay more for Europe’s defence than our allies do.”
Key events
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US defence secretary urges UK to spend more on defence, ‘step up and do even more’
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US force review will ‘change how we look at continent,’ Hegseth says
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Russian oil refinery on fire after barrage of Ukrainian drones strike Moscow
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Trump was ‘pumped with’ harmful ideas during G7 summit, Kremlin says
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Nato agrees to modernise nuclear capabilities, strengthen planning
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Hegseth’s frustration is not new, but still striking – snap analysis
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‘Our direction of travel is and has been clear,’ Hegseth tells Nato
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Some Nato countries ‘will fail’ US posture review, Hegseth says
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US to conduct a review of forces in Europe
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Hegseth says ‘era of free riding’ is over
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Nato allies refusal to help on Iran ‘shameful,’ Hegseth says
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US ‘gave allies test to support America … and too many failed it,’ Hegseth says
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‘There have been real setbacks we cannot ignore,’ Hegseth tells Nato
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‘Europe was not supposed to be a dependency of the US,’ Hegseth tells Nato
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‘Nato has been a paper tiger and a one-way street,’ US Hegseth tells Nato ministers
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Morning opening: Ukraine hits Moscow oil refinery, disrupts flights in retaliation attack as Nato, EU leaders meet for talks
US defence secretary urges UK to spend more on defence, ‘step up and do even more’
US defence secretary Pete Hegseth has also offered his view on the relationship with the UK, after meeting Britain’s new defence minister Dan Jarvis.
His predecessor resigned in protest against low government spending on defence.
Hegseth said it was “a good meeting,” stressing that “the US-British defence alliance is an important one.”
He praised Jarvis for having first-hand experience of serving in a combat zone.
But he said “the message was the same: hey, we need you guys to step up and do even more, spend even more.”
He added:
“If we need access and basing, whether it’s in the UK or say at Diego Garcia, we can’t live in a world where other countries are standing at the end of a runway with a clipboard trying to decide what flies and what doesn’t. It’s not gonna, it’s not gonna work for us. It’s not good in contingencies, and I don’t think it’s what he wants either.”
He continued saying that “the more the UK spends on defence, the stronger Nato is going to be, the stronger western civilization is, and that’s a good thing.”
“I think [it was] a good start to a relationship that we need to renew even more,” Hegseth said.
US force review will ‘change how we look at continent,’ Hegseth says
We are now again hearing from US defence secretary Pete Hegseth again, as he’s speaking with reporters after his explosive speech at the Nato ministerial in Brussels this morning.
Just as I argued (10:15), he tells them that the message is not new, with many countries already stepping up – but not all of them.
“We will be clear with them, and as we do this review, we’ll change how we look at the continent as a result,” he says.
Separately, speaking on Iran, he also notes that a number of European countries are “prepared to step up” to help with the strait of Hormuz.
“It’s an international water bill, and frankly, European countries and Asian countries use it a lot more than we do,” he says.
Russian oil refinery on fire after barrage of Ukrainian drones strike Moscow
Peter Beaumont in Pavlograd and Warren Murray
Ukrainian drones have hit several locations across Moscow, including setting an oil refinery on fire, sending out flames and towering plumes of smoke over the city and forcing the capital’s airports to suspend flights.
The scale of the long-range attack, apparently designed to shut down operations at the key oil refinery in the Kapotno area, caught most Muscovites by surprise in a city that does not typically warn residents with air raid alarms, and prompted panicked messages on social media.
Footage posted online showed three plumes of smoke rising from the refinery.
The strike was the second in two days on the facility, in what the Ukrainian president, Volodymyr Zelenskyy, then called “a just response to Russian strikes”.
“Air defence forces are continuing to repel a large-scale attack. Several drones managed to reach the [Moscow oil refinery],” said Sergei Sobyanin, Moscow’s mayor, adding that a shopping centre was also damaged. He claimed about 180 drones heading for the capital had been downed.
Sobyanin said emergency crews were working at the site and also reported “damage” to Sadovod shopping centre in the south-eastern part of the city. At least seven drones appear to have beaten Russia’s air defences to strike targets in the city.
Traffic was halted on Moscow’s ring road near the refinery, the broadcaster RIA cited the interior ministry as saying, while air traffic was disrupted at Vnukovo, Sheremetyevo, and Zhukovsky airports.
Jakub Krupa
Let’s get a bit more on these Ukrainian drone strikes on Moscow.
Trump was ‘pumped with’ harmful ideas during G7 summit, Kremlin says
Meanwhile, the Kremlin has offered its take on yesterday’s G7 summit – including a supportive statement on Ukraine (Europe Live, Wednesday) – saying that the US president, Donald Trump, was “pumped with” harmful ideas by the EU.
The US had no contacts with Moscow after the meeting, Kremlin adviser Yuri Ushakov was quoted by Interfax and Reuters as saying.
Ushakov also disputed the EU’s assumption that the battlefield situation was changing in Ukraine’s favour.
Nato agrees to modernise nuclear capabilities, strengthen planning
Separately, Nato has agreed to modernise its nuclear capabilities and strengthen its nuclear planning capacity, the alliance’s senior body for nuclear deterrence said in a statement quoted by Reuters.
All Nato allies except France are members of the Nuclear Planning Group, which serves as a forum for consultation and decision-making on nuclear deterrence.
Defence ministers taking part in the meeting “recalled that the strategic nuclear forces of the Alliance remain the supreme guarantee of Allied security and underpin Nato’s extended deterrence architecture,” the statement said.
Hegseth’s frustration is not new, but still striking – snap analysis
Jakub Krupa
None of this is really new new – Hegseth largely repeats the US’s main frustrations and grievances with the alliance, repeatedly expressed by Trump – but the tone of the delivery is still very, very striking.
Hegseth has laid into Nato allies for not helping enough with bases and overflights during its early Iran operations – and once he did not name any countries, it’s likely targeted at the likes of Spain, Italy, Portugal.
In other parts, it is just a broader criticism of what the US sees as “free riding” from the allies, as they do not move quickly enough on spending.
Coming just weeks before the Nato summit in Ankara, it is clearly intented to serve as a warning to several of the allies that still don’t spend enough and don’t seem to act with the urgency the US is expecting them to increase that spending – or even offer a credible path towards it.
The proposed posture review – and explicit threat that some of them will fail it – and the suggestion the US could reduce its contributions if others do not pay enough, will make some think twice about their plans in the next few weeks.
As Hegseth ends his remarks, Rutte says “there’s much to discuss and decide today.”
You bet it’s going to be lively.
‘Our direction of travel is and has been clear,’ Hegseth tells Nato
Hegseth says “our direction of travel is and has been clear.”
“This is the right thing to do by the American people. It’s the right thing to do by this alliance.
Europe can and must take primary responsibility for its conventional defence as it pledged at The Hague Summit, and in the process safeguarding Europe’s defence for generations to come, we know our allies can do it, and it’s time.”
Some Nato countries ‘will fail’ US posture review, Hegseth says
Hegseth makes it clear that the review will not be just a box-ticking exercise.
“It’s a review that some countries will fail and others will pass with flying colours. In the end, the review is intended to both improve US force posture and basing and strengthen Nato 3.0.”
US to conduct a review of forces in Europe
Hegseth says the US will be “doubling down” on its efforts to get allies to spend what they need to spend.
He says his department will conduct a six-month review of US forces in Europe.
He says it will look at actual benefits of having US military in Europe – and will be a real review.
“It will be designed to ensure that Nato is moving fast and irreversibly toward Europe leading, stepping up to take primary responsibility for the defence of Europe.”
He then goes further to say that the US dues to the Nato budget will be contingent on other countries meeting their defence spending targets.
“Where other allies do not spend with urgency, our dues, contributions will go down. Nato will be a two-way street.”
He adds:
“America cannot care for or pay more for Europe’s defence than our allies do.”
Hegseth says ‘era of free riding’ is over
Hegseth says that “some of Nato’s largest economies, some of our richest countries, allies that are happiest to go on about the rules-based international order and middle powers banding together still think the era of free riding is here.”
He says Trump disagrees.
“This is not what any reasonable person would expect, and it’s not going to cut it any more.”
(He may be thinking of, among others, Spain, which has long been the target of US criticism, and has clashed with it in recent months.)
Nato allies refusal to help on Iran ‘shameful,’ Hegseth says
Hegseth makes it very clear how the US is annoyed about the perceived lack of support on Iran.
“The United States has defended Europe for generations, and the President said all he said was that our jets would need to take off from bases in Europe or our ships from ports to strike targets in the Middle East, Iranian targets that threaten European interests even more directly than they threaten us.
But too many of our allies said no, or tried to drown us in arcane legal debates, or criticised us publicly for doing what they aren’t prepared or able to do themselves. It was shameful.
These allies, they put America’s sons and daughters, our sons and daughters, at risk by denying them the predictable access facing an overflight that never should have been in question at all.”
US ‘gave allies test to support America … and too many failed it,’ Hegseth says
Hegseth now goes hard on some Nato countries that are still paying below the expected levels.
He says “for all of our clarity, too many allied capitals seem to still miss something in translation” and “too many allies still do not recognise the historic need … to forge a relevant, powerful military alliance.”
He says the US “gave our allies a test to support America when we asked for their help and too many failed it.”
‘There have been real setbacks we cannot ignore,’ Hegseth tells Nato
Hegseth says that Trump is clear about his intention to increase defence spending so the US leads and shows others “it’s not do as I say, it’s do as we do.”
He says he believes the US approach has been validated on Ukraine, with allies taking more responsibility for Ukraine’s defence – and this approach actually yielding positive results.
“It is happening, and it’s a validation of President Trump’s approach, an approach that will set the table for peace.”
But he says that “for all these early steps in the right direction, there have also been real setbacks that we cannot ignore.”
Hegseth continues by saying that Nato 2.0 was “an era of distraction, de-industrialisation and demilitarisation,” with “an era of free riding.”
“Those were lost years that we are not going back to.”
He says that’s why his department is “so clear and so candid” about the need to “restore Nato’s core military role and character” and why it’s returned US troop levels to pre-2022.
He says the alliance needs to return to its roots to be as strong as required and “if need be, make good on Article Five.”
He says some countries “got the message and stepped up,” but others are still failing.
‘Europe was not supposed to be a dependency of the US,’ Hegseth tells Nato
Hegseth seems to praise spending commitments adopted at last year’s Nato summit in The Hague, saying they were “all about transforming Nato back into a real military alliance that is focused on hard power and real deterrence.”
But in another eye-catching quote, he goes on to say:
“Europe was not supposed to be a dependency of the United States. That’s not what Winston Churchill or Charles de Gaulle or Konrad Adenauer wanted or expected. No, Europe was supposed to be a military power, allied with a strong America.”
He goes back in Nato history to 1951, quoting Eisehower comments that “if in 10 years all American troops stationed in Europe for national defence purposes have not been returned to the US, then this whole process will have failed.”
But he says that Nato 2.0 in the following decades increasingly focused on “gender equality and climate change” instead of “tanks and fighters and air defences.”
“Europe’s borders flew wide open, welfare states expanded, defence budgets cratered, along with Europe’s belief in itself and its civilization. Nato lost its way.”
Ouch, again.
‘Nato has been a paper tiger and a one-way street,’ US Hegseth tells Nato ministers
US secretary of defence Pete Hegseth has asked to speak at the beginning of the Nato ministerial in Brussels, and it very much looks like his comments will set the tone for the day.
He begins by saying that Trump “has said again and again … our allies must step up.”
“Nato has been a paper tiger and a one-way street. No more.”
Ouch.
Morning opening: Ukraine hits Moscow oil refinery, disrupts flights in retaliation attack as Nato, EU leaders meet for talks
Jakub Krupa
Ukraine hit an oil refinery near Moscow and other targets in Russia overnight in what president Volodymyr Zelenskyy called “a justified response” to recent strikes on Ukraine.
Russian officials were quoted as saying that the attack forced commercial flights and airports to be suspended for safety reasons and caused a temporary halt on Moscow’s ring road, after some 180 drones were shot down over the Russian capital.
“This is a fully justified response to Russian attacks on our cities and communities, and another important result of our warriors’ work against facilities that sustain Russia’s war machine,” Zelenskyy said.
The strikes come on the day of a Nato ministerial meeting in Brussels, the last before next month’s summit in Ankara.
Nato allies are expected to discuss the latest on their defence spending plans, with the US pressing Europe to take more responsibility for the defence of the continent.
Later on, the ministers will also take part in the Ukraine Defence Contact Group meeting, a key forum to coordinate on support for Ukraine, which is expected to be attended by Zelenskyy.
The main event comes fairly late in the day, as EU leaders are expected to gather for the European Council meeting on Ukraine and the Middle East. It’s a two-day summit, likely to go late into the night.
Lots for us to cover.
It’s Thursday, 18 June 2026, it’s Jakub Krupa here, and this is Europe Live.
Good morning.
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