The Forecast: China’s Iran strategy

Welcome back to The Forecast from Bloomberg Weekend, where we help you think about the future — from next week to next decade.

This week we're looking at China's response to the conflict between Iran, Israel and the US — as well as the future of fake meat, the first $4 trillion dollar company and more.

China's Iran Strategy

With the US-brokered ceasefire between Israel and Iran holding, attention has shifted to what the conflict means for China and the balance of power between Washington and Beijing.

President Xi Jinping has strengthened ties with Tehran in recent years, welcoming it into the Shanghai Cooperation Organization (SCO) in 2023 and then BRICS — bolstering both groups' ability to challenge US power on the world stage. And as a net importer of crude oil with growing economic ties in the Middle East, China has a lot at stake in the region.

The conflict presents Xi with an opportunity to style himself as more of a stabilizing force than the Trump administration. China will "primarily use the situation as a way of painting the United States as the unreliable global partner," John Liu, who oversees Bloomberg's China coverage from Beijing, told the Big Take Asia podcast.

The risk to China's energy security also appears to be contained, with Donald Trump giving Beijing the green light to continue buying oil from Iran, despite US sanctions. China gets about 14% of its crude from Iran, and about 45% of its oil imports pass through the Strait of Hormuz – which remains open despite Tehran's threat of a blockade.

All of that is positive for China. But its decision to stay on the sidelines, other than condemning the US and Israeli strikes, risks undermining the appeal of aligning with Beijing. Meanwhile, the B2 bomber strikes showed the US remains the "only global power with reach anywhere in the world," Liu said.

Last week, China hosted a meeting of SCO defense ministers that included Iran's Aziz Nasirzadeh. Xi will miss the July 6-7 BRICS summit in Rio de Janeiro, however, an absence that will do little to help him expand China's global influence via the bloc.

While some commentators suggest the conflict has another potential silver lining for China – distracting Washington from strategic competition with Beijing in the Asia-Pacific – it's unlikely to impact China's long-term calculations on Taiwan and the South China Sea. The Trump administration has signaled quite clearly it's not going to take its eye off the region, according to Jenni Marsh, who leads Bloomberg's economic and government coverage of Greater China.

"For Xi Jinping, the calculation of his ambitions around Taiwan probably are much more long-term," she told a panel discussion at a Bloomberg event last week in Hong Kong. The Iran conflict "does not mean that China would invade Taiwan because Trump is caught up somewhere else."

— Edward Johnson, Bloomberg Weekend

Predictions

Wall Street will regret ignoring consumer sentiment: "Over the 79 years of the [University of Michigan's consumer sentiment] survey, a drop this large this fast has almost always predicted a recession." — Ben Steverman, Bloomberg Businessweek

The global economic outlook is improving, slightly: "Bank of America has upgraded its global growth forecast in response to the de-escalating trade war between the US and China" and now expects "the global economy to grow 3% in 2025 and 2026 and 3.3% in 2027." But it also cautions that "we are hardly out of the woods." — Mark Niquette, Bloomberg News

Nvidia could become the first company worth $4 trillion: "Two years after Nvidia Corp. made history by becoming the first chipmaker to achieve a $1 trillion market capitalization, an even more remarkable milestone is within its grasp." — Ryan Vlastelica, Bloomberg News

A Putin war with NATO would cost the world $1.5 trillion: That estimate, from Bloomberg Economics, includes "the direct cost of destruction in the warzone, higher energy prices as supply from Russia is cut off, and a selloff in financial markets." — Bloomberg Politics

Fake meat's future is in Europe: Plant-based burger companies are struggling with falling sales, "yet there is still one place that remains a relatively bright spot for the industry that wants to push shoppers away from eating animals." — Agnieszka de Sousa, Bloomberg News

Florida won't replace New York, mayoral politics notwithstanding. The reason is simple: "Florida's attractiveness will always be a direct corollary of its proximity and easy access to New York." — Jonathan Levin, Bloomberg Opinion

The fight over genetically modified "superbabies" is coming soon: A California startup says it's raising money to work on genetically editing human embryos, while scientists and ethicists say the technology is "unproven and potentially dangerous" and "could usher in a new era of eugenics." — Sophie Alexander and Ike Swetlitz, Bloomberg News

"AI is doing 30% to 50% of the work at Salesforce now," CEO Marc Benioff told Bloomberg. That's not a prediction exactly, but it sure seems Forecast-y! — Brody Ford and Emily Chang, Bloomberg News

What Are the Chances...

Trump said Wednesday that the US and Israel's conflict with Iran was "over," at least for now. Traders on Polymarket seem open to that possibility: The chances of Israeli military action against Iran in July have fallen sharply from over 80% to just 27%, as of Friday at 1:40 p.m. ET. The chances that Iran closes the Strait of Hormuz in 2025 fell from a high of 60% to 18%.

The chances of a US-Iran nuclear deal, on the other hand, have not recovered since Israel's attack on Iran earlier this month. And the chances that Iran possesses a nuclear weapon by the end of this year are at 12%, about where they were all spring.

Week Ahead

Monday: China publishes manufacturing PMI; Germany and Italy publish CPI; the UK reports GDP; the ECB Forum on Central Banking begins in Sintra, Portugal.

Tuesday: The US publishes job openings and manufacturing PMI; Indonesia and the Eurozone publish inflation data.

Wednesday: South Korea releases inflation data.

Thursday: The US publishes its June jobs report, which Bloomberg Economics expects to show unemployment ticking up to 4.3% — driven by cuts in education likely due to uncertainty over government funding.

Friday: US markets closed for Independence Day.

Also: Next Wednesday, July 9, is Trump's self-imposed deadline for trade deals before his "Liberation Day" tariffs resume.