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The Pentagon keeps promising to follow the law when using AI, but what are the limits?

Kraig Pakulski 0 27 Article rating: No rating

By Sean Lyngaas, CNN

(CNN) — The Iran war has seen the US military use AI more than any conflict before, drawing on vast amounts of data — from satellites, signals intelligence and elsewhere — piped into software programs made by contractors like Palantir.

AI tools like Anthropic’s Claude have sifted through the data far quicker than any human could to flag potential targets to strike for commanders, according to multiple sources familiar with US operations.

The ubiquity of AI tools in war has raised questions about whether those tools are contributing to errors on the battlefield. Some congressional Democrats have pushed the Pentagon to answer questions about whether AI may have been partially at fault for a US strike in February that hit an Iranian elementary school and, according to Iranian state media, killed at least 168 children. But what are the limits on the military’s use of AI?

Defense Secretary Pete Hegseth has emphasized that humans at the Pentagon, not AI agents, make the ultimate call on who to kill in war.

“We follow the law and humans make decisions,” Hegseth told the Senate Armed Services Committee last week. “AI is not making lethal decisions.”

Pentagon spokesmen have similarly repeatedly said that the military’s use of AI follows the law.

But other than specifying that commanders are responsible for lethal targeting decisions and their consequences, the law does not place explicit limits on where AI can be used in the so-called kill chain. The speed with which AI helps commanders make those lethal decisions is raising new questions of when and how often a human needs to be involved in the process, legal experts told CNN.

The lack of restrictions has led to some very public debates about the ethics of AI in warfare. The Pentagon is in a messy legal battle with a leading American AI firm, Anthropic, after that company insisted on some limitations in how its technology might be used, with Hegesth calling the company’s CEO an “ideological lunatic” over the demand.

“The story is ultimately one of how fast you choose to — or can afford not to — run with scissors,” said Gary Corn, a former deputy legal counsel in the Office of the Chairman of the Joint Chiefs of Staff. “And we see that the approach presently is, ‘We’re going to sprint as fast as we can with scissors.’ That’s the core of the Anthropic fight.”

US Air Force Colonel John Boyd coined the phrase “OODA loop” (observe, orient, decide, act) to describe the iterative windows in battle when commanders have to make decisions. Much of the legal framework for the use of AI stems from pre-existing law that’s tied to who is responsible when those decisions are made.

“AI is exponentially increasing” the speed at which commanders and their support staff will have to navigate OODA loops in battle, said Cory Simpson, a former legal adviser to US Special Operations Command.

In war, those who get through that loop the quickest have an advantage.

In a video posted to X by Palantir in March, Cameron Stanley, the Pentagon’s chief digital and AI officer, praised how Palantir’s Maven Smart System software has transformed US military targeting. He demonstrated how the software, which he said is deployed “

Market rebound: Why some stocks are looking past the Iran war

Kraig Pakulski 0 32 Article rating: No rating

By John Towfighi, CNN

(CNN) — The US stock market isn’t the only market that’s rebounded to record highs.

Stock indexes in Taiwan, South Korea and Japan have clinched fresh records in recent trading sessions, bouncing back after tumbling in March.

Asian countries are heavily reliant on oil imports from the Middle East that have largely stalled since the Iran war. But the hit to their economies hasn’t stopped their stock markets from surging in recent weeks.

South Korea’s benchmark Kospi index and Taiwan’s Taiex index both hit a record high on Wednesday. Japan’s benchmark Nikkei 225 hit a record high last week. Meanwhile, the S&P 500 and Nasdaq Composite in the US also both clinched record highs on Wednesday.

The enthusiasm in Asian and US markets is largely thanks to the global AI boom. The AI-driven rally has overshadowed some of the risks from the war with Iran. Semiconductor chips are in high demand because of the push to build AI infrastructure, which has particularly benefited markets in Asia.

By comparison, markets in countries that don’t have the same level of exposure to AI – like Europe – haven’t seen these gains.

“Different regions have different potential tailwinds, but like the US, much of Asia is poised to benefit from the AI capex cycle,” said Daniel Skelly, head of Morgan Stanley’s wealth management market research and strategy team.

South Korea and Taiwan shine

The United States is a net-energy exporter, while countries like Japan and South Korea are net-energy importers. This means economies in Asia have felt more of the pain of higher oil prices.

But in markets, the AI hype is lifting stocks despite concerns about higher energy costs and potential hits to consumer spending and economic growth.

South Korea is a global leader in semiconductor chips, and its stock market has surged: The Kospi gained nearly 76% in 2025, its best year since 1999, and is already up 75% so far this year. On Thursday, the surge sent the Korean equity market past Canada’s to the world’s seventh largest.

Samsung Electronics soared this week to surpass $1 trillion in market value, the second Asian company after Taiwan Semiconductor Manufacturing Company, known as TSMC, to hit the milestone.

Meanwhile, Taiwan’s Taiex is up 16% since the war began. The Taiex is up 42% this year. Taiwan in April became home to the world’s sixth-largest stock market, also surpassing Canada’s market.

“Asian markets are reacting well to the latest peace efforts and the chipmaker momentum,” Jim Reid, head of global macro research at Deutsche Bank, said in a note.

The Strait of Hormuz effectively closed at the start of March, choking off a fifth of the global oil supply. Japan’s Nikkei 225 was down a swift 13% by March 31.

But the index rebounded sharply just like US stocks, erasing its war-related losses and hitting a record high on April 16. The Nikkei is up 1% since the war with Iran began and up 18% so far this year.

Investors have leaned into optimism about an end to hostilities, but the swift rally also underscores the significance of the global AI rally. Artificial intelligence, semiconductor companies and data center-related companies account for about 50% of the weight of Japan’s Nikkei 225, according to JPMorgan Chase.

“Investors have gone back to the comfort of where they’re seeing earnings being delivered, and where are earnings being delivered? It’s US tech, it’s the AI ecosystem,” said Arun Sai, senior multi-asset strategist at Pictet Asset Management.

Mixed bag for other global stocks

While markets in Asia continue to hit records, markets in Eur

Fed officials are growing anxious about the Iran war

Kraig Pakulski 0 26 Article rating: No rating

By Bryan Mena, CNN

Washington (CNN) — Tension is building among the policymakers tasked with wrangling inflation as the economic effects of the US-Israeli war with Iran broaden.

When Federal Reserve officials convened on March 17-18, just a few weeks after the war broke out, Chair Jerome Powell said any effects on inflation would likely be temporary and could be contained within the energy industry, keeping the door open for at least one rate cut this year. At the time, Wall Street was also optimistic that Kevin Warsh, President Donald Trump’s pick to succeed Powell, would push for rate cuts, if he’s confirmed.

But the Iran war has dragged on since then, and is now in its tenth week. At the latest Fed meeting in late April, officials’ anxieties became much more apparent. Three officials dissented from the Fed’s latest policy statement, disagreeing with its “easing bias,” or the suggestion that rates may go lower.

Those officials — Fed presidents Beth Hammack of Cleveland, Lorie Logan of Dallas and Neel Kashkari of Minneapolis — said in statements detailing their dissents that the Fed is not being forthcoming about the growing chances of a rate hike. And they’re likely not the only ones within the Fed’s 19-person rate-setting committee with those concerns, according to experts, since only 12 of them have voting power at a time.

“The opposition against the easing bias was likely broader than just those three,” said Derek Tang, an economist at Monetary Policy Analytics. “But the question is, when will the dam break on inflation expectations? Inflation has been above their 2% target for a while now.”

Snarled supply chains

It’s not just oil: The Iran war has made it difficult for businesses to access various other key commodities, such as fertilizer, helium and aluminum, in turn pushing up their prices.

That’s leaving businesses across industries scrambling to reconfigure their supply chains and come up with strategies to offset the disruptions, according to the latest business surveys from the Institute for Supply Management. For example, in ISM’s April survey, released Tuesday, a utility company said it is “mitigating risk through early procurement, supplier diversification and strategic inventory positioning.”

The Federal Reserve Bank of New York’s Global Supply Chain Pressure Index shot up in April to a reading of 1.82, up from March’s 0.68 and the highest level since 2022.

“This echoes the severe shortages and supply disruptions that the world economy experienced in 2021 as it emerged from the pandemic,” New York Fed President John Williams said Tuesday at an event in New York.

Logan, who is a Fed voter this year, echoed that concern in a statement detailing her policy dissent last week, adding it could exacerbate inflation: “The conflict in the Middle East raises the prospect of prolonged or repeated supply disruptions that could create further inflationary pressures.”

Inflation expectations

In March, Powell said Americans’ perception of prices will shape the Fed’s response to the Iran.

The Fed always pays close attention to inflation expectations, particularly over the long term, because they can be self-fulfilling. If people expect inflation to remain elevated in the comings years, then they’ll adjust their spending accordingly. It’s also a key gauge of confidence in the Fed’s ability to rein in price pressures.

Williams in his Tuesday speech said inflation expectations remain “well anchored, despite the deluge of shocks.” Key surveys from the University of Michigan, the New York Fed and the Conference Board

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