Markets seem to be listening to President Trump. He started the war and has the capacity to resume it. If the war resumed, oil futures would spike and equities would sell off. As long as there's a ceasefire and Trump sounds positive, most markets (equities, bonds, credit) are signaling they expect a deal relatively soon and that the worst of the energy shock is behind us. We can get back to looking at the wonders of AI and buying tech stocks.

Even though oil and fuels are more expensive now, that's seen as resolving itself.

I'm more concerned now than a week ago because Trump has moved on, focusing on domestic issues, treating the war as won. The take from other Gulf and European leaders that this will take months is a fair call. Concerns about long-term reductions in supplies of oil, gas, petrochemicals, fertilizer, helium, cement, aluminum are all still in play. That raises the risk that disruption to real-world supplies causes significant long-term damage while markets price for the worst being behind us.

The IEA warns no new oil cargos loaded in the Hormuz region in April. We have frozen oil tankers sitting there. The higher equities go back towards the pre-war trend, the risk is growing that this disruption will bring everything crashing back down.

One clear reason is the expectation of resilience built from shocks like COVID and tariffs. There's also the AI boom, which was a positive disruption for the world economy last year, spreading beyond the U.S. to Korea, Taiwan, and China. As long as you expect the war's impact to fade, the logic is you need to get back into AI and its positives for the global economy.

If you think Iran means short-term pain, the longer-term gain is brewing in AI. After the war saw sell-offs in places like Korea, Taiwan, and Nasdaq, you have the capacity to snap up shares at a lower price than if the war had not occurred.

Back to pre-war norms. One impact of the war that won't go away is a significant increase in U.S. and other defense spending, highlighting the likelihood of fresh increases in the U.S. debt burden. Trump is pushing for increased defense spending and other projects, while potential savings from tariff revenue are under threat. The U.S. deficit potential to grow is still in play, and bond investors may demand ever higher yields if we get severe increases in deficits.