Brent crude climbed toward $93 a barrel this week, its fourth straight session of gains, as the 60-day deadline for a US-Iran peace deal expired on August 17 with no agreement in sight. The naval blockade of Iranian ports stays in place. Washington and Tehran are, by most accounts, further apart than they were when they signed their ceasefire framework back in June. And yet the Stoxx Europe 600 is up roughly 12% for the year, with German, French and Italian benchmarks at record highs, German government bonds outperforming US Treasuries, and Bank of America's latest fund manager survey showing the most bullish tilt toward European equities over American ones since before the war started in February. Europe is not merely surviving a live regional war sitting on top of a fifth of the world's oil supply. By some measures, it is thriving because of it, or at least alongside it.
That is the puzzle worth sitting with. Is this a market that has correctly identified something real and structural happening inside the European economy, strong enough to outweigh a war that spiked oil past $140 a barrel in March? Or is it a market that has simply stopped pricing a risk that never actually went away, and is due for a rude reminder the next time Hormuz shuts down hard?