Normalization ?

US and European equity markets have now fully retraced their losses since the beginning of the Iran conflict. Oil, however, tells a different story, still trading roughly 27% higher. This divergence is striking given that the Strait of Hormuz — a critical artery for global oil and gas flows — remains partially constrained, and geopolitical visibility in the region remains limited.

At the same time, the economic impact is beginning to materialize more clearly. Higher energy prices are feeding through to consumers and corporates on both sides of the Atlantic. Inflation is edging higher again — Germany, for example, reported 2.7% year-over-year in March. Governments are starting to react: the new coalition under Chancellor Friedrich Merz has already introduced targeted relief measures, including temporary fuel tax reductions and a €1,000 tax-free bonus.

Markets are, once again, looking through the immediate risks and pricing a normalization scenario. While this may ultimately prove correct, it leaves little margin for error in the short term.

Beyond markets, it is important not to lose sight of the broader human and economic costs of such conflicts. Complacency is rarely a good ally in investing.