Risk rally on borrowed time while the Strait remains closed

If the diplomatic and military stalemate between the US and Iran continues, and the Strait of Hormuz remain largely closed, policymakers and market participants will find it increasingly difficult to keep “looking through” the crisis. The widespread assumption that the ongoing disruption to energy supply will generate only limited economic damage can probably sustain investors’ optimism for a while yet. But at some point the situation on the ground needs to actually improve, or that optimism will presumably start to fade.