The evidence that investors are overlooking the implications of the current situation is piling up. The war’s end is no longer the point at which things will return to something approaching normal. U.S. inflation was at 3.3 percent last month and is expected to rise further, and the second-order effects on goods that are derived from fossil fuels or rely on energy—in the latter case, all of them—haven’t even hit yet. Diesel and jet fuel, the heavy transportation fuels, are rising faster than gasoline. There are trucking costs and fertilizer costs and plastic and aluminum packaging costs, all of which will spark more core inflation, which hasn’t budged much relative to more volatile benchmarks like energy.

Then there’s the impact on capital flows coming from the Persian Gulf. The major Gulf states are in no position right now to invest, which had hitherto propped up projects and asset managers globally. Losing Gulf state capital might be a bigger deal than losing their oil. The fact that the U.S. is considering a bailout of the United Arab Emirates is a terrible sign....

Ultimately, the market’s aversion to reality reflects a problem that’s been talked about a lot: the tendency to let short-term thinking dominate over the long-term fundamentals. Algorithmic traders looking for arbitrages or small price movements aren’t going to internalize a dramatic shock to global supply chains. It has to come at a level of international recognition that the way we have structured the economy is prone to this level of risk. That should have dawned on people after COVID, and so far it hasn’t dawned on people now. But it will.