The equity markets are exhibiting a curious blend of recklessness and rationality in response to the ongoing Iran war. Despite rising oil prices—Brent crude exceeding $107 per barrel—and potential disruptions in the Strait of Hormuz, global stocks are climbing, with major economies like the United States, South Korea, and Japan approaching all-time highs. This resilience may stem from the rise of passive investing, which allocates funds irrespective of geopolitical events, and a prevailing belief in an AI-driven productivity boom. However, this calm may not last, as the impact of energy shocks typically unfolds over time, affecting sectors like airlines and consumer budgets before hitting corporate earnings. Investors are currently banking on three key assumptions: that the conflict will not lead to a global supply shock, that oil prices will not remain high long enough to stifle growth, and that the AI capital expenditure cycle will sustain equity valuations. Yet, the market's ability to ignore geopolitical risks could prove precarious, especially for economies like India that are sensitive to energy price fluctuations. As the situation develops, ordinary economic indicators such as profit warnings and inflation trends may ultimately reveal the true impact of the conflict.