The global market is transitioning from a "supply shock trade" to a "growth impairment trade". Trump's statement about the war possibly ending in weeks hasn't reassured the market because investors are truly concerned not about when the war is politically declared over, but about how quickly high oil prices will harm consumption, inflation, and global growth. After Trump's speech on April 2, oil prices surged again, indicating that traders believe energy constraints will persist rather than quickly be lifted.
Why Supply Shock Turns into a Demand Issue
All energy crises eventually touch on the same problem: how high prices can go and how long the end consumers can endure them. Reuters clarified in its column on April 2 that while the global economy appeared more resilient in March than expected, this does not mean that high oil prices have not caused harm, but may only indicate that the shock is still being transmitted. The IEA's head has also warned that the crisis in April will be more severe than in March, as in March there were still some supplies en route pre-war that provided a buffer, but in April the supply losses will be fully realized. If so, the macro market will gradually shift from "shortages driving up prices" to "prices suppressing demand," which is the essence of demand destruction.
Cross-Asset Implications
On a cross-asset level, this shift is crucial. In the early stages of an oil price surge, energy stocks, the dollar, and some inflation-sensitive assets benefit. However, once the market starts believing that high prices will hinder demand, the logic becomes complex: bonds will be torn between inflation concerns and growth concerns, the stock market will see a re-differentiation with "energy and defense relatively outperforming, while consumption and transportation are under pressure," and the dollar will oscillate between safe-haven status and expectations of future rate cuts. Reuters’ global market commentary on April 2 has already reflected this shift: the market was initially briefly optimistic due to the potential easing of tensions, but Trump's speech brought risk assets back to reality. In other words, it's not merely an oil market story now, but a typical stagflation shock rehearsal.
Why "Ending in Weeks" Is Still Insufficient to Calm the Market
The reason is that the macro market trades not only the endpoint but also the path. Even if the war truly ends in two to three weeks, if the Hormuz Strait continues to be disrupted and oil prices remain above $100 for an extended period, the squeeze on transportation, tourism, manufacturing, and household spending has already occurred. Reuters' reports on aviation and LNG show that some industries have begun adjusting their business strategies and demand expectations. This means that the market is not afraid of a permanent shortage, but rather "even a short one is enough to hurt profits, consumption, and growth." That is why high oil prices have more market pricing power than war slogans.
Long-term Narrative
From a longer-term perspective, this crisis reminds the market that the energy shock constraint on the global economy has not disappeared; it was simply underestimated in recent years. The IEA member countries releasing 400 million barrels of reserves in a single move, the U.S. loaning out the SPR, and countries beginning to discuss energy-saving and emergency measures all indicate that policymakers are worried the problem might evolve from market volatility into a growth constraint. If the conflict cools down quickly, high oil prices may manifest more as a violent but reversible macro disturbance; if it persists longer than expected, demand destruction, inflation resurgence, and growth slowdown will occur together, forcing global markets to readjust to asset pricing in a "high energy cost era."
