The “Cracks” Behind U.S. Stock New Highs: Why Is the Market Celebrating While the Finance Minister Is Afraid?

This week, the S&P 500 index set a historical high of 7022 points, seemingly wiping away the shadow of war entirely. But the finance ministers from ten countries did not breathe any easier because of this. Nobel laureate Friedman’s theory reminds us that financial markets repair “expectations,” while the damage to the real economy—just now beginning to be settled.

Markets move at the speed of light; the real economy moves at a turtle’s pace

The stock market trades in “expectations of expectations.” As soon as signs of a ceasefire appear, money will, in the blink of an eye, price in the “peace dividend” into stocks. But the bills of the real economy—pipelines destroyed by explosions, shipping routes cut off, logistics costs pushed higher—take months to show up in corporate earnings reports and CPI data. This is the “long and variable lag effect” that Friedman emphasizes. Now, the bills are emerging, one by one.

The three “smoking” real bills

1. The hidden inflation “long tail”
Although oil prices have fallen back to 94 dollars, the earlier high oil price of 115 dollars has seeped into fertilizers, transportation, and all industrial goods like a toxin. Federal Reserve officials warn that core inflation may remain around 3% for the rest of 2026. This means interest rates will be kept at high levels for a longer time—U.S. stocks are built on a foundation of funding costs higher than before the war.
2. Distorted physical flows
Because Middle East supply is disrupted, the amount of aviation kerosene Europe plans to import from the United States in April is expected to reach a record high. Being forced to “go far and wide” across half the globe to find fuel in itself is a loss of efficiency and a push factor for costs.
3. The 58 billion-dollar “broken window trap”
The war caused losses of about 58 billion dollars to energy infrastructure. Repairing this bill will not add any new capacity; it will only tie up global equipment and engineering resources, further driving up construction delays and inflation pressure. This is a net consumption, not a growth engine.

Conclusion

The U.S. stocks that hit new highs this week are stepping on a foundation of higher funding costs than before the war. The ledgers of the real economy never lie; they just move more slowly. When the market celebrates, the finance ministers’ concerns precisely remind us that while it’s easy to fix prices, fixing the fractured global supply chain and the inflation foundation is far from simple.
#美伊局势和谈与增兵博弈