Markets are a frog in boiling water on Iran-Israel

Despite all this, the markets' reaction has been relatively tame and contained. Rather than price the market implications of a durable escalation in geopolitical threats and a fatter tail risk of substantially higher oil prices for long, traders have been quick to fade the initial moves in many asset prices. This includes oil, by far the most sensitive international price, which is today well below where it closed before Iran first retaliated for Israel's consulate attack. These prices have also failed to maintain their initial move up on the latest news of Israel's response. The price of oil is well…