The Persian Gulf is in an unstable disequilibrium. There has been no lasting deal to reopen the Strait of Hormuz, because the United States and Iran remain far apart in their demands, with the Iranians holding more leverage than President Donald Trump ahead of the US mid-term elections this November. In the absence of a full deal, renewed skirmishing was highly likely, reflected in the growing risk of a return to full-blown warfare.

Still, equity markets did climb higher on the hope that a temporary ceasefire would lead to a full deal, and market reactions to the latest re-escalation of tensi...