The market and the IMF are looking at the same risk and drawing very different conclusions.

The market and the IMF are looking at the same risk and drawing very different conclusions.

The S&P 500 hit a record high on Friday. Earnings have held up. The recent rebound was one of the fastest on record. The market’s message is simple: this shock will pass, and it will pass quickly.

The IMF is telling a different story. In its scenarios for a war-driven closure of the Strait of Hormuz, even the base case means slower growth and higher inflation. In the harsher cases, the trade-off gets worse: weaker growth, stickier prices, and less room for central banks to respond.

Both reactions have logic behind them.

Markets are responding to what has worked since 2020. Sharp shocks have often faded faster than feared, and buying into the panic has usually paid off.

The IMF is focused on what has changed. Labour markets are softer. Central banks have less room for error. And after the inflation shock of 2022, expectations may react faster when energy prices rise again.

That leaves three broad paths for H2 2026.

If the conflict eases soon and energy prices fall back, the rally holds.

If it drags through the summer, inflation picks up again and margins start to tighten. That is when the earnings resilience story starts to wobble.

If disruption runs into 2027, policymakers are back in a stagflation bind.

At a record high, the market is priced for the cleanest outcome. The risk is a world that lands somewhere worse than the best case and is still being treated as noise.