Commit What You Know of Iran to the Flames.

The article examines market reactions to recent hostilities in Iran through the lens of David Hume’s 18th-century philosophical skepticism, particularly his "problem of induction," which questions assumptions about causation based on past observations. It highlights how investors often rely on historical patterns of geopolitical shocks and oil price spikes, which typically cause short-term market selloffs followed by recoveries if conflicts resolve quickly, as seen in past events like the 1973 Yom Kippur War and the Covid-19 outbreak. The current calm in markets reflects an assumption that the Iran conflict will be contained, though the article notes this is uncertain and depends on political and military factors such as U.S. election dynamics and Iran’s capacity to sustain conflict. Ultimately, the piece underscores the difficulty of predicting market outcomes amid geopolitical crises and the limits of inductive reasoning in such contexts. [Extracted from the article]