but market is forward looking right? everyone knows that oil is going higher which will compress margins, lead to inflation but it still not showing in stock prices, why?

Exactly the right tension to probe. There are six reasons markets can "know" something and still not price it in.

1. The market doesn't know how long the shock lasts — and duration is everything

The market isn't ignoring the oil shock. It's making a probability-weighted bet that it resolves. The market's April rally embedded a meaningful assumption that the Iran conflict would resolve relatively quickly and that energy prices would normalize. If oil is at $105 for three months and then falls back to $75, the earnings damage is manageable — maybe one bad quarter. If it stays above $100 for 12-18 months, it's a different story entirely. The market is pricing the former scenario. The bears think the latter is more likely. Neither side knows for certain, and until there's resolution, stocks stay elevated because enough investors believe the disruption is temporary. Crestwood Advisors

2. There is no better alternative for large pools of capital

This is the most underappreciated reason. Institutional investors — pension funds, sovereign wealth funds, insurance companies — have trillions of dollars that must be deployed somewhere. Bond markets are selling off, with 10-year yields at 4.6% and rising. Real estate is illiquid. Cash earns less than inflation in real terms. Commodities are volatile. So even expensive equities remain the least-bad option for capital that cannot sit idle. The money doesn't leave the market just because it sees risks — it stays until there is somewhere better to go. This is sometimes called TINA — "There Is No Alternative" — and it keeps floors under equity prices even when fundamentals deteriorate. Yahoo Finance

3. Positioning and momentum are self-reinforcing in the short term

Investor sentiment remains very optimistic overall, but a peek under the hood shows the broader market is lagging the largest tech companies — a divergence that is increasingly worrying some investors as it suggests a fragile rally. When a market is being held up by momentum in a handful of large stocks, fund managers who are underweight those stocks underperform their benchmarks. That forces them to buy — not because they think the stocks are cheap, but because not owning them is a career risk. This creates buying pressure entirely disconnected from fundamental analysis. CNBC

4. Corporate earnings have not yet confirmed the damage

Markets reprice aggressively when earnings actually disappoint — not when analysts expect them to disappoint. Of the 211 S&P 500 companies that cited "Middle East" on their Q1 earnings calls, only a small number actually lowered EPS guidance for 2026. Until companies formally cut guidance, portfolio managers can argue the damage is speculative. The moment Q2 earnings start coming in below expectations — which probably happens in July — the market will have concrete evidence rather than forecasts. That's typically when repricing accelerates. FactSet

5. The AI narrative is acting as a counterweight

The market is simultaneously holding two thoughts: oil is inflationary and bad for margins, but AI is deflationary and good for productivity. The second belief is partially offsetting the first in investors' minds. If AI genuinely delivers productivity gains — meaning companies can produce more output with fewer people and lower costs — it could compress margins less than historical oil shocks would predict. This isn't irrational. It's a genuine uncertainty about which force dominates. The market is currently betting AI wins. That bet may prove correct or incorrect, but it explains why the traditional oil-shock playbook isn't being followed mechanically.

6. The lag means the pain is still ahead — not behind

Energy Aspects' Amrita Sen captured this precisely: "This has been the biggest conundrum for us — if anything, we think oil should be higher and the equity market should be a lot, lot weaker. They are not going to be great nearly to the same extent in Q2." CNBC

Markets are forward-looking but they discount probabilities, not certainties. The sequence that has to happen — oil stays high → Q2 margins compress → companies cut guidance → earnings estimates fall → multiples compress — takes 3-6 months to fully play out. The market can see the chain coming but bets on each link breaking until it doesn't.

The honest summary

Markets being "forward looking" doesn't mean they price in every risk immediately. It means they incorporate probability-weighted expectations about the future. Right now the market is assigning a high probability to: the war resolving, the Fed not hiking, AI saving margins, and the consumer staying resilient. If any two of those assumptions prove wrong simultaneously, the repricing can be sudden and severe — because the market won't gradually drift down, it will gap down when the narrative breaks.

That's what Niles means when he says "be nimble." The risk isn't that the market doesn't know about the oil shock. The risk is that it's one catalyst away from deciding its assumptions were wrong — and markets move much faster in that direction than they did getting to these levels.