By the time most traders reached their desk on Wall Street, it was over. Iran retaliated. Oil surged. Havens jumped. Then it all just faded away.

Market watchers booted up their terminals to find investors rediscovering their taste for risk across everything from equity volatility to currency options. Their bet? The Iranian missile strikes on U.S. bases in Iraq overnight were as much escalation as we’ll get, and it paves the way for a revival of the new-year rally.

The U.S. open served as confirmation: The S&P 500 gained 0.3% as of 10:07 a.m. in New York. Contracts on both the Nasdaq 100 and the Dow Jones Industrial Average also advanced.

Just hours ago it was a different story. News of the Iranian attack prompted a bout of risk aversion and sharp algo-driven moves in Asia. Havens including Treasuries, gold and the yen surged alongside crude; riskier assets like stocks and equity futures were dumped.

Yet as the session wore on, Iran made clear it didn’t want a war, and markets regained their composure. U.S. index futures reversed losses to trade in the green, the havens erased gains and even oil turned lower. After plunging to a one-month low overnight, 10-year Treasury yields are rising.

All told the underbelly of risk markets is flashing one clear message: the current U.S.-Iran clash has likely reached a climax.

“The market response this morning is I think correct,” Rupert Harrison, multi-asset portfolio manager at BlackRock Inc., said on Bloomberg Television. “All the incentives for the main players here are not to allow an escalation that seriously impacts for example oil supply which is going to be the main issue for markets. And therefore in all likelihood this is going to be a de-escalation from here.”

The dollar-yen rate’s swings on Wednesday epitomized the whipsawing day in markets. The Japanese currency first surged as algorithmic machines seized on headlines announcing the Iranian reprisal over the U.S. killing of an military commander, before quickly reversing. The dollar-yen is at 108.77 versus a low of 107.7 in the aftermath of the attack, and the prior close of 108.44.

Wild moves in other key markets also reversed. Gold is around $1,570 versus yesterday’s close of $1,574 and an overnight high of $1,611. Benchmark 10-year Treasuries are at 1.831% having tumbled to as low as 1.703% during the Asian session versus the Tuesday close of 1.82%.

Both sides have issued mollifying rhetoric, with Foreign Minister Mohammad Javad Zarif adding Tehran is not seeking war. President Donald Trump tweeted “all is well” and the U.S. confirmed on Wednesday no Americans were killed in the attacks.

Oil simply couldn’t sustain its momentum. Despite crude’s 2% gain over the last three sessions and a rush of inflows late last week, exchange-traded products tied to the commodity are seeing a spike in short interest, a sign some traders are expecting the rally to fade. A leveraged note -- ticker UWT -- saw bearish positioning jump to the highest since early 2018 as of Monday, Markit data show.

In another signal that investors aren’t pricing in a disruption to oil supply, Brent contracts have dropped alongside WTI, the U.S. price. Historically, the former tends to gain during attacks on infrastructure in the Middle East.

Volatility in emerging-market currencies has held steady, even as investors seek the safety of the dollar or yen. And while the S&P 500 has lost 0.6% over the last three sessions there are few signs traders are wagering on much deeper declines.

The Cboe put-to-call ratio for stocks, which tracks volume in bearish versus bullish bets, on Tuesday fell near a 2014 low recorded in late December. Short interest in the world’s largest exchange-traded fund, which tracks the U.S. benchmark, dropped to a two-year low on Monday, according to the latest data from IHS Markit Ltd.

While equity hedging costs have climbed slightly, as seen in the so-called skew, the volume of protective puts outstanding -- which bet against the S&P 500 -- have barely budged relative to bullish calls.

There also appears to be little conviction that the VIX will keep swinging from here. The Cboe VVIX Index, a measure of options prices on the gauge, has been drifting downward since the start of the year, suggesting traders aren’t expecting any outsized moves. Similarly, open interest in call options on the VIX is falling, with traders selling contracts over the last several sessions.

“It’s noteworthy that Iran’s response was to target a U.S. military base, and not target sites that would have directly impacted the supply of oil,” Mark Haefele, chief investment officer at UBS Global Wealth Management, wrote in a note. “Outside a severe disruption scenario, we do not believe that oil prices can sustain at current levels.”