The market rallied yesterday on headlines about Iran and Oman drafting a protocol for safe navigation through the Strait of Hormuz. Oil dropped. Stocks went up. Everyone breathed a sigh of relief.

Except there's a problem: the deal doesn't apply during wartime. And in case you missed it, Iran says it's currently at war.

According to Tasnim News, Kazem Gharibabadi, an Iranian official, made this crystal clear: "Iran is currently in a state of war and it is unrealistic to expect peacetime rules to apply under such conditions."

He added that "restrictions and limitations have naturally been imposed as a result of the conflict," referring to U.S. and Israeli forces and their supporters.

So what exactly did the market rally on? A future agreement that will take effect after the war ends. Which is great, assuming the war ends. But right now, oil tankers are still at risk, supply is still disrupted, and nothing has actually changed.

This is classic market behavior: rally first, read the fine print later. Algorithms picked up the headline "Iran-Oman protocol for Hormuz Strait" and bought everything in sight. No one bothered to check whether the protocol actually does anything in the current situation. It doesn't.

And here's the thing about Hormuz: it's not just any shipping lane. About 20% of global oil supply passes through that strait. If Iran decides to actually restrict traffic, or if tanker insurance costs spike because of war risk, oil prices go higher. A lot higher.

We've already seen oil hit $110 a barrel this week. That's not a normal price. That's a price that assumes significant supply risk. And nothing in this announcement reduces that risk.