The world - and shares - will recover from disasters if given time

In the fields, the grass is greening, much to the delight of the alpacas. They are quite smug, having mercifully gone all clear through two consecutive bovine TB tests.

So life is good and all is well with the world. Except of course it isn't: events in Japan have been truly terrible and Libya is an awful demonstration of what a dictator is capable of doing to his own people. All is definitely not well with the world; we all share the same emotions as we witness such horrors.

But these are the financial pages, we have to consider more prosaic stuff. Global events are reflected in a gallon of diesel now costing nigh on 6.70 and stock markets doing what they do best: wobbling. Does any of this make sense? Yes and no seem to be the answers.

Lost Libyan oil supply can be made up by Saudi Arabia, but the overall supply/demand balance is tight. Global oil trading patterns have to change and this is disruptive. The risks of further instability are real, as is the risk of a genuine supply shortfall.

The current price of crude may well be a bit of a spike, but to have all this going on without a spike in the price is unimaginable. And we should see it for what it is - another wake-up call that we have to wean ourselves off this stuff. The oil price is a market signal, pay it some respect.

Japan is another matter, a truly mega disaster, and in its wake there's the predictable chorus of (financial) doom and gloom. Stock markets have tanked, as they usually do, and it's a great time for pessimists.

But invariably these reactions are proved wrong. Granted, a nuclear power station running amok is a tad beyond most of our experience, but this is not another Chernobyl.

Disasters bring mayhem to the immediate local economy; normal activity stops, GDP is effectively zero. Sometimes the best reaction is to abandon the area lest the disaster repeats itself, in which case activity - housing the displaced, replacing lost production and so on - is generated elsewhere.

More often populations regroup and rebuild. Either way, within a period of usually just a few months, local GDP is boosted by reconstruction and it tends to remain above its prior trend for an extended time.

It is clear that there will be some disruption to global supply chains. Building a typical car takes some 5,000 components, many of them pretty basic and often made by small factories in places like north-east Japan. Globally integrated supply chains create international interdependence and can transmit sudden supply shocks in unexpected ways.But they also offer historically unprecedented flexibility - what was being made in a small plant in Japan could just as well be made in Glenrothes, or Mumbai. Loss of a power station works wonders for the order books of a generator manufacturer; coins always have two sides.

Now, I am not trying to minimise dreadful events, nor to argue that disasters are in some sense self-financing. There is always a cost - and alongside multiple human tragedies there are huge financial losses.

Nuclear generation has not become any easier to sell to sceptical populations over the past ten days. Persistence with dirty and expensive power generation will have genuine financial (and environmental) costs. But stock markets have not sat down and done a careful, rational analysis. Instead, stocks have been dumped in a knee-jerk way, generally by punters at the margin (aka hedge funds).

It may seem distasteful to write of massive human tragedy and stock markets on the same page, so I won't push the point too far beyond noting that irrational markets invariably create opportunities. No apologies, though, for urging you not to chase the markets down; sit it out, it always makes sense.

• Peter Bickley is a consultant economist