The markets have a peculiar way of pricing in risk. Sometimes it is a gradual shift in bond yields. Other times it is a sudden, violent eruption of volatility. Today, we witnessed the latter, not on the trading floor, but on the slopes of Mount Lewotobi in Indonesia.

A British-led hiking party, comprising 12 Britons and 8 Indonesian guides, was caught in a sudden volcanic eruption that sent a plume of ash and pyroclastic material 3,000 metres into the sky. The group was descending from a ridge when the volcano began spewing molten rock and ash. They ran for their lives, taking cover in a cave as superheated gas and rock fragments swept past their position.

Fortunately, all members of the group survived, with three sustaining minor injuries. The narrow escape is a reminder that even the most carefully calculated expeditions can be upended by forces beyond human control. Much like the bond market, which can be lulled into complacency by low volatility before a sudden spike forces traders to scramble for cover.

Geologists have long warned of increased activity in the ring of fire, but the timing and severity remain unpredictable. The Indonesian government has issued a warning for residents to evacuate within a 5-kilometre radius, but such measures are costly and often ignored. The incident will likely reignite debates about the cost of disaster preparedness and the allocation of government funds.

From a fiscal perspective, the question is whether Indonesia's government spending on volcano monitoring and early warning systems is sufficient. The answer, as with most government programmes, is a resounding no. The country's budget deficit has narrowed, but capital expenditure on infrastructure and disaster mitigation remains inadequate. The eruption serves as a stark reminder that the true cost of austerity often materialises in the most dramatic fashion.

For the hiking group, the immediate concern is recovery and return to the UK. But for the City of London, the event is a footnote in a week dominated by gilt yields and inflation expectations. The Bank of England's Monetary Policy Committee will note the disruption to global travel and potential inflationary pressures on commodities, but the impact is likely negligible.

What matters more is the broader trend: natural disasters are becoming more frequent and severe, courtesy of climate change. This will place a growing burden on government finances, driving up debt levels and potentially affecting sovereign credit ratings. Investors are not pricing this in adequately. They are fixated on central bank policy in the short term, ignoring the long-term structural risks.

In the meantime, the survivors of Mount Lewotobi will count their blessings. They gambled with altitude and came out ahead. For the rest of us, the gamble is on whether we can manage fiscal risk before the next eruption, whether it is volcanic or financial.

The bottom line: markets abhor uncertainty. But sometimes the uncertainty is not in the data; it is in the ground beneath our feet.