Futures linked to Canada’s main stock index strengthened on Monday amid reports that Iran had halted its attacks on Israel, a development that appeared to ease some of the recent geopolitical tensions affecting markets.
By 08:52 ET (12:52 GMT), the S&P/TSX 60 index standard futures contract had advanced by 13 points, or 0.6%.
Sentiment on Canadian equities had soured on Friday when the Toronto Stock Exchange’s S&P/TSX composite index posted its largest one-day decline since February 12. That drop was attributed to weaker prices for gold and silver alongside rising market expectations that the Federal Reserve could raise interest rates later this year.
Investors in Canada are also watching a Bank of Canada interest rate decision scheduled for Wednesday. Market participants will attempt to discern policymakers’ views on where borrowing costs may head through 2026, a key input for corporate financing costs and the outlook for domestic demand.
U.S. futures and prior session moves
U.S. index futures climbed in early Monday trading. At 09:04 ET (13:04 GMT), Dow futures were up 0.2%, S&P 500 futures had risen 0.9%, and Nasdaq 100 futures jumped 1.8%.
Those gains followed a difficult session on Wall Street on Friday. A robust U.S. employment report for May — which showed stronger-than-expected payroll growth — reinforced views that the Federal Reserve may opt to lift interest rates this year to counter inflationary pressures linked in part to tensions in the Middle East. That dynamic pushed government bond yields higher and weighed on equity sentiment.
The S&P 500 retreated by 2.6% in the prior session, marking its worst day of the year to date and ending a run of nine consecutive weekly gains. The Nasdaq Composite also fell sharply, with much of the selling reflected in semiconductor-related stocks. The Philadelphia Semiconductor Index plunged by more than 10%, a move that market participants linked to investor concerns about the implications of softer-than-expected quarterly results from Broadcom for the AI-driven chip demand narrative.
Despite the broader weakness in equity markets late last week, chip-related names were firmer ahead of Monday’s open. Broadcom, Micron and Nvidia were all reported to be higher in pre-market trading.
Iran and Israel exchange strikes; reports of pause
Iran’s armed forces, citing the state-run Fars news agency, announced an end to military operations against Israel. That statement arrived after a fresh round of strikes exchanged between Iran and Israel extended into Monday, actions that threatened to unravel a fragile, U.S.-brokered ceasefire and dim the prospects for a broader Middle East agreement.
The recent strikes were reported to be the first direct attacks between Iran and Israel since the shaky truce took effect in April. Media coverage indicated the latest exchange began with an Israeli strike on Beirut in Lebanon. Israel has been engaged with Iran-backed Hezbollah militants in Lebanon, though until recently the conflict had not escalated beyond relatively low-intensity skirmishes.
According to reports, Tehran then launched strikes of its own, prompting an Israeli retaliation that the Israeli military said struck targets in central and western Iran. On Monday, Israeli authorities reported alarms warning of further waves of attacks and said they intercepted a ballistic missile launched from Yemen, as reported by the Wall Street Journal. Iran’s Islamic Revolutionary Guard Corps also reported attacks on airbases in southern Israel, citing the same outlet.
In a public comment, U.S. President Donald Trump said the strikes would not affect ongoing U.S. efforts to negotiate a peace deal with Iran. Separately, an Iranian official with knowledge of talks told MS NOW that a broader agreement was "no longer feasible at this stage."
Energy markets and the Strait of Hormuz
Brent crude pared earlier gains to trade up 1.1% at $94.10 a barrel on Monday. That level remained below previous peaks above $100 a barrel but was still well above pre-war price levels.
Market participants have been closely tracking oil prices because a significant spike in crude would likely feed into broader price growth across economies. One of the factors pushing energy prices higher has been the ongoing closure of the Strait of Hormuz, a strategic waterway off Iran’s southern coast through which roughly a fifth of the world’s oil and liquefied natural gas passes.
Oil prices have been volatile in recent weeks amid speculation that the U.S. and Iran may be close to reaching a deal to reopen the strait and allow tanker traffic to resume. At present, Iran has maintained control over access to the waterway while the U.S. has kept in place a blockade of Iranian ports.
Those supply-side constraints have stoked concerns that energy-driven inflation could build, which in turn has amplified expectations that central banks might raise interest rates in response. The U.S. nonfarm payrolls report, which showed solid job gains, further reinforced that view.
Investors will watch U.S. consumer and producer price data due later in the week for additional signals on the trajectory of inflation and the likely policy response from central banks.
Gold and safe-haven flows
In the precious metals market, spot gold inched down 0.1% to $4,325.40 an ounce. Gold had tumbled more than 3% on Friday as market participants reassessed the path of U.S. monetary policy following the unexpectedly strong labor market report.
The May payrolls data — which recorded 172,000 new jobs and an unemployment rate that held at 4.3% — pushed up Treasury yields and strengthened expectations for an interest rate increase this year. Because gold does not pay interest, that higher-rate environment tends to reduce its relative appeal. A firmer U.S. dollar has also made the metal costlier for overseas buyers and chipped away at demand.
What to watch next
Key near-term items for market participants include the Bank of Canada interest rate decision on Wednesday and U.S. consumer and producer price releases later in the week. Both the central bank decision and U.S. inflation data are likely to influence perceptions of future policy tightening and, consequently, the outlook for equities, fixed income and commodities.
Given the confluence of geopolitical developments in the Middle East, energy-market dislocations and shifts in rate expectations signaled by labor market strength, investors remain attentive to how these forces interact to affect inflation and economic activity.