Canada’s principal equity benchmark opened in negative territory on Monday as market participants continued to assess the outlook for talks aimed at ending the Iran war following a fresh round of military strikes.
Market moves in Toronto
The S&P/TSX 60 fell by 6 points, a drop of about 0.3%, while the broader Toronto Stock Exchange S&P/TSX composite lost roughly 110 points, also down 0.3% on the session. Those declines arrived after the composite had registered a 0.7% gain to 34,758.57 on Friday, and after the index posted a 2.4% advance for May, marking a second consecutive month of gains.
U.S. markets: mixed tone
Across the border, U.S. exchanges displayed a mixed picture that suggested an attempt to extend gains from the prior week, even as renewed strikes in the Middle East dented hopes for a swift ceasefire extension between the U.S. and Iran. By 12:15 ET (16:15 GMT), the Dow was down 153 points, or about 0.3%, the S&P 500 was essentially flat, and the Nasdaq was higher by roughly 40 points, or 0.2%.
Equity sentiment had received a lift from a high-profile product announcement in the semiconductor space. Nvidia unveiled a new processor designed for Windows PCs, a move that fed existing enthusiasm for artificial intelligence-related hardware and software and helped underpin recent market resilience despite geopolitical headwinds.
Geopolitics and military activity
Prospects for an immediate peace accord in the Middle East were tempered by fresh exchanges of strikes. U.S. forces said they struck radar and drone-control targets in Iran after Tehran shot down an American drone over the weekend, the article reported. Iran confirmed it launched an additional retaliatory strike, and Kuwait reported intercepting drone and missile fire. In another theatre, Israel moved to expand control over a part of Lebanon in response to drone launches by Iran-aligned Hezbollah militants.
Political statements accompanied the military activity. The U.S. President emphasized a belief that Iran seeks an agreement as negotiations continue over sticking points such as Tehran’s nuclear program. The White House was reviewing a proposed memorandum of understanding that would reportedly extend an existing ceasefire, call for a resumption of shipping through the Strait of Hormuz, and set out a framework for discussions about Iran’s nuclear ambitions. Iran’s lead negotiator signaled that Tehran would not accept a pact that fails to secure its rights.
Energy and commodities
Against that backdrop, Brent crude futures climbed again. Although the prospect of a U.S.-Iran ceasefire extension has kept prices below recent highs above $100 a barrel, Brent remains elevated relative to levels before the conflict. Market commentators suggested that even if a deal were reached, shipping through the Strait of Hormuz is unlikely to normalize quickly. That expectation, together with Iran’s control of the waterway, supports a geopolitical risk premium in oil markets.
Oil has been central to investor focus since the conflict began in late February. The effective shutdown of the Strait of Hormuz - a key route for about a fifth of global oil and natural gas shipments - sent energy prices higher and raised concerns about potential inflationary pressure worldwide.
Meanwhile, gold prices eased. Traders cited worries that an energy-driven uptick in inflation could prompt central banks to raise interest rates, a dynamic that typically pressures non-yielding assets such as bullion. Market pricing indicated at least one Federal Reserve rate increase this year, according to a Reuters report referencing the CME FedWatch Tool. A firmer U.S. dollar also reduced gold’s appeal for overseas buyers.
Technology and chip sector dynamics
Separately from the geopolitics-driven moves, chipmakers and software names moved on company news. Intel, Advanced Micro Devices and Qualcomm fell in premarket trading after Nvidia revealed a new processor line intended for Microsoft’s Windows platform that will be used in a family of laptops and desktop PCs. The announcement introduces a potential new competitor in the emerging market for AI-capable personal computers.
Software stocks, including Microsoft, showed strength. Nvidia’s chief executive announced the new "RTX Spark" product during a keynote at the COMPUTEX conference in Taiwan on Monday. The RTX Spark family will include Nvidia’s N1X processor - a custom chip developed in partnership with Microsoft and designed by MediaTek - and will be based on the Arm platform. Nvidia said the chips are principally intended to run locally hosted artificial intelligence agents, and that the company worked with Microsoft on the supporting software framework.
Dell’s recent results also supported sentiment into the prior session. The company raised its full-year profit and revenue forecasts, a move that helped underpin the market rally seen on Friday.
What this means for investors
Investors are balancing geopolitical risk and its implications for energy markets against ongoing enthusiasm for AI-related technology. The near-term path for shipping in the Strait of Hormuz, oil supply dynamics and central-bank policy expectations will remain key variables for market direction. In equities, technology hardware and software firms react differently to product innovation and guidance, while energy-sensitive sectors will track developments in the Middle East closely.
Key takeaways
- The S&P/TSX composite and S&P/TSX 60 opened lower as fresh military strikes in the Middle East clouded ceasefire prospects.
- U.S. markets traded mixed, with the Dow down, the S&P 500 flat and the Nasdaq higher, while Nvidia’s new PC-focused processor lifted AI-related market sentiment.
- Brent crude rose on ongoing geopolitical risk around the Strait of Hormuz; gold fell as rate-hike expectations and a stronger dollar weighed on bullion.
Risks and uncertainties
- Renewed military exchanges between the U.S. and Iran, and related strikes in the region, could sustain elevated oil prices, affecting energy and inflation-sensitive sectors.
- Failure to reach a ceasefire or a memorandum of understanding acceptable to both sides would extend shipping disruptions through the Strait of Hormuz and maintain a geopolitical premium in markets.
- Monetary-policy expectations - including the market-implied prospect of at least one Fed rate increase this year - and a firmer dollar could continue to pressure non-yielding assets such as gold.
Investors and analysts will watch further developments in diplomatic talks, additional military activity, and company-level announcements for clearer direction on market positioning.