Futures associated with Canada’s main equity benchmark ticked down modestly on Monday as investors digested a setback in attempts to end the conflict between the United States and Iran. The move came after U.S. President Donald Trump expressed apparent disapproval of Iran’s response to an American peace proposal.
By 08:57 ET (12:57 GMT), the S&P/TSX 60 index standard futures contract had eased by 1 point, or roughly 0.1%.
That small pullback contrasted with a stronger finish for Canadian stocks last week. The S&P/TSX composite index closed up 0.7% at 34,077.76 on Friday, marking the index’s highest closing level since April. The composite has now recorded gains for two straight weeks. Market participants attributed recent momentum to a combination of softer-than-expected employment statistics, which tempered near-term expectations for interest rate hikes, alongside generally solid corporate earnings that have lent support to investor sentiment.
U.S. futures and equity tone
Across the border, U.S. futures were broadly muted in early trading. At 08:47 ET (12:47 GMT), Dow futures were down 0.1%, S&P 500 futures were lower by 0.2%, and Nasdaq 100 futures slipped 0.3%.
Despite the early softness in futures, the benchmark S&P 500 and the technology-focused Nasdaq Composite both recorded fresh record closing highs on Friday, extending a strong run into a sixth consecutive week.
Market momentum has been underpinned in part by expectations that the Trump administration is searching for a way to bring a more-than-two-month conflict with Iran to an end - a development investors see as reducing the risk of prolonged disruption to global trade and commodity flows. At the same time, traders continue to pay attention to heavy, ongoing capital spending by major technology firms on data center capacity to support artificial intelligence - a factor that has helped buoy the technology sector.
"For stocks stateside, the bull case is simply one that’s too robust to fight right now, as geopolitical optimism combines with stellar earnings growth, and a return of euphoria around the AI theme," said Michael Brown, Senior Research Strategist at Pepperstone, in a note. "Unless and until any of those factors shift, the path of least resistance should continue to lead higher, with dips remaining relatively shallow for now, and likely being used as buying opportunities by most."
Diplomacy stalls and energy risks
Tensions in the Middle East remained front and center after Iranian state media said Tehran issued a response to a U.S. plan intended to end more than two months of hostilities. Tehran’s reply emphasized concluding the fighting on all fronts and demanded compensation for war damage. Iran also reiterated that it controls the Strait of Hormuz - a narrow but vital maritime passage off the country’s southern coast through which about a fifth of the world’s oil usually transits. The passage has been effectively shut during the conflict and is currently blockaded by both the U.S. and Iran, according to the reporting.
An unverified headline on Monday cited the Tasnim News Agency as saying Iran had deployed deep-roaming submarines in the strait. Within hours after Iran’s apparent counteroffer, President Trump wrote on social media: "I don’t like it - TOTALLY UNACCEPTABLE." No additional details were supplied.
The U.S. had proposed an immediate end to the fighting, followed by more detailed negotiations on key matters including Iran’s nuclear program. An Iranian spokesperson waved away Mr. Trump’s seeming rejection, saying Tehran was not seeking to secure the "satisfaction of others" and was primarily focused on "national interests and legitimate rights," the Wall Street Journal reported.
In response to the latest diplomatic setback, oil prices moved noticeably higher. Brent crude futures for July delivery rose 2.9% to $104.24 a barrel, while U.S. West Texas Intermediate futures for June delivery gained 2.9% to $98.20 a barrel.
Gold, the dollar and inflation focus
Gold fell even as energy-linked inflation concerns remained elevated. Bullion has faced headwinds during the conflict as markets anticipated that higher energy costs could stoke inflation and push central banks toward tighter policy, an environment that typically weighs on non-yielding assets like gold. Concurrently, the U.S. dollar strengthened as investors sought refuge in the greenback amid the geopolitical uncertainty. A firmer dollar can reduce demand for gold from overseas buyers by making the metal more expensive in local-currency terms.
Beyond immediate geopolitical developments, market attention this week is expected to center on incoming U.S. inflation data, which investors will use to gauge the inflationary impact of the conflict, and President Trump’s scheduled visit to China later this week. Discussions in Beijing with President Xi Jinping are anticipated to cover Iran, trade and global energy security.
Selected corporate news
In company-specific headlines, a flagship private-credit vehicle managed by KKR that is widely held by individual investors posted a steep first-quarter loss of $560 million, a result driven by a number of loans moving into default. The associated write-down at FS KKR Capital was stated to be roughly equivalent to 10% of the firm’s net asset value and has raised concern about the health of the broader private-credit sector.
Homebuilder Beazer Homes USA Inc. saw shares jump after media reports indicated that Dream Finders Homes Inc. was nearing an announcement of a $704 million bid to acquire the company.
Software firm Monday.com also rallied after the company raised its full-year guidance for revenue and adjusted operating income.
Market takeaway
Investors entered the week balancing the prospect of diminishing geopolitical risk - should diplomacy succeed - against the tangible near-term disruptions that have already affected energy trade routes and commodity prices. Softer employment data and positive corporate earnings helped underpin risk assets last week, but the trajectory of oil, the dollar and inflation readings will likely sway sentiment in the days ahead.
Given the current mix of diplomatic uncertainty, commodity-market sensitivity and upcoming U.S. economic releases, market moves may remain driven by short-term news flow even as underlying equity indexes exhibit resilient trends.