Futures connected to Canada’s primary stock index moved higher on Wednesday, supported by hopes that the conflict involving Iran may be drawing closer to a halt. By 07:26 ET (11:26 GMT) the S&P/TSX 60 index standard futures contract had gained 12 points, or 0.6%, with the commodity-heavy Canadian benchmark receiving partial support from a modest rise in gold prices.
The broader TSX finished the first quarter up 3.3%, and the recent positive momentum stretched into a seventh consecutive session. That said, the index still recorded a decline of 4.6% for the month of March, a period during which global markets were pressured by the escalation of violence in the Middle East.
Across the border, U.S. stock futures were also firmer. As of 06:11 ET (10:11 GMT), Dow futures were up 220 points, or around 0.5%, S&P 500 futures had risen by 31 points, or approximately 0.5%, and Nasdaq 100 futures were higher by 152 points, or about 0.6%.
The gains on Wall Street on Tuesday were driven in part by growing market optimism that the U.S. might step back from its joint strike posture with Israel against Iran, a confrontation that had widened and threatened to draw in neighboring countries. That optimism followed reporting that quoted a U.S. president telling aides he was open to withdrawing from the conflict even if the Strait of Hormuz remained largely obstructed to tanker traffic. In subsequent comments to reporters and in social media posts, the president effectively confirmed that reporting, analysts at Vital Knowledge said in a client note.
In addition, the U.S. leader reiterated that negotiations with Iran were proceeding well, a claim that Tehran has frequently disputed. Iran did acknowledge exchanges of messages between the two sides, and the Iranian president said that the country possessed the "necessary will" to end the war if it received guarantees that it would not be attacked again.
Analysts at ING observed that sentiment was stabilizing as equities recovered and credit spreads narrowed. They noted that amid mixed messaging there were already indications that the U.S. president was seeking an exit path, and that markets responded to headlines indicating that the Iranian president might be prepared to end the conflict, while still maintaining Iran’s stipulated conditions.
Oil prices eased on the prospect of a near-term cessation of hostilities, briefly pushing benchmark crude back below $100 per barrel. June Brent futures were last down 0.5% at $103.35 a barrel. After the outbreak of the conflict in late February, Brent had spiked to nearly $120 a barrel, up from pre-conflict levels of roughly $70 a barrel.
U.S. West Texas Intermediate futures fell by 1.2% to $100.16 per barrel. The strain on supplies had been driven in large part by the effective closure of the Strait of Hormuz, a strategic waterway along Iran’s southern coast that carries about a fifth of the world’s oil. Persistent threats of Iranian drone or missile strikes on vessels had reduced tanker traffic to a trickle, raising concerns about the availability of energy supplies to nations globally.
Those supply worries had raised the prospect of an energy-driven inflation shock that could push central banks toward interest rate increases. Expectations that policymakers might respond to a spike in energy-driven inflation had previously supported higher government bond yields and exerted pressure on equities.
Gold extended its advance for a fourth straight session in European trading on Wednesday. The drop in oil helped to temper some of the immediate fears about an inflation surge stemming from energy shortages, a dynamic that can weigh on non-yielding assets such as gold in a rising-rate environment. A softer U.S. dollar also provided a tailwind for the metal, making it relatively more attractive to overseas buyers; the U.S. dollar index was last down 0.5%.
Laurence Booth, Global Head of Markets at CMC Markets, commented that with gold’s sensitivity to the dollar and to broader risk assets elevated, any stabilization in geopolitical tensions could allow prices to resume an upward trajectory, underpinned by underlying structural demand.
Market participants are weighing the possibility that diplomatic or de-escalatory signals could reduce near-term energy risk, ease inflation concerns tied to oil, and improve risk appetite across equities. At the same time, observers remain attentive to political messaging from leaders and to developments that could reverse the recent thaw in risk sentiment.
Overall, the session reflected a cautious rebound in risk assets driven by reports and statements suggesting potential movement toward ending hostilities, movements in commodity prices that are central to the Canadian index profile, and cross-asset reactions to shifting perceptions of geopolitical risk.