Futures tied to Canada's primary stock benchmark fell sharply on Monday as investors reacted to a renewed escalation in the Middle East, with fighting between U.S. and Israeli forces on one side and Iran on the other showing few signs of abating.
By 08:01 ET (11:46 GMT), the S&P/TSX 60 index standard futures contract had declined by 20 points, equal to a 1.1% drop. The pullback came as markets weighed the prospect that rising energy costs and regional instability would ripple through global inflation and growth metrics.
Across the region, air strikes and counterstrikes have intensified, with bombardments striking critical infrastructure in multiple countries, including major oil producers in the Gulf. Those developments pushed crude oil prices sharply higher before some gains later moderated.
Commodities and the TSX
The S&P/TSX composite, which carries a heavy commodity weighting, has retreated from recent record highs amid investor concern that the jump in oil could rekindle inflationary pressure. A stronger oil market is widely seen as a potential headwind for rate-sensitive sectors and for consumer spending if higher pump prices filter through.
U.S. futures tumble as oil pressure mounts
U.S. equity futures also moved sharply lower. At 06:15 ET (10:15 GMT), Dow Jones Futures had fallen by more than 540 points, or about 1.1%; S&P 500 Futures were down roughly 70 points, or 1%; and Nasdaq 100 Futures declined about 270 points, or 1.1%.
Wall Street's main averages had closed the previous trading week lower, each down at least 1%, as investors digested the implications of intensified fighting in the Middle East for the broader economy.
Crude surges and inflation concerns
Crude prices rose sharply after the weekend's escalation. U.S. benchmark West Texas Intermediate crude climbed near $120 a barrel amid fears of supply disruptions and threats to shipping through the Strait of Hormuz, a critical conduit for global oil shipments. Earlier in the session oil moved above $100 a barrel.
The surge in oil has raised concerns among investors that a renewed energy shock could push inflation higher and curb household spending in the United States. Policymakers could face a more complicated outlook if price pressures remain elevated even as growth shows signs of moderating.
International Monetary Fund head Kristalina Georgieva warned in a keynote address in Japan that a protracted 10% rise in crude could translate into a 0.4-percentage-point increase in global headline inflation, urging policymakers to "think of the unthinkable and prepare for it." That comment came against the backdrop of recent soft U.S. labor data, which had already renewed questions about the strength of the American job market.
Economic calendar and data watch
The U.S. economic calendar was light on Monday, but major releases loom later in the week. Investors will watch the monthly U.S. consumer price index on Wednesday, a key gauge of inflation, followed by the personal consumption expenditures price index on Friday - the Fed's preferred inflation measure - alongside a tracker of job openings.
Gold's pullback amid dollar strength and oil moves
Gold gave back some of its gains as flows favored the dollar and oil. At 07:50 ET, spot gold had fallen 1.6% to $5,087.14/oz, while gold futures were down 1.3% at $5,093.85/oz. Earlier in the session spot gold touched a low of $5,015.23/oz.
Although the yellow metal has benefited from haven demand and remained above the $5,000-an-ounce level, concerns that rising energy-driven inflation could prompt a more hawkish stance from major central banks have tempered its advance.
Political developments
The conflict has also seen political developments within Iran: Mojtaba Khamenei was named the country’s new supreme leader following the assassination of his father, Ali Khamenei. Mojtaba, characterized in reporting as a hardliner and described by President Donald Trump as "unacceptable," is expected to continue a confrontational posture toward the West.
Separately, President Trump commented on Sunday evening that the rise in oil prices was an acceptable outcome of military action directed at Iran's nuclear program, a view he posted publicly as higher energy costs began to show up at U.S. pump prices.
Corporate news
On the corporate front, Hewlett Packard Enterprise was slated to report quarterly results after the bell on Monday. Additional earnings due later in the week included Kohl's, Oracle, Dollar General and Dick's Sporting Goods.
Market attention was also drawn to a reported commercial move involving Novo Nordisk and Hims & Hers Health. Bloomberg reported that Novo Nordisk plans to distribute its weight-loss drugs through Hims & Hers' telehealth platform, representing a notable reconciliation between the two firms after a recent legal dispute. Shares of Hims, which have fallen roughly 51% year-to-date, jumped more than 50% in premarket trading on Monday after the report.
What to watch next
- Developments in the Middle East and any further impact on oil supply or shipping routes.
- U.S. inflation reports later in the week, including the CPI on Wednesday and the PCE index on Friday.
- Corporate earnings flow, beginning with Hewlett Packard Enterprise, for signs of how companies are managing cost pressures.
Investors are navigating a market environment shaped by geopolitics, commodity price moves, and key economic data due in the coming days. The interplay of these factors will likely determine short-term risk sentiment across commodity-linked equities, consumer-exposed sectors, and fixed-income markets.