Canada’s primary stock benchmark declined on Thursday morning, as investors re-assessed market risk in the face of ongoing geopolitical uncertainty and renewed moves in energy markets. By 10:28 ET the S&P/TSX Composite index had fallen 150.94 points, or 0.45%, while the S&P/TSX 60 index was down 8.66 points at 1,944.53.
Market context
Markets had rallied the previous session after reports of a diplomatic breakthrough between Washington and Tehran, but the optimism proved fragile. Traders reacted to emerging signs of strain in the two-week ceasefire agreement, prompting a more cautious tone across equities and commodities.
Crude rebounds after sharp drop
Energy markets were a focal point on Thursday. After experiencing their steepest single-day decline since April 2020 in the session prior, crude prices swung back higher. Crude Oil WTI Futures rose 7.86% to $101.83 a barrel, while Brent futures moved back toward the $100 mark. Market participants continued to watch activity in the Strait of Hormuz closely, where traffic remains disrupted despite the tentative pause in hostilities. Reports that Iran has halted tanker passage in response to ongoing regional strikes kept supply concerns central to trading dynamics.
Inflation data keeps pressure on sentiment
Alongside geopolitical developments, fresh U.S. inflation data added to investor unease. The February personal consumption expenditures price index - the Federal Reserve’s preferred inflation gauge - rose 3% on an annual basis, a reading that sits well above the central bank’s 2% objective. That persistence in price growth, observed before the latest oil-price shock, left markets focused on the implications for U.S. monetary policy. Traders are now looking to Friday’s consumer price index report for further clarity on March inflation trends.
Ceasefire outlook remains uncertain
The diplomatic situation in the Middle East appeared to be unsettled. Tehran has alleged violations of the 10-point peace proposal that was brokered earlier in the week, and disagreements over whether Lebanon should be included in the deal emerged as a key sticking point. Despite those tensions, Iranian negotiators are expected to attend talks in Islamabad on Saturday morning. U.S. President Donald Trump has said U.S. military forces will remain positioned around Iran until a more durable agreement is reached.
Gold benefits from safe-haven flows
Precious metals advanced as investors sought traditional havens amid the heightened geopolitical backdrop. XAU/USD was up nearly $50 at $4,768.47 per ounce by mid-morning. The metal had previously come under pressure as rising oil prices stoked expectations for "higher-for-longer" interest rates from the Federal Reserve; the latest move indicates a rotation back toward hedging against potential escalations in the region.
Summary of implications
- Equities - The TSX and large-cap Canadian names came under pressure amid wider risk-off sentiment.
- Energy - Oil’s rebound and Strait of Hormuz disruptions reinforced supply concerns that are central to energy-sector pricing.
- Fixed income and policy - Elevated inflation readings keep monetary policy considerations at the forefront for markets.
Outlook
In the near term, market direction will likely hinge on developments surrounding the ceasefire agreement, shipping activity through the Strait of Hormuz, and forthcoming U.S. inflation data. Each of these factors has the potential to sway risk appetite, commodity prices, and expectations for monetary policy.