TSX Falls as Geopolitical Tensions Escalate

The S&P/TSX Composite Index recovered from early losses to close 0.5% higher at 33,108 on Thursday, tracking the rebound for US equities as reports that Iran is considering allowing some shipments of oil from the Persian Gulf eased concerns of stagflation in the Canadian economy. Iranian media indicated that officials are coordinating a toll for tankers leaving the Persian Gulf. The development alleviated concerns that an energy shock would magnify inflationary pressures and force the BoC to maintain rates restrictive for longer, aiding the outlook for stocks in the Toronto exchange. Heavyweight energy producers led the gains as spot crude oil benchmarks rose to their highest in 18 years, with Cenvovus and Canadian Natural rising 3% and 2%, respectively. The Toronto Stock Exchange will be closed on Friday for Good Friday.

The S&P/TSX Composite Index lost 1% on Thursday to trade below 33,000 as hopes of a swift Middle East resolution faded after US President Trump signaled an escalation in attacks on Iran. Oil prices rebounded sharply on supply concerns, fueling stagflation worries. Canadian bond yields climbed as investors priced in a more hawkish outlook from the BoC and other major central banks, weighing on banking stocks amid credit demand concerns. The Royal Bank of Canada lost nearly 1%, TD Bank fell over 0.5%, and Bank of Montreal dropped 1.5%. Gold prices retreated from two-week highs as Trump flagged continued US military action in Iran. Agnico Eagle lost over 2.6%, while WPM plunged nearly 3.5%. In contrast, energy producers advanced on higher oil prices, Canadian Natural rose 4% and Suncor Energy gained over 3%.

Futures tracking the S&P/TSX Composite Index were lower on Thursday as hopes of a swift end to the Middle East war faded after US President Trump signaled an escalation in attacks on Iran. Oil prices rebounded sharply on supply concerns, fueling stagflation worries. Canadian bond yields climbed amid the inflationary pressures as investors price in an increasingly hawkish outlook for major central banks, weighing on banking stocks as credit demand could face headwinds. The Bank of Canada is expected to hold interest rates unchanged this month, though traders are pricing in two quarter-point hikes by year-end. The central bank's governing council noted it will rely more than usual on its own judgment on rate decisions given heightened global uncertainty, according to minutes released Wednesday. In contrast, higher oil prices supported energy stocks, while falling gold prices pressured miners, retreating from two-week highs as Trump flagged continued US military action in Iran.