Futures connected to Canada’s principal stock gauge moved lower on Tuesday as the market awaited a U.S. ultimatum tied to the reopening of the Strait of Hormuz.
By 08:37 ET (12:37 GMT), the S&P/TSX 60 index standard futures contract was down 6 points, or 0.3%. Market direction on the commodity-focused index was influenced in part by movements in metals and energy prices: spot gold inched higher while Brent crude futures held around $110 a barrel after retreating from earlier intraday peaks.
Monday had seen the broader TSX composite reach an almost four-week high, supported by hopes that the more than month-long conflict could be resolved. That optimism, however, did not eliminate near-term sensitivity to developments around the Persian Gulf and to incoming U.S. economic data.
U.S. futures volatility
U.S. equity futures showed choppy trading in early action. As of 06:33 ET (10:33 GMT), Dow futures were largely flat, S&P 500 futures were down 6 points, or roughly 0.1%, and Nasdaq 100 futures had eased about 43 points, or 0.2%.
All three major U.S. averages had closed higher in the previous session as investors searched for signs of progress toward ending the conflict that has dominated market attention for weeks. Yet the conflict’s economic fallout was also being scrutinized. Data covering March indicated the U.S. services sector expanded at a slower-than-anticipated pace during the period that includes most of the fighting. Within that sector, employment contracted and the prices paid component - a gauge often watched for inflationary pressure - rose to its highest level since October 2022.
Concerns about financial stability also lingered. The health of the roughly $1.8 trillion private credit market remained a point of unease after Blue Owl Capital, which has become emblematic of those worries, dropped to an all-time closing low following its announcement it would limit redemptions from two funds in response to a rise in withdrawal requests.
Energy and the Strait of Hormuz
Oil prices stayed elevated as shipping traffic continued to trickle through the Strait of Hormuz, a chokepoint off Iran’s southern coast through which about a fifth of the world’s oil typically transits. Brent crude futures were last reported up 0.9% at $110.70 a barrel, while U.S. West Texas Intermediate futures had jumped 2.5% to $115.26 a barrel.
The prolonged limited flow of tankers through the strait has heightened concern about global crude supplies, with major implications for energy-importing regions in Asia and for European natural gas flows tied to the Persian Gulf.
At a press conference on Monday, the U.S. president tied any ceasefire arrangement to a clear Iranian commitment to reopen the strait. He warned that if Tehran failed to comply by his 8 p.m. Eastern time deadline on Tuesday, the United States would strike bridges and power plants in Iran with force sufficient that it would take the country "100 years to rebuild." The president also left room for diplomacy, saying Iran would "like to make a deal."
Gold and the dollar
Gold ticked higher on Tuesday while the U.S. dollar eased slightly. Despite the intraday uptick, the yellow metal has declined over the past month, a trend market participants linked to the expectation that elevated energy prices could feed through to higher inflation and support central banks' decisions to keep interest rates higher for longer. In such an environment, non-yielding assets like bullion often underperform.
Concurrently, the dollar had strengthened recently as traders sought a safe haven, which tends to make dollar-priced gold more expensive for foreign buyers. On Tuesday the dollar index, which measures the greenback against a basket of other currencies, slipped marginally.
Broadcom, Google and AI capacity deals
Shares of Broadcom climbed in premarket U.S. trading after the semiconductor and infrastructure supplier announced a long-term collaboration with Google to jointly develop and support custom next-generation artificial intelligence-optimized processors. Broadcom said it will also provide networking and other components for Google’s AI racks through 2031.
Separately, Broadcom agreed to give AI startup Anthropic access to approximately 3.5 gigawatts of AI computing capacity that draws on Google’s AI processors, starting next year.
Analysts at Vital Knowledge commented in a note to clients that the agreements introduce "upside risk to Broadcom’s" previously stated guidance for AI-related revenue exceeding $100 billion in 2027.
Market takeaways
Markets entered Tuesday in a cautious posture, with the interplay of geopolitical risk in the Middle East, elevated commodity prices and specific corporate developments shaping investor flows. The TSX’s sensitivity to resource prices kept attention on oil and gold, while U.S. futures reflected the interaction of conflict-related headlines, weaker-than-expected services-sector data for March, and strains in parts of the private credit market.
Given the balance of these influences, equity futures, commodity prices, and certain corners of credit markets will likely remain key areas for traders to monitor in the near term.