Futures tied to Canada’s benchmark stock index nudged lower on Monday as investors digested a U.S. threat to block some shipping through the Strait of Hormuz and a pullback in gold prices linked to rising oil. The S&P/TSX 60 index standard futures contract was down 7 points, or about 0.4%, by 08:45 ET (12:45 GMT).
Last week the S&P/TSX composite index climbed 0.7% to 33,695.76, marking its highest closing level since March 4 and extending its weekly gains to a third consecutive advance. Still, the start of the new trading week was tempered by developments that pushed energy costs higher and prompted traders to reassess inflation and central bank expectations.
U.S. futures and market tone
Sentiment in U.S. equity futures was also weaker on Monday morning. By 08:55 ET, Dow futures were down 461 points, or about 1.0%, S&P 500 futures had slid 33 points, or roughly 0.5%, and Nasdaq 100 futures were lower by 113 points, or about 0.4%.
The main U.S. averages had finished last week mixed as investors exercised caution ahead of high-stakes negotiations between Washington and Tehran in Pakistan. A temporary two-week ceasefire had been put in place, but observers noted the fragility of the pause and the uncertain path to a more lasting cessation of hostilities.
Geopolitical escalation and U.S. blockade announcement
The market reaction intensified after a U.S. announcement that the Navy would begin an "immediate" blockade to prevent ships from entering or exiting parts of the Strait of Hormuz. The president warned that no ship that has paid what he described as an effective toll charged by Tehran would have "safe passage on the high seas." A subsequent Pentagon statement clarified that vessels "entering or departing Iranian ports or coastal areas" would be blocked, while other ships would be allowed to traverse the strait.
Those moves followed 21 hours of talks in Pakistan between U.S. and Iranian delegations that concluded without an agreement to solidify the two-week halt to hostilities. The U.S. delegation was led by Vice President JD Vance, who said Iran had rejected U.S. demands to refrain from developing a nuclear weapon. Iran did not immediately comment on the discussions; Pakistan, acting as mediator, urged both parties to "uphold their commitment to ceasefire." The ceasefire itself remains temporary and its permanence is uncertain.
Oil jumps above $100 and market interpretation
Oil prices rose sharply on Monday as a reaction to the blockade threat and lingering disruptions stemming from the conflict. By 09:08 ET, Brent futures had climbed 6.9% to $101.77 a barrel, while U.S. West Texas Intermediate futures added 7.3% to $103.56 a barrel.
The Strait of Hormuz is a strategic chokepoint through which roughly one fifth of the world’s oil moves, and crude had risen since the Iran conflict began in late February amid an effective curtailment of tanker traffic through the passage. Following last week’s initial ceasefire announcement, crude briefly fell back below $100 a barrel, but prices have remained well above pre-conflict levels.
Some market commentators viewed the U.S. blockade announcement as a negotiating lever rather than a definitive long-term policy shift, noting that the price reaction has been "relatively contained." Nonetheless, the immediate effect was to push oil back above the $100 mark and to refocus attention on the potential for energy-driven inflationary pressure.
Inflation data and implications for rate expectations
Traders were also parsing data that showed a sharp acceleration in consumer price gains in March, a move driven largely by higher gasoline pump prices tied to the energy shock. That jump in fuel costs contributed materially to the headline inflation reading, even as underlying measures that strip out fuel and food were less pronounced.
Persistently elevated oil could translate into increased inflation risks across economies that rely on imported energy, prompting market participants to scale back bets that the U.S. Federal Reserve will cut interest rates this year. CME FedWatch market-implied probabilities indicated that investors saw only a 16% chance of at least a 25-basis-point rate reduction at the Fed’s December meeting, down from 21% the day before.
The view of a higher-for-longer interest-rate environment weighed on non-yielding assets such as gold. At the same time, a flight to the U.S. dollar amid risk aversion could make bullion more expensive for overseas buyers and further dampen demand for the metal.
Sector effects and commodities
Canada’s S&P/TSX is known to be commodity-heavy, and the move in oil reverberated across the index. Rising crude typically benefits energy-related equities while adding pressure on sectors sensitive to inflation, such as consumer discretionary. The pullback in gold pricing reflected changing expectations for rate cuts and demand from bullion as a crisis hedge.
Wall Street earnings spotlight: Goldman Sachs and peers
Investors also had earnings on their radar, with major U.S. banks set to report this week. Goldman Sachs kicked off the reporting cadence with a first-quarter beat: the firm posted a 19% increase in profit for the quarter, reporting profit of $5.63 billion, or $17.55 a share, and revenue of $17.23 billion. The bank said its trading and banking operations benefited from volatile markets, producing a record quarter for those units, and noted that dealmaking activity and heavy investment in artificial intelligence infrastructure helped lift results. Goldman’s quarter was described as its second-best ever for profit and revenue, behind the first quarter of 2021.
Other large banks scheduled to report this week include JPMorgan Chase, Wells Fargo, Citigroup, Bank of America and Morgan Stanley. Market participants will be watching how volatile markets, trading revenue, and lending trends are reflected across the sector amid broader macro uncertainty.
Bottom line
Early trading in North America was subdued as a mix of geopolitical escalation, a renewed spike in oil prices, and shifting inflation and rate expectations outweighed the recent advance in Canada’s equity benchmark. The durability of the ceasefire and the ultimate outcome of negotiations between Washington and Tehran remain key unresolved questions that could have sizeable market implications if the situation evolves.
Key points
- TSX futures fell about 0.4% as markets reacted to a U.S. threat of a Strait of Hormuz blockade and a drop in gold following a rebound in oil.
- Crude prices spiked with Brent at $101.77 a barrel and WTI at $103.56 a barrel, refocusing attention on energy-driven inflation risk.
- Major U.S. banks begin reporting results this week, led by Goldman Sachs, which posted a 19% rise in first-quarter profit on revenue of $17.23 billion.
Risks and uncertainties
- Geopolitical risk - The U.S. announcement of a blockade and the uncertain status of a temporary two-week ceasefire create the potential for further disruptions to tanker traffic through the Strait of Hormuz, affecting energy markets and trade-sensitive sectors.
- Inflation and monetary policy - A sharp rise in oil and gasoline prices that drove a surge in March consumer price gains raises the risk of sustained inflationary pressure, which could reduce the likelihood of near-term Fed rate cuts and alter financial conditions.
- Earnings sensitivity - Upcoming bank earnings will be scrutinized for how volatile markets and dealmaking activity are impacting revenues and profitability, even as broader market volatility and geopolitical tension add uncertainty to outlooks.