Canada’s main stock index slipped on Tuesday as investors monitored the situation in the Middle East, after Iran showed no signs of relenting to U.S. President Donald Trump’s ultimatum to reopen the Strait of Hormuz.
At 10:55 a.m. ET, the S&P/TSX Composite Index was down 0.1 per cent at 33,149.58 points.
As Trump’s deadline approached, the U.S. intensified strikes on Iran, targeting Kharg Island, home to Tehran’s main oil export terminal.
Trump has given Iran until 8 p.m. ET – 3:30 a.m. in Tehran – to end its blockade of Gulf oil or face massive destruction of its infrastructure.
“If the U.S. were to go into Iran and do what they say they’re going to do, the markets will probably react negatively initially, but then they will likely respond positively thinking this is closer to an end,” said Allan Small, senior investment advisor at Allan Small Financial Group with iA Private Wealth.
“Being in this state is not good for the markets, we are in limbo.” Escalating Middle East tensions pushed eight of the ten major sectors on the TSX into negative territory, with energy and utilities among the only sectors in green as oil prices extended gains.
U.S. West Texas Intermediate crude futures surged above US$115 a barrel, while Brent crude futures hovered near US$110, pushing the energy subindex up nearly 2 per cent.
The healthcare sector led losses on the benchmark index with a 1.8 per cent decline, while consumer discretionary stocks slipped more than 1 per cent. The gold sub-index and the materials sector , which includes stocks of metal miners, dropped 0.4 per cent as silver fell 3 per cent.
Meanwhile, heavyweight financials were down 0.1 per cent. On the economic front, data showed Canadian economic activity contracted in March for the first time in four months as inflation pressures increased.
Among individual stocks, International Petroleum climbed 5.2 per cent after BMO Capital Markets upgraded it to “outperform” from “market perform.”
The S&P 500 fell 0.7 per cent. The Dow Jones Industrial Average was down 210 points, or 0.5 per cent and the Nasdaq composite was 1.1 per cent lower.
The moves were tentative, much like they’ve been since the start of the war with Iran, as uncertainty reigns about whether the fighting could end soon. During just the first hour of Tuesday’s trading, the Dow careened between a gain of 74 points and a loss of 425.
The worry in markets has been that a long-term disruption will keep oil prices high for a long time and send a painful wave of inflation crashing through the global economy. Iran on Monday rejected the latest ceasefire proposal and instead said it wants a permanent end to the war.
So far in the war, Trump has made a series of threats to blow up Iranian power plants if it doesn’t open the Strait of Hormuz, but he has then delayed it several times. The possibility remains that Trump could back down again, among other scenarios, which is keeping uncertainty high.
A year ago, Trump ultimately backed off many of the stiff tariffs that he initially threatened to put on imports from other countries, though they ended up higher than from before his second term.
“Investors are likely to remain on edge and markets unable to establish trends, probably until there is a clear outcome later this evening: a deal, the U.S./Israeli strikes intensify, or Iran’s retaliation becomes escalatory instead of proportional,” according to Paul Christopher, head of global investment strategy at Wells Fargo Investment Institute.
On Wall Street, companies with big fuel bills fell to some of the sharpest losses as further gains in oil prices cranked up the pressure.
Norwegian Cruise Line Holding dropped 4.3 per cent, and United Airlines sank 3.7 per cent.
Companies whose customers may have the least room to absorb the recent jump in gasoline prices were also struggling. Dollar Tree slid 4.8 per cent, and Dollar General fell 1.8 per cent.
Companies enmeshed in the cryptocurrency industry were also losers as the price of bitcoin sank. Coinbase Global dropped 4.6 per cent, and Strategy sank 4.1 per cent.
Stocks of health insurers helped to limit the market’s losses after the Centers for Medicare & Medicaid Services said Medicare Advantage payments will likely see a net average increase of 2.48 per cent in 2027. That was well ahead of what some investors expected, according to UBS analysts led by AJ Rice.
UnitedHealth Group jumped 8 per cent, and Humana rose 5.5 per cent.
Universal Music Group also helped to limit losses for global stock indexes after Bill Ackman’s Pershing Square Capital Management offered to buy the record label behind Taylor Swift and Bad Bunny in a cash-and-stock deal valued at approximately US$64 billion.
The proposed purchase, which Pershing Square argued would clear uncertainty that’s weighed on UMG’s stock, would bring the company to Nevada and move its stock listing from Amsterdam to the New York Stock Exchange. UMG’s stock in Amsterdam jumped 10.8 per cent but remains well below what Pershing said its bid is worth. That could indicate investor doubt that the deal will happen.
In stock markets abroad, indexes fell across much of Europe. Asian stock indexes were a touch stronger, with South Korea’s Kospi up 0.8 per cent for one of the world’s bigger gains.
In the bond market, Treasury yields ticked a bit higher ahead of Trump’s looming deadline. The yield on the 10-year Treasury rose to 4.36 per cent from 4.34 per cent late Monday.
That’s well above its 3.97 per cent level from before the war, and the rise has pushed up rates for mortgages and other loans going to U.S. households and businesses, which slows the economy.
Reuters and The Associated Press
