Good morning. Hopes for a swift end to the Iran war faded as the United States seized an Iranian cargo ship attempting to breach its naval blockade, prompting Tehran to reject further peace talks ahead of the expiration of a two-week ceasefire Wednesday. In focus this week, we try to follow the bouncing barrel.
Up first
In the news
Trade: Prime Minister Mark Carney says Canada’s close ties to the United States have become “weaknesses” that must be corrected.
Metals: Rio Tinto Group is moving to squeeze as much aluminum as it can from its Canadian smelters to meet demand from U.S. customers as the war in the Middle East lifts global prices.
Politics: Ontario Premier Doug Ford is selling a private government jet days after its purchase was revealed.
European leaders met this weekend to discuss securing the Strait of Hormuz in Paris. From left, German chancellor Friedrich Merz, French President Emmanuel Macron, British Prime Minister Keir Starmer and Italian Prime Minister Giorgia Meloni.WPA Pool/Getty Images
In focus
A turning point, but in which direction?
Let’s get this strait: The White House said U.S. Vice-President JD Vance is travelling today to Pakistan for high-level meetings with Iran, which said on Sunday it had not agreed to negotiations.
Tehran’s refusal to join in the talks, which were scheduled to take place tomorrow, follows the U.S. capture of an Iranian-flagged cargo ship that had tried to get past the military’s blockade of the Middle Eastern country’s ports.
“We have full custody of their ship, and are seeing what’s on board!” U.S. President Donald Trump wrote yesterday on social media.
The developments marked a sharp turn from just two days prior, when Trump said an end to the war could come “soon,” and Tehran said it would open the Strait of Hormuz, a vital passageway for oil and gas. The announcements sent futures contracts for Brent and U.S. West Texas Intermediate crude to their lowest levels since March 10.
In early trading last night, oil prices shot up again by more than 6 per cent as traders saw tensions reignited in the war, which is now entering its eighth week.
For at least a day, Trump appeared to be on the verge of ending the war against Iran as suddenly as he launched it. But the ceasefire and the opening of the strait could both be reversed in a matter of minutes, Mark MacKinnon wrote on Friday. And he was right.
If no long-term deal is finalized this week, Trump has said, the U.S. will resume its attacks on Iran. On Saturday, after the U.S. refused to end its blockade of Iran’s ports, Tehran again closed the strait – dashing hopes that the millions of barrels of oil and gas that passed through the waterway prior to the war will return to market any time soon.
Even if a broader agreement is pulled out of the fire, major shipping companies have said restoring traffic through the chokepoint to normal levels – about 130 ships a day before the war – will take several weeks.
And an agreement to open the strait doesn’t immediately make it safe to cross. The U.S. Navy warned in an advisory that the mine threats in parts of the waterway were not fully understood.
The price of oil futures has cooled, if only by a little, but companies are still feeling the squeeze of energy costs that have doubled since the beginning of the war.
Air Canada said it is suspending flights to New York’s JFK airport from Toronto and Montreal between June and October because of high fuel prices.
In U.S. retail sales data for March, out tomorrow, investors are expecting to see the effect of US$4-a-gallon gasoline prices on consumer spending.
Inflation split: Elevated oil prices owing to the war in Iran are set to push up Canada’s inflation rate.
Headline Consumer Price Index, the broadest measure that will be reported by Statistics Canada this morning, includes food and energy. Gasoline prices spiked about 20 per cent from a month earlier, likely pushing the measure to about 2.5 per cent from 1.8 per cent in February.
Gas and heating fuels got more expensive, but they make up a relatively small share of overall household spending, limiting their direct impact on broader price increases, economists at Toronto-Dominion Bank wrote on Friday.
Core measures, including CPI-median and CPI-trim, remove large price swings to capture the broader trend across goods and services, and they are expected to hold near 2.3 per cent, little changed from recent months.
These gauges are closely watched by the Bank of Canada because they reflect underlying inflation, which had been easing before the recent rise in energy costs. Market watchers expect the central bank to hold its trend-setting lending rate at its April 29 decision and through the rest of 2026.
The hot seat: Kevin Warsh, the U.S. President’s pick to lead the Federal Reserve, appears before a Senate confirmation hearing tomorrow.
Warsh would inherit the job at a peculiar time for the Federal Reserve. Trump has resurfaced threats to fire Jerome Powell even as the Fed chair nears the official end of his term. Powell has said he would stay on in the role if his replacement is not confirmed by May 15.
Trump ramped up his attacks on Powell, whom he nominated in his first term, since his return to the Oval Office. Lowering interest rates would be one way to boost the U.S. economy, which is facing worries about higher inflation largely owing to the Iran war. Since the U.S. and Israel launched their February attacks, markets have moved from pricing in two rate cuts by the end of the year to none.
Before the bell: Rogers Communications Inc. stock has sunk 11 per cent this year to a 10-month low – and with the Leafs out of the playoffs and Blue Jays out of runs, it doesn’t look like the telecommunications giant can hope to ease the loss of slower population and subscriber growth with sports. Along with increased competition between the telecom carriers, Amber Kanwar writes in her weekly market setup, investors will want to hear how the company plans to boost the signal.
Earnings in Canada this week also include Metro Inc. on Wednesday. Fairfax Financial Holdings Ltd. and Teck Resources Ltd. report on Thursday. In the U.S., Tesla Inc. and Boeing Co. report on Wednesday, followed by American Express Co. and Intel Corp. on Thursday, and Procter & Gamble Co. on Friday.
You can find our full calendar of economic and earnings reports here.
Around the world: Turkey’s central bank announces its next interest rate decision on Wednesday in a test of its commitment to raising rates to contain inflation, after years of keeping borrowing costs low even as prices surged. Those policies weakened the currency and drove up the cost of imports, pushing inflation higher – it’s expected to approach 30 per cent by the end of the year – and forcing a shift to aggressive rate increases under a new economic team installed by Turkish President Recep Erdogan in 2023.
Central banks across Asia are announcing rate decisions this week: China today, Indonesia on Wednesday and the Philippines on Thursday are all expected to hold.
With a report from Reuters
Charted
Co-sign of the times
With home prices vastly outpacing incomes over the past two decades, the number of first-time buyers who’ve tapped parents to co-sign mortgages has surged, a new analysis published by the Bank of Canada shows.
Quoted
[Leo] seems convinced that the world needs to hear explicit condemnation of injustice and aggression, and he seems aware that he is one of very few people who have a global pulpit.
— John Thavis, a retired Vatican correspondent who covered three papacie
Pope Leo debuts a new, forceful speaking style as he steps onto the world stage.
Morning update
Global markets turned lower as markets grew increasingly concerned that the ceasefire between the U.S. and Iran might not hold, while tensions over the Strait of Hormuz escalated.
Wall Street futures were in the red, while TSX futures followed sentiment lower.
Overseas, the pan-European STOXX 600 was down 1.02 per cent in morning trading. Britain’s FTSE 100 declined 0.58 per cent, Germany’s DAX fell 1.36 per cent and France’s CAC 40 gave back 1.12 per cent.
In Asia, Japan’s Nikkei closed 0.6 per cent higher, while Hong Kong’s Hang Seng gained 0.77 per cent.
The Canadian dollar traded at 73.04 U.S. cents.