Good morning. In focus today, we’re tracking how the U.S.-Israeli strikes on Iran are playing out across global markets. Plus, Prime Minister Mark Carney makes headway with India, announcing earlier today a deal to supply the fast-growing country with uranium.
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In the news
Live now: Tensions are flaring in the Middle East after air strikes kill Iranian Supreme Leader Ayatollah Ali Khamenei.
Trade: Conservative Leader Pierre Poilievre said he’s open to meeting with U.S. leaders if it will help Canada’s efforts to end the continuing trade dispute.
Health care: Ottawa says provinces should pay for nurse practitioners, but gives a one-year grace period before enforcement.
Thousands gathered yesterday for a pro-government demonstration in Tehran after Iranian state media confirmed the death of Ayatollah Ali Khamenei.Majid Saeedi/Getty Images
In focus
Stepping back on a seismic moment
Oil will be at the centre of market attention this week, but the repercussions of the air strikes and Iranian retaliation are likely to ripple across currencies, equities, safe‑haven assets such as gold and a wide range of commodities.
1. Zooming out: The U.S. and Israeli attack on Iran is poised to intensify volatility across global markets – already unsettled by the Trump administration’s new tariff threats – and to fuel renewed concerns about broader inflationary pressures.
The potential for a prolonged conflict that could envelop the Middle East carries significant risks for oil prices, which had already moved higher this year in anticipation of a strike on Iran. Oil futures rose last night, reflecting bets that a drawn-out conflict could disrupt flows through key shipping routes and keep global supply tighter for longer.
The Organization of the Petroleum Exporting Countries and its allies announced yesterday that it would boost daily output in an attempt to calm energy markets, and U.S. President Donald Trump said he was in talks with Iranian leaders to de-escalate.
But market watchers were doubtful that oil’s short-term trajectory, at least, could be contained. The key question hinges on how long they’ll stay elevated. Rising oil prices lift the costs of transportation, manufacturing, agriculture and shipping. Climbing crude pushes up the cost of making and moving things, and the difference is ultimately passed along to consumers. In the U.S., where energy markets are already under pressure from tech companies’ insatiable appetite for electricity, inflation is likely bound to heat up this year, John Rapley writes.
2. Zooming in: The scale of the fallout will largely rest on what happens on the strip of water between Oman and Iran. The Strait of Hormuz, which carries roughly a fifth of the world’s petroleum, is the single most important chokepoint in global energy trade.
At present, shipping across the strait is at a near-standstill after insurers warned of cancelling policies and raising premiums. In retaliation for the U.S. attacks, Tehran could close the strait outright. “How this ends is extremely uncertain at this point but in the meantime oil markets will have to face their worst fears,” Amarpreet Singh, a Barclays analyst, wrote in a client note yesterday.
A prolonged shutdown of the corridor, which connects the Persian Gulf with the Gulf of Oman and the Arabian Sea, could drive Brent crude futures – the most widely used global benchmark – north of US$100 a barrel from a close of about US$72 on Friday, a shock economists say could pose a significant risk for countries already struggling to find steady footing.
The Strait of Hormuz
If the conflict proves short‑lived – and if tankers can move freely through the Strait of Hormuz – crude prices would still rise, but far less sharply, and with a much more limited impact on the broader economy. Still, it might make sense to fill up if you haven’t already.
(And if you’re planning a trip to the Middle East, Toronto Pearson International Airport authorities are recommending that passengers check with their airlines before heading to the airport.)
For a growing number of Canadian companies investing in the Persian Gulf, meanwhile, the missile attacks are upending what had been a safe bet around a spike in economic development.
3. Knocking on India’s door: Prime Minister Mark Carney announced a $2.6-billion deal earlier today to supply Canadian uranium to India. After meeting with Indian Prime Minister Narendra Modi, the two leaders also launched talks on a comprehensive trade deal.
The uranium deal was one of 10 commercial agreements touted during the trip and valued at a combined $5.5-billion. Unlike the uranium contract, many had been made public months ago.
Speaking to a crowd of about 100 business investors and executives in India’s financial capital of Mumbai this weekend, the Prime Minister said he aims to wrap up the wider trade agreement with India by the end of the year, Steven Chase reported from the financial centre.
The four-day visit to the subcontinent marks the end of a “challenging period” in Canada-India relations and the beginning of a new, “more ambitious partnership” with the world’s fifth-biggest economy, he said.
Carney pitched the Mumbai audience on Canada’s energy riches as well as tax rates and red-tape reductions by his government. Canada’s capacity to export liquefied natural gas to Asia is expected to increase by more than 50 million tonnes in the coming years, he said.
India is the world’s largest developing country, and among the fastest-growing middle powers. On Friday, the government reported that its economy grew by nearly 8 per cent in its most recent quarter on the strength of its manufacturing sectors – and ability to find new markets for exports hit by U.S. tariffs.
4. The middle powers push back: Governments that struck trade deals with Trump are revisiting their terms after the U.S. Supreme Court struck down the President’s use of emergency tariffs.
India was planning to send a delegation to Washington last week to discuss details of a trade deal the two countries announced in February but decided to defer the talks to “study the implications” of the court’s decision. On Friday, Indian Commerce Minister Piyush Goyal said the country would seek a “rebalancing” of their proposed deal.
The European Parliament also hit the brakes on ratifying a deal reached with Trump last July at his Turnberry Scottish golf resort. Senior lawmakers argued last week that Trump’s threat to implement new tariffs would represent a breach of that accord.
The British government, which became one of the early deal-makers with the Trump administration when it negotiated a 10-per-cent tariff, is among the countries worst hit by Trump’s new global tariff regime. Downing Street has said reciprocal action is on the table if he doesn’t back down.
The Supreme Court ruling has given countries that forged deals with the Trump administration cause to re-evaluate their negotiating positions, especially as the new tariffs Trump is threatening are also expected to draw lawsuits.
5. A productive conversation: Statistics Canada’s labour productivity report on Wednesday is expected to show how tariffs and supply‑chain disruptions have exposed Canada’s deep dependence on the U.S. – and unmasked structural weaknesses that had long kept chronically low productivity out of view.
With even more uncertainty on the horizon, economists fear that already low levels of investment from corporate Canada – the kind that drives innovation and helps cushion countries against external shocks – will flatline.
Against that backdrop, the efforts of political and business leaders to draw investment are becoming more urgent – and will no doubt feature in key speeches this week from Bank of Canada officials.
- In an address today at the Monetary Policy Mandate Conference in Oslo, Bank of Canada Deputy Governor Sharon Kozicki will talk about the country’s monetary policy “in a world of supply-driven trade-offs.”
- On Wednesday, central bank Governor Tiff Macklem will be talking in Toronto about global economic and financial stability risks.
Quoted
The smoothie shop meme is my favourite – I look like I’m crawling on the smoothie counter, and leaning in and the text is “gurrl.” I don’t even remember doing that, but I still laugh at it.
Heated Rivalry’s Bianca Nugara dishes on her smoothie order and getting recognized in Zara.
Morning update
Oil prices surged and shares slid as military conflict in the Middle East looked set to last for weeks, threatening to upend a global economic recovery and perhaps reignite inflation.
Wall Street futures slid after all three major indexes ended decisively lower on Friday. Dow futures were down 1.17 per cent, S&P 500 down 1.1 per cent, and Nasdaq futures down 1.46 per cent as of 4:17 a.m. ET. TSX futures declined after Canada’s main stock index ended Friday’s session in the red.
Overseas, the pan-European STOXX 600 was down 1.42 per cent in morning trading. Britain’s FTSE 100 lost 0.99 per cent, Germany’s DAX fell 1.80 per cent and France’s CAC 40 gave back 1.64 per cent.
In Asia, Japan’s Nikkei closed 1.35 per cent lower, while Hong Kong’s Hang Seng shed 2.14 per cent.
The Canadian dollar traded at 73.20 U.S. cents.