Geopolitical Tensions Spike as Iran Rejects Peace Talks; Energy Costs Surge

The S&P/TSX Composite Index ended Thursday nearly flat, closing at 33,912.93, down 0.12%, as investors reacted to escalating tensions in the Middle East. The market's hesitation stems from Iran's refusal to engage in peace talks with the U.S., resulting in twin blockades across the Strait of Hormuz. While U.S. President Donald Trump extended a ceasefire to facilitate negotiations, the Iranian regime has demanded the removal of naval blockades on its ports before discussing peace. Conflicting reports regarding control of the strait have heightened fears of a protracted conflict and long-term inflationary pressure, prompting traders to move away from risky assets. The geopolitical instability is already manifesting in economic data. Statistics Canada reported that producer prices rose 2.40% month-over-month in March, exceeding the 1.60% forecast. This spike was driven primarily by a record 27.40% surge in energy and petroleum product prices due to the closure of the strait. On a year-over-year basis, producer prices climbed to 7.80%. Despite the macro headwinds, certain sectors showed resilience. Industrials led the gains at 2.77%, with Waste Connections Inc and Mullen Group Ltd posting significant jumps. However, the broader market remains cautious, further weighed down by uncertainty surrounding the $1.2 trillion CUSMA trade renewal negotiations ahead of the July 1 review checkpoint.