Iran's closure of the Strait of Hormuz sent crude oil past $126 per barrel and triggered the sharpest monthly sell-off since 2023. Brent crude surged more than 50% from pre-conflict levels as roughly 21 million barrels per day of supply were threatened.
The oil shock split Canadian sectors sharply. Energy surged 8.2% as producers benefited from higher crude prices. Materials collapsed 16.3% as gold posted its worst loss since October 2008 on dollar strength and evaporating rate-cut expectations.
Benchmark | Feb-2026 | Feb-2026 |
|---|---|---|
S&P 500 Total Return | -0.8% | -5.0% |
S&P/TSX Total Return | 7.7% | -4.3% |
Source: FactSet
Global Market Overview
U.S. consumer prices rose 2.4% year-over-year in February, holding steady, but the Strait of Hormuz crisis rapidly shifted the inflation outlook. The 10-year Treasury yield surged roughly 48 basis points to 4.44% by late March as energy-driven inflation expectations climbed. Money markets priced out nearly all 2026 rate cuts that had been expected before the conflict began on February 28.
European equities suffered their steepest monthly decline since the 2020 pandemic, with the Stoxx 600 falling roughly 8%. Germany's DAX dropped 13.4% and France's CAC 40 fell 12.2% as the energy shock hit Europe's import-dependent economies hardest. Eurozone inflation jumped to 2.5% in March, well above the ECB's 2% target, raising the prospect of tighter policy at the worst possible time for growth.
Canadian Market Overview
The S&P/TSX lost 4.3% in March as the oil shock lifted Energy but crushed other sectors. Canada lost 83,900 jobs in February, one of the largest declines outside the pandemic, pushing the unemployment rate to 6.7%. Headline CPI eased to 1.8% year-over-year, though surging energy prices threatened to push inflation higher in months.
The Bank of Canada held its policy rate at 2.25% on March 18, citing heightened uncertainty from the Iran conflict and U.S. trade policy. Governor Macklem described the rate as appropriate even as the economy faces weakening growth alongside potential higher inflation. The next Monetary Policy Report is scheduled for April 29.
Canadian Sector Performance
Energy surged 8.2% as the Strait of Hormuz closure pushed Brent crude past $126 per barrel, lifting oil and gas producers across the TSX.
Discretionary fell 8.2% as rising energy costs, a weakening labor market, and 83,900 jobs lost eroded the consumer spending outlook.
Materials fell 16.3% as gold dropped more than 13%, its steepest decline since 2008, driven by dollar strength and evaporating rate-cut expectations.
Important Dates
April 10: Canada Unemployment Data
April 10: U.S. CPI Inflation
April 20: Canada CPI Inflation
April 24: Canadian Retail Sales
April 29: Bank of Canada Interest Rate Decision
Portfolio Strategy Tip
Energy and Materials often move together when commodity prices rise, but March broke that pattern. Oil surged on supply disruption while gold fell on dollar strength and fading rate-cut expectations. Treating commodities as a single allocation can mask the very different forces driving individual resource sectors.
Final Thoughts
March repriced inflation risk after the Strait of Hormuz disruption pushed oil higher and forced markets to reassess rate expectations. Energy benefited directly while most sectors absorbed the effects of higher discount rates and weaker growth expectations. The duration of the supply shock will determine whether sector divergence persists.