A U.S.–Iran ceasefire framework reached in the final week ended a 13-week standoff over the Strait of Hormuz, opening a path toward restoring traffic through the world's most important oil-shipping route. Crude prices fell roughly 20% from their 2026 highs to around $88 per barrel, helping shift market sentiment from April's inflation scare toward renewed confidence in disinflation. The S&P 500 rose 5.26% on a fresh AI-capex bid, while Canada's S&P/TSX gained 2.52%, even as lower oil prices weighed on its Energy sector.
Benchmark | Apr-2026 | May-2026 |
|---|---|---|
S&P 500 Total Return | 10.5% | 5.3% |
S&P/TSX Total Return | 3.8% | 2.5% |
Source: FactSet
Global Market Overview
United States
U.S. equities extended their advance as the ceasefire-driven slide in crude reset inflation expectations, lifting the S&P 500 5.3% to a record and the Nasdaq 8.4% on renewed AI capital spending. The broader macro backdrop remained mixed: PCE inflation accelerated to 3.8% and Q1 GDP was cut to 1.6%, pushing the 30-year Treasury yield above 5.1%. With Kevin Warsh sworn in as Fed Chair on May 22 and no meeting on the calendar, policy held at 3.50%–3.75% ahead of the June 16–17 FOMC.
Europe
The roughly 20% drop in crude to near $88 was the month's dominant macro signal, easing imported-energy costs for European consumers and trimming the inflation impulse that had pressured the region in April. Gold held near record levels as portfolio-hedge demand persisted despite the risk-on tone, supporting mining shares globally. European equities tracked Wall Street higher as lower energy prices and steadier bond markets improved the growth outlook.
Canadian Market Overview
The S&P/TSX returned 2.5% in May, lagging the U.S. as its heavy Energy weighting absorbed the decline in crude prices. Inflation remained the central tension: Canadian CPI rose to about 2.8% in April from 2.4% in March, driven largely by higher gasoline prices, even as core measures continued to ease toward 2%. First-quarter GDP growth remained soft and business investment extended a multi-quarter contraction, underscoring the drag from trade uncertainty and U.S. tariff risks.
The Bank of Canada held its overnight rate at 2.25% on April 29, choosing to look through the energy-related inflation shock while stating it would not tolerate sustained price pressures. With crude prices now retreating, markets largely expect another hold at the June 10 decision, leaving the forward guidance as the primary focus. For the TSX, the combination of softer oil prices, resilient banks, and firm metals supported a month characterized more by sector rotation than broad-based weakness.
Canadian Sector Performance
Telecom: +6.9%. Led the index as investors favored defensive, high-dividend names on expectations the Bank of Canada stays on hold and yields ease.
Materials: +6.2%. Gold and base-metal miners rallied as bullion held near record highs and defensive demand persisted despite the risk-on backdrop.
Financials: +4.3%. Banks gained ahead of fiscal Q2 earnings as a steeper yield curve and resilient credit conditions supported net interest margins.
Important Dates
June 6: Canada Employment Report (May)
June 10: Bank of Canada Rate Decision
June 11: U.S. CPI (May)
June 16–17: FOMC Meeting and Rate Decision
June 24: Canada CPI (May)
Final Thoughts
The rally’s durability now hinges on whether the ceasefire holds and disinflation resumes despite a 3.8% PCE print and slowing growth. The June 10 Bank of Canada decision and the June 16–17 FOMC meeting, the first under Chair Kevin Warsh, are the key tests. The principal risk remains stagflation: if oil rebounds or inflation proves sticky, equity valuations leave less room for disappointment. We favor selective, factor-driven exposure over broad indexing heading into a data-heavy June.