Geopolitical tensions drove stock market volatility
Markets reacted sharply to shifting headlines throughout the week, leading to uneven performance across the major indexes. On Monday, the Wall Street bellwether S&P 500 gained more than 0.83% after U.S. President Donald Trump suggested the conflict with Iran could be approaching an end. The Dow and Nasdaq also posted solid advances of 0.50% and 1.83%, respectively, after recovering from steep intra-day losses. Canada’s TSX rose 0.32%, supported by strong performances in the tech sector.
Markets lost ground on Tuesday, as investors kept a close watch on developments in the Middle East. The S&P 500 dipped 0.21%, the Dow edged 0.07% lower and the Nasdaq finished flat. The TSX moved modestly higher, gaining 0.25%, as a pull-back in oil prices briefly eased inflation concerns.
On Wednesday, investor sentiment continued to soften following reports of renewed military activity in the Middle East and ongoing volatility in energy markets. The Dow closed 0.61% lower, the S&P 500 slipped 0.08% and the Nasdaq was again unchanged. The TSX drifted 0.54% lower, weighed down by tech and mining stocks. Losses deepened on Thursday, with the major U.S. indexes finishing at their lowest levels of the year. The S&P 500 shed 1.52%, the Dow fell 1.56% and the Nasdaq dropped 1.78%. The TSX lost 0.83%, as broad-based declines outweighed gains in the energy sector.
Friday saw all the major U.S. stock indexes close in the red as oil prices continued to rally and threatened to reignite inflation. The S&P 500 gave up 0.61% on the way to posting its third-straight weekly loss. The Nasdaq dropped 0.93% and the Dow was down 0.26%. The TSX fell 0.83%, reaching a one-month low, with weaker-than-expected employment data weighing on sentiment.
Crude prices whipsawed
Oil markets continued to set the tone for stock markets. Prices fluctuated wildly, as investors assessed the evolving situation around the Strait of Hormuz, a critical global shipping route. Early-week expectations of easing tensions pushed oil prices lower and helped lift North American equities. However, renewed military activity later in the week — including reports of damaged cargo ships and clashes near key waterways — sent oil prices higher again.
On Wednesday, the International Energy Agency announced plans to release a record volume of emergency reserves to ease near-term supply pressures, a move that briefly helped temper prices. Still, analysts noted that strained stockpiles and logistical challenges could limit how quickly those barrels reach the market. Despite the release of reserves, investors remained concerned that a prolonged conflict could restrict energy flows from the region and trigger a spike in global inflation. Crude prices continued to climb on Thursday, after Iran’s new Supreme Leader, Mojtaba Khamenei, said that the Strait of Hormuz should remain closed as a “tool to pressure the enemy.”
Economic data offered key insight ahead of central bank decisions
On Wednesday, the U.S. consumer price index report showed inflation rising 2.4% year over year in February, matching expectations and indicating slow but steady progress toward the Federal Reserve’s (the Fed’s) 2% target. On Friday, the personal consumption expenditures index (the Fed’s preferred measure of inflation) indicated that underlying price pressures remained firmer earlier in the year, rising 2.8% in January. Taken together, the reports suggest that inflation was easing but is still elevated. In Canada, February’s labour market data, released by StatsCan on Friday, surprised to the downside. Employment fell by 84,000 positions, driving the unemployment rate up to 6.7% as full‑time and private‑sector hiring weakened. The sharp decline contrasted with expectations for a modest job gain and followed another month of losses in January.
With geopolitical developments and volatile oil markets continuing to set the broader tone, this economic data provided an important update for policy-makers. Both the Bank of Canada and the Fed will weigh these signals as they assess the balance of risks at their upcoming policy meetings.
Be informed, but not influenced, by the news
Media and news reports can be informative, but they shouldn’t drive your investment decisions. Always put market performance into perspective, with your goals as the focus. Partnering with us is a great way to keep your investment plan moving forward. Our experienced portfolio managers can guide your investments through market uncertainty and help you stay on track toward your financial goals. If you have questions or decide it’s time to review your plan, our financial representatives are here to help.
Central bank interest-rate announcements (March 18)
Investor concerns are rising over the possibility that central banks may need to raise interest rates to ensure that soaring oil prices don’t reignite inflation. Markets are likely to react to policy-maker statements when the Bank of Canada and the Fed announce their respective interest-rate decisions on Wednesday.
More important dates
- April 3: Canadian and U.S. stock indexes closed for Good Friday
- April 30: 2025 personal income tax filing deadline
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