Market News

TORONTO — Canadian and U.S. markets lost ground Thursday following a sharp increase in oil prices after attacks on two Saudi oil tankers in the Red Sea.

Carol Schleif, chief market strategist at BMO Private Wealth, said that markets were facing a "wall of worry" with stocks seeing pressure from several factors, including higher oil prices and nervousness about the AI trade.

"It's important to take a step back and realize markets have done really well, year-to-date. The TSX was at new highs recently, the S&P 500's high, you've seen a big transition in leadership," she said.

In the oil market, the September crude oil contract for North American benchmark West Texas Intermediate was up US$5.36 at US$92.19 per barrel. The price for a barrel of Brent crude oil, the international standard, jumped seven per cent to settle at US$100.69.

Underscoring the importance of the sea route for the economy, U.S. President Donald Trump threatened "major military punishment" against the Houthi rebels in Yemen, who are backed by Iran, if they keep attacking ships.

Schleif said oil prices could "stay more troubled for longer" given the strain on oil reserves and hostilities both in and outside of the Strait of Hormuz.

It was just a few weeks ago that Brent had dropped below US$72 per barrel, roughly back to where it was before the United States and Israel attacked Iran to begin their war, on hopes that a wind-down in the war would fully reopen the Strait of Hormuz.

It's possible the jumps in oil prices will worsen inflation, which in turn could push the U.S. Federal Reserve and other central banks to raise interest rates. The Bank of Canada has so far seemed content to stay put on rates, saying there are few signs so far that inflationary pressure from the Iran war is spilling into other consumer prices.

The S&P/TSX composite index was down 292.45 points at 35,192.66. In Canada, the TSX saw broad-based losses led by weakness in technology stocks. The energy and utilities sectors were the only ones to see gains.

On the trade front, Prime Minister Mark Carney huddled with premiers Thursday to prepare a response to fresh tariff threats from the United States. Carney told reporters ahead of his meeting with the first ministers that Canada is "in a stronger position than we were when this trade war started," thanks to the focus of the people around the table.

Trump signed a series of executive orders on Monday that would impose a separate 50 per cent tariff on a range of goods coming from Canada.