02.04.202611:47:51UTC+00TSX Futures Fall as US Signals Iran War Escalation

Futures linked to the S&P/TSX Composite Index fell on Thursday as expectations for a quick resolution to the Middle East conflict dimmed, after US President Trump signaled an escalation of attacks on Iran. Oil prices rebounded sharply on renewed supply concerns, stoking fears of stagflation. Canadian government bond yields rose amid mounting inflation pressures, as investors increasingly price in a more hawkish stance from major central banks—sentiment that weighed on banking stocks, with credit demand seen at risk of slowing.

The Bank of Canada is widely expected to leave interest rates unchanged this month, but futures markets are now pricing in two quarter-point hikes by year-end. According to minutes released Wednesday, the central bank’s governing council indicated it will lean more heavily than usual on its own judgment in setting policy, given the elevated level of global uncertainty.

In equity markets, higher oil prices provided support for energy shares, while a pullback in gold prices pressured mining stocks. Gold retreated from two-week highs after Trump signaled that US military operations in Iran would continue.