A board above the trading floor of the New York Stock Exchange is shown in this image, Tuesday, July 1, 2025. (AP Photo/Richard Drew)
TORONTO — Canadian and U.S. stock markets fell and oil prices rose on Monday after the U.S. launched its first military action in a month against Iran.
U.S. forces struck Iranian rocket launchers on the Strait of Hormuz on Sunday. Meanwhile, the United Arab Emirates said it intercepted an Iranian drone over its waters on Monday.
The aggressive actions follow a lull in activity in the U.S. war with Iran, which has lasted more than six months.
“We’ve got renewed tensions between the U.S. and Iran around shipping in the Gulf and the Strait of Hormuz, and they’ve pushed the price of crude oil higher,” said Anish Chopra, managing director with Portfolio Management Corp.
“That really matters because the price of oil feeds directly into inflation expectations and into interest rate expectations.”
The October crude oil contract was up US$2.36 at US$85.76 per barrel.
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The war has curtailed traffic in the strait, which accounts for about 20 per cent of the world’s oil shipments. Oil prices remain high after an initial surge earlier in the conflict and that has made everything from gasoline to shipped goods more expensive.
The S&P/TSX composite index was down 283.44 points at 36,270.48. Technology led the declines, while the energy sector was the only positive force.
On Wednesday, the Bank of Canada is set to deliver its next interest rate announcement as the escalating trade war with the United States casts an uncertain light. The central bank has kept its benchmark rate on hold at 2.25 per cent for nearly a year now.
Chopra said investors will be closely watching for any comments from the central bank around inflation and the trade situation.
On Aug. 22, the U.S. imposed 50 per cent tariffs on roughly five per cent of Canadian exports and Canada plans to retaliate with its own counter-tariffs starting Sept. 8. U.S. President Donald Trump has also threatened steeper levies on autos and auto parts starting Jan. 1, 2027.
Financial market odds for a seventh straight hold in the policy rate stood at 95 per cent as of late afternoon on Monday, according to LSEG Data & Analytics.
“A hold at 2.25 per cent is the near-universal call, so the story is the tone, not the rate,” Sébastien Mc Mahon, chief economist at iA Financial Group, said in a statement.
He said he doesn’t expect Canada’s central bank to raise interest rates this year.
“If the bank drops or softens that language, or nudges toward October, that’s the real headline,” Mc Mahon said.
In New York, the Dow Jones industrial average was down 374.09 points at 53,185.90. The S&P 500 index was down 25.62 points at 7,686.14, while the Nasdaq composite was down 31.54 points at 26,370.89.
The Canadian dollar traded for 72.12 cents US compared with 72.00 cents US on Friday.
The December gold contract was down US$48.40 at US$4,481.50 an ounce.
This report by The Canadian Press was first published Aug. 31, 2026.
— With files from The Associated Press
Companies in this story: (TSX: GSPTSE, TSX: CADUSD)
Daniel Johnson, The Canadian Press
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