Tensions in the Middle East have simmered since the middle of June when the US and Iran reached an interim peace deal and agreed to negotiate a more permanent arrangement. However, tensions flared earlier this week when several ships were struck in the Strait of Hormuz. The US responded with attacks on Iran, with US President Donald Trump cautioning the ceasefire may be over. This raised concerns among global investors, who are now left to consider how heightened tensions could impact the global economy and consumer prices.

• Trump expressed his anger with Iran after several oil tankers were struck in the Strait of Hormuz. The key waterway was reopened when the US and Iran reached an interim peace deal, which helped bring down oil prices.
• On Tuesday, the US revoked a waiver that allowed Iran to sell its oil. The Iranian government said that action rendered June’s interim peace deal “ineffective.”
• The US launched new attacks on Iran yesterday. Trump expressed caution about the peace negotiations, which rattled global investors. Trump also threatened to establish another blockade on Iran’s ports.
• Concerns over geopolitical tensions reemerged yesterday, which weighed on global financial markets. Oil prices have moved higher over the past two days, stoking concerns about inflation.

Markets were largely optimistic that the US and Iran would continue working on a permanent peace agreement and maintain their ceasefire. The actions over the last few days have put that into question. Global financial markets always face a level of uncertainty as policies and relationships may change over time. The impact of the US-Iran conflict has indeed been felt by Canadians, who are facing higher prices at the gasoline pump, which has curbed discretionary spending.

If you would like to discuss this economic and market update or have questions about your finances and investments, please feel free to contact me anytime.