Tensions in the Middle East entered a fourth day yesterday. Reports showed Iran struck a US base in Saudi Arabia with a drone. The US and Israel are boosting their military presence in the region as strikes on Iran continue. It is unclear how long this conflict might last, raising concerns about its impact on financial and commodity markets. Given the significant amount of oil produced in the Middle East, investor attention has turned to the impact on oil markets and what that might do to inflation in countries around the world, including Canada.

• The price of oil rose by almost 6% on Monday, climbing above US$70/barrel. Oil prices finished higher again yesterday. Oil prices had reached levels not seen since January 2025.
• The Strait of Hormuz remains largely closed, leaving a backlog of tankers unable to ship oil to places around the world. China has called on all sides to cease military operations and allow for the safe passage of tankers through this critical waterway. China purchases much of its oil from Iran.
• According to local media in Iran, Iran has threatened to target oil tankers going through the Strait of Hormuz. However, US President Donald Trump said the US would provide naval escorts to ensure the safe passage of tankers. In response, the price of oil pulled back late in the day after advancing earlier in the session.
• Several countries have reached out to Canada’s Energy Minister to see if Canada can help meet their demand for oil. Energy Minister Tim Hodgson said it may take some time for Canadian producers to increase production.
• Global equity markets fell sharply yesterday. In Canada, the S&P/TSX Composite Index finished sharply lower.

The ongoing conflict in the Middle East is making investors nervous. In Canada, gasoline prices will rise, which could put more pressure on Canadians, who are already facing cost-of-living challenges. Geopolitical tensions have escalated, which could cause some choppiness in financial and commodity markets.

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.