TORONTO, March 7, 2026, 01:32 EST
Canada’s main stock index ended Friday at a two-week low, capping its worst week in over a month, as a war-driven oil spike and inflation worries knocked down nearly every major sector. The S&P/TSX Composite Index closed at 33,083.72, down 1.6% on the day and 3.7% for the week. Nine of 10 sectors fell on Friday; financials lost 1.9%, industrials 2.4% and consumer discretionary 2.8%, though the index is still up 4.3% this year after a 28.25% gain in 2025. 1
The retreat jars with a late-February Reuters poll that had strategists looking for more record highs this year, arguing the TSX’s bias toward financials, industrials and commodity-linked companies would benefit from a global cyclical upswing. That made last week’s reversal matter more than a routine pullback. 2
Oil prices surged as the conflict effectively closed the Strait of Hormuz, a Gulf shipping lane that carries about a fifth of the world’s oil. Investors have increasingly warned that a prolonged disruption could reignite inflation, threaten growth and weaken the case for more interest-rate cuts. 3
The week started very differently. The TSX climbed 0.6% on Monday to a record 34,541.27 as energy shares rose 1.8%, while Canada’s manufacturing Purchasing Managers’ Index, or PMI, a survey of factory activity where readings above 50 signal growth, reached a 13-month high of 51.0. Philip Petursson of IG Wealth Management said Canada’s market is “so leveraged to oil” that Iran tensions do not always hurt local investors. 4
By Tuesday, that trade had cracked. The index dropped 2.2% as materials, the mining-heavy sector, sank 7.2% and gold slid 4.3%; Colin Cieszynski of SIA Wealth Management said investors realized the war “could last a while” and mining shares took the hit. 5
Wednesday brought a partial rebound, up 0.5%, led by a 2.2% rise in technology and a 6% jump in Shopify. SSR Mining surged 14.6% after agreeing to sell its 80% stake in Turkey’s Copler mine for $1.5 billion in cash, but the bounce came with caution after Canada’s services economy contracted for a fourth straight month. Michael Sprung of Sprung Investment Management said periods like this are a time to “take a pause” on portfolios. 6
Thursday brought more selling. The TSX fell 1% as materials dropped 3.9%; Brian Madden of First Avenue Investment Counsel said the market was not “immune to the broad-based de-risking” even with its heavy exposure to gold and energy. Energy still rose 0.9%, helped by an 8.5% jump in oil, while Canadian Natural Resources and Kinaxis gained after earnings. 7
Not everything cracked. The Canadian dollar rose 0.5% on the week and outperformed its major developed-market peers, while the Ivey Purchasing Managers’ Index, another business-activity survey in which readings above 50 signal expansion, climbed to 56.6 in February, its highest since September. Still, the Ivey employment gauge slipped to 49.4, a sign the domestic backdrop was not clean. 8
The selling was not just Toronto. Wall Street’s S&P 500 lost 2.02% for the week, while Europe’s STOXX 600 shed 5.5%, its biggest weekly drop in almost a year, as the same oil shock and weak U.S. jobs data hit risk appetite across markets. 9
The risk for Toronto now is that oil, not earnings, sets the tone again next week. Investors will watch whether the Middle East war broadens and how much it disrupts supply, alongside U.S. inflation data; Michael Arone of State Street said oil above $100 a barrel would “spook markets more,” and an upside inflation surprise would be bad for stocks. A pullback in crude or signs of diplomacy would likely ease some of that pressure, but last week left little doubt about what is driving the TSX. 10
