Canada, U.S. markets fall amid inflationary fears and higher oil prices

The Bay Street financial district of Toronto is shown. THE CANADIAN PRESS/Doug Ives

TORONTO — Canadian and U.S. stock markets fell on Thursday as higher oil prices stoked inflationary fears.

“Every day is the same day, almost like Groundhog Day. It’s all about the price of oil. Oil prices go higher, the market goes lower,” said Allan Small, senior investment adviser at iA Private Wealth.

Oil prices moved higher as Iran intensified its attacks on oil and gas facilities around the Persian Gulf in response to an Israeli attack on an important Iranian natural gas field. The attacks added to fears that fighting may knock out production of oil and gas in the Gulf for a long time, which would mean high prices could last a while and cause inflation to rip higher around the world.

The May crude oil contract was up nine cents US at USUS$95.55 per barrel. Meanwhile, Brent crude, the international standard, briefly rose above USUS$119 per barrel in the morning before settling at USUS$108.65.

“That’s the risk … inflation will start to rise based on higher energy, oil prices (and) natural gas prices,” Small said.

But if the conflict were to end in the coming days or weeks, Small said the affects on inflation would be minimal.

The S&P/TSX composite index tumbled 457.69 points at 31,854.98.

In New York, the Dow Jones industrial average was down 203.72 points at 46,021.43. The S&P 500 index was down 18.21 points at 6,606.49, while the Nasdaq composite was down 61.73 points at 22,090.69.

The U.S. Federal Reserve and Bank of Canada elected to hold their respective interest rates steady on Wednesday, with both central banks acknowledging inflationary risks from the war in the Middle East.

Oil prices have gotten so high that traders are nixing bets that the U.S. Federal Reserve will cut interest rates even once this year. It’s a dramatic turnaround from before the war, when traders were betting heavily that the Fed would cut rates multiple times.

Now, traders are betting on a 73 per cent chance that the Fed will hold rates steady this year or maybe even raise them, according to data from CME Group. Just a month ago, those same traders were betting on a 74 per cent probability that the Fed would cut rates at least twice.

Most sectors were in negative territory on the TSX, with basic materials acting as the biggest weight on the overall index.

Meanwhile, energy was the only sector in positive territory, helped by gains from Canadian Natural Resources Ltd. and Suncor Energy Inc., which rose 2.98 per cent and 2.21 per cent, respectively.

As the Canadian energy sector sees gains from higher oil prices, Small said investors should be cautious as oil prices are likely to “plummet” if positive news emerges from the Middle East regarding a resolution.

The Canadian dollar traded for 72.84 cents US compared with 72.96 cents US on Wednesday.

The April gold contract was down USUS$290.50 at USUS$4,605.70 an ounce.

This report by The Canadian Press was first published March 19, 2026.

Daniel Johnson, The Canadian Press.