Canada’s main stock index retreated on Friday, as escalating military action between Israel and Iran rattled global markets and dampened investor risk appetite. The S&P/TSX Composite Index fell 0.5% to 26,490.64, reversing recent gains and reflecting heightened caution across sectors sensitive to geopolitical turmoil.
The market downturn was driven primarily by losses in technology shares, which dropped 1.5% as investors sought safety in more defensive assets. Financial stocks also declined nearly 1%, adding to the pressure on the benchmark index.
The sell-off followed Israel’s widescale strikes on Iranian nuclear and missile facilities, an operation Israeli officials described as the start of a prolonged campaign to prevent Tehran from acquiring nuclear weapons. Iran responded with threats of severe retaliation, fueling fears of a broader regional conflict.
In response to the rising tensions, investors pivoted sharply toward traditional safe havens. The materials sector, buoyed by gold mining stocks, advanced 0.6% as gold prices climbed on increased demand for security. The energy sector emerged as the day’s top performer, surging 1.7% amid a sharp rally in crude oil prices.
Oil futures soared as much as 13%, with Brent crude jumping over 10% to its highest level in nearly five months, reflecting market concerns about potential supply disruptions in the oil-rich Middle East.
Despite the day’s losses, the TSX remained on track for a third consecutive weekly gain, having set record highs earlier in the week. This resilience is attributed in part to the index’s heavy weighting in commodities, which tend to outperform during periods of geopolitical uncertainty.
“Gold and oil make up a big chunk of our market and anything commodities-based is relatively going to do well,” noted a senior investment advisor, highlighting the TSX’s defensive qualities compared to technology-heavy U.S. indices.
Looking ahead, investors will be closely monitoring diplomatic developments and any further escalation in the Middle East, as well as the upcoming G7 summit, which could influence global trade sentiment. For now, the TSX’s performance underscores the market’s sensitivity to geopolitical shocks and the enduring appeal of Canada’s resource-rich sectors during turbulent times.
