TORONTO – Canadian and U.S. stock markets fell on Wednesday amid interest rate decisions from the Bank of Canada and the U.S. Federal Reserve, with both central banks acknowledging inflationary risks from the war in the Middle East.
“It’s exactly what was expected, both the Bank of Canada and the Federal Reserve paused today … a lot of that is back to the uncertainty question — what is the impact of this war going to be on inflation in the near term?” said Ashish Utarid, assistant vice-president of investment strategy with IG Wealth Management.
The S&P/TSX composite index was down 616.42 points at 32,312.67.
In New York, the Dow Jones industrial average was down 768.11 points at 46,225.15. The S&P 500 index was down 91.39 points at 6,624.70, while the Nasdaq composite was down 327.11 points at 22,152.42.
The Bank of Canada held its benchmark interest rate steady at 2.25 per cent Wednesday as monetary policy-makers wait to see whether a surge in global oil prices tied to war in the Middle East becomes a wider inflation problem.
Bank of Canada governor Tiff Macklem said the energy price surge will almost certainly push inflation higher in the coming months.
Meanwhile, U.S. Fed officials expect the war will worsen inflation this year while having little impact on growth, but they still expect to cut the key rate once in 2026. For now, Fed policy-makers left short-term interest rates unchanged on Wednesday for the second straight meeting at about 3.6 per cent.
The U.S.-Iran war has made it difficult for anyone to make economic forecasts.
“If there’s an off-ramp that is in a few weeks, this will just be a tiny blip on the year-over-year inflation numbers,” Utarid said.
However, he said if oil prices remain elevated for a significant period of time, the higher energy costs will lead to demand destruction.
The May crude oil contract was down seven cents US at US$95.46 per barrel.
Oil prices have soared because the war has disrupted the Persian Gulf’s energy industry. Iran’s state television said Wednesday that the Islamic Republic would be attacking oil and gas infrastructure in Qatar, Saudi Arabia and the United Arab Emirates after an attack on facilities associated with its offshore South Pars natural gas field.
If the disruptions keep oil and gas prices high for long, they could create a debilitating wave of inflation for the global economy.
All TSX subsectors were negative on Wednesday, with basic materials acting as the biggest weight.
The April gold contract was down US$112.00 at US$4,896.20 an ounce.
“With more uncertainty, it’s plausible that investors look at the peak prices of gold and say, ‘You know what, I’m going to rotate out now. I’ve made my profit, let’s look for other opportunities,’” he said.
The Canadian dollar traded for 72.96 cents US compared with 73.00 cents US on Tuesday.
This report by The Canadian Press was first published March 18, 2026.
— With files from The Associated Press
Companies in this story: (TSX:GSPTSE, TSX:CADUSD)
