TORONTO – Canada’s main stock index dived, then pared back some of its losses to finish the day 2.2 per cent lower on Tuesday as investors worried about a widening of the war between Iran and the United States and Israel.
“The big fear with this conflict, the social ramifications aside, is what’s the impact going to be on energy and oil prices and how is that going to potentially translate into inflation?” said Michael Greenberg, head of Americas portfolio management at Franklin Templeton Investment Solutions.
He said that higher energy prices could also raise costs for other goods, given the impacts on things like shipping, input and manufacturing costs.
The cost of crude oil was up as Iran launched a series of retaliatory attacks, including a drone strike on the U.S. Embassy in Saudi Arabia. The April crude oil contract was up US$3.33 at US$74.56 per barrel.
The S&P/TSX composite index was down 756.33 points at 33,784.94.
Canada’s index was weighed down by sharp losses in the basic materials sector as the April gold contract was down US$187.90 at US$5,123.70 an ounce.
Greenberg said the rally in gold prices over the past year or two was largely driven by central banks buying the commodity, followed by interest among retail investors.
“What we’ve seen in the last couple of months is central bank gold buying has really slowed down, which is no surprise. As prices got to very elevated levels, it makes a lot of sense that some of these central banks would slow their buying,” he said.
Greenberg said declines in gold prices have a greater impact on the performance of the TSX compared to U.S. indexes.
In New York, the Dow Jones industrial average was down 403.51 points at 48,501.27. The S&P 500 index was down 64.99 points at 6,816.63, while the Nasdaq composite was down 232.17 points at 22,516.69.
Worries are particularly high about the Strait of Hormuz off the coast of Iran, a narrow passageway where roughly a fifth of the world’s oil passes.
Iranian Brig. Gen. Ebrahim Jabbari, an adviser to the paramilitary Revolutionary Guard, vowed that any ships that passed through the strait would be set on fire.
“Any longer-term shutdown of that shipping lane will add dramatically to the cost to shipping oil globally, if not hampering the supply,” Greenberg said.
Making things uncertain for markets is the question about how long this war may continue.
A major attack by the United States and Israel has already killed Iranian Supreme Leader Ayatollah Ali Khamenei, but Trump said late Monday night on his social media network, “Wars can be fought ‘forever,’ and very successfully” with the supply of munitions that the United States possesses.
Some professional investors said again Tuesday they don’t think this is the beginning of a long-term down market and that stocks could rebound if the war doesn’t last that long. But they acknowledge it could take a while for that to become clear, and Tuesday’s swings for markets show how uncertain things are.
Anish Chopra, managing director with Portfolio Management Corp., says fears of a longer conflict between the U.S. and Iran were driving a risk-off sentiment in Canadian and U.S. stock markets.
“Markets are trading in a risk-off mode as investors are concerned by the conflict in the Middle East, the fact that it’s escalating and the potential that it could last for longer than what people were anticipating,” Chopra said.
“As a result of that, you’re seeing significantly higher oil and gas prices, and the concern around oil and gas prices rising is a resurgence in inflation.”
He added that higher inflation could impact the path of interest rates.
The Canadian dollar traded for 73.08 cents US compared with 73.06 cents US on Monday.
This report by The Canadian Press was first published March 3, 2026.
Companies in this story: (TSX:GSPTSE, TSX:CADUSD)
— With files from The Associated Press.
