CHARTBOOK Market Comment

The conflict involving Iran has kept the Strait of Hormuz largely closed for most of the year and oil above US$100 through much of the autumn. Fuel prices like gasoline and diesel have surged, lifting headline inflation to 3.1% while core inflation (excluding energy) sat at 2.1%. The same split is wider in the United States, where headline inflation is 3.7% against core of 2.6%

In the United States, the Federal Reserve raised the target range for the federal funds rate to 3.75%–4.00% in September, noting that economic activity is expanding at a solid pace, domestic spending remains resilient, capital investment is robust and inflation remains elevated. That mix is supportive for earnings, but it has also pushed expected policy rates and longer-term bond yields higher. Canada is facing a similar tension.

On the trade rupture, Governor Macklem was specific: the newly tariffed products “represent about 5% of exports to the United States.”

As August begins, markets are navigating a more divergent macro backdrop. Global activity remains resilient, helped by U.S. consumption and AI-related investment, but inflation risk has not fully disappeared.

The war involving Iran and the disruption to transit in the Strait of Hormuz have lifted energy prices, complicated central bank decision-making and reintroduced a stagflationary risk into the outlook.

Major AI companies continue to grow at an extraordinary pace.

Markets enter May facing a more complex and less forgiving macro backdrop. The dominant near-term risk is the Middle East conflict and the resulting disruption to energy flows through the Strait of Hormuz.

Global markets face an increasingly volatile backdrop as the conflict between the U.S., Israel, and Iran has escalated into a full-scale regional war, disrupting global energy markets and rattling investor confidence.

Global markets entered 2026 with a complex backdrop: resilient but slowing economic growth, elevated policy uncertainty, and a meaningful shift in the relative performance of U.S. versus international equities.

2026 began with geopolitics related volatility, as the World Economic Forum brought world leaders together.

Recent market performance has raised questions about whether certain areas, particularly AI-related stocks, may be experiencing heightened optimism.