Canada’s main stock index was up more than 430 points in early afternoon trading, while U.S. stock markets also rallied after U.S. President Donald Trump extended his deadline for Iran to reopen the Strait of Hormuz.
Trump also held out the possibility of a resolution to the war — though Iranian officials denied there were negotiations.
The S&P/TSX composite index was up 435.21 points at 31,752.62, though it pared some early-morning gains. The index opened nearly 700 points higher.
In New York, the Dow Jones industrial average was up 738.21 points at 46,315.68. The S&P 500 index was up 84.08 points at 6,590.56, while the Nasdaq composite was up 294.05 points at 21,941.67.
Colin Cieszynski, portfolio manager and chief market strategist at SIA Wealth Management, said in a note to investors that a “swift and radical shift in sentiment” occurred during Monday morning trading.
“Early on, equities and precious metals were extending Friday’s losses amid threats of imminent attacks on Iranian energy production facilities that could further escalate the war. Just after 7:00 a.m. EDT this morning, President Trump tweeted that based on progress in talks with Iran over the weekend, the plan has been paused for five days to allow for more talks,” he said.
“This news turned U.S. index futures from negative to positive.”
Over the weekend, Trump had threatened to “obliterate” Iran’s power plants if it doesn’t open up the Strait of Hormuz within 48 hours. The strait has become a sore point for Trump because its near-closure by Iran has prevented oil tankers from leaving the Persian Gulf to supply customers around the world.
Financial markets have had vicious swings, both up and down, since the war began because of uncertainty about how long it may last. The fear is that the war could keep so much oil and natural gas from the Persian Gulf off global markets that it sends a debilitating wave of inflation crashing through the global economy.
The May crude oil contract was down US$9.67 at US$88.56 per barrel, while the April gold contract was down US$160.60 at US$4,414.30 an ounce.
Derek Holt, head of capital markets economics at Scotiabank, didn’t give much credence to Trump’s comments in a note Monday.
“I’ll leave you to decide whether it’s true that talks have evolved in such fashion, or whether Trump chickened out perhaps upon seeing markets or seeing Iran’s response, or whether someone benefited from the market swings etc,” he said.
“To say that U.S. foreign and domestic policy are in a state of utter chaos would be an understatement as uncertainty is being driven through the roof to the detriment of the economy and markets.”
The Canadian dollar traded for 72.96 cents US compared with 72.90 cents US on Friday.
— With files from The Associated Press