The S&P/TSX Composite Index closed down sharply at the lowest in six weeks on Thursday, as shares in the base metals sector tumbled while investors weighed surging oil prices and heightened Canada-US trade tensions.
The index closed down 400.28 points, or 1.1%, at 35,506.28 with most sectors in the red. Base metals led decliners, down 5.8%, followed by utilities and telecom that closed down 1.6% and 1.5%, respectively. The financial sector was up 0.3%.
In commodities, West Texas Intermediate (WTI) and Brent crude surged as escalating attacks on oil tankers around the Strait of Hormuz and renewed threats to Red Sea shipping heightened concerns about further disruptions to Middle East oil supplies.
October WTI crude oil contract settled up $6.43, or 6.7%, at $102.48 per barrel, while November Brent oil was last seen up $6.71, or 6.6%, at $107.92 per barrel.
Meanwhile, December Comex gold futures dropped 2.1%, or $92.00, to $4,368.70 per ounce at last look.
In currencies, the US dollar edged up 0.2% against the Canadian dollar to CA$1.3831 at last look.
On monetary policy, the Bank of Canada is expected to begin raising interest rates with a 25-basis-point hike in December, according to Scotiabank Economics in a note.
Elevated trade uncertainty with the US and contained core inflation give the BoC room to wait for clearer evidence before acting, Scotiabank wrote.
Meanwhile, Rosenberg Research said the BoC should hold rates unchanged as escalating trade tensions with the US threaten to further weaken the Canadian economy.
With economic growth under pressure and the labor market weakening, further rate hikes appear increasingly difficult to justify until there is greater clarity on the trade outlook, added Rosenberg.
On the trade front, more than 53,000 Canadian small businesses are directly impacted by US tariffs, Canadian counter-tariffs, or both, the Canadian Federation of Independent Business said in a note. It estimates that of the 53,112 small businesses directly impacted, the majority are importers.
Notably, Canadians are backing Prime Minister Mark Carney and his Liberal government as they take on US President Donald Trump in the trade dispute, according to an Angus Reid Institute survey published on Thursday.
The Liberals' lead over the Conservative Party of Canada has widened to 14 points, with 46% of respondents supporting the Liberals versus 32% for the CPC, up from a four-point lead in July, said Angus Reid.