The resources heavy Toronto Stock Exchange raced to fresh record intraday and closing highs after rising for a fourth straight session on Monday, even as a sharply lower oil price prompted both RBC and National Bank to try and put the related market shock in context.
Today the TSX closed up 359.53 points or 1% at 34,830.89 with most sectors higher. After climbing above 34,840 early in the session, the index then succumbed to some likely profit taking, but then it recovered from nearer 34,700 mid-afternoon.
According to Dow Jones Market Data, FactSet the TSX going in to Monday was month-to-date up 1.49% and year-to-date up 2,758.60 points or 8.70%.
Base Metals led gainers (up 2.3%) as gold traded higher by midafternoon Monday with the U.S. dollar falling on hopes the United States and Iran are nearing a deal to end the three-month war that has caused the largest-ever energy supply shock. Gold for July delivery was up $49.60 to US$4,606.00 per ounce in electronic trade, with markets closed for the Memorial Day holiday.
But Energy was down 3.3% as oil traded sharply lower midafternoon Monday, falling more than 6% as peace negotiations between Iran and the U.S. continue, raising hopes for a deal that will reopen the blockaded Strait of Hormuz. West Texas Intermediate crude oil for July delivery was last seen down US$6.21 to US$90.39 per barrel in electronic trade, with markets closed for the Memorial Day holiday, July Brent oil was down US$7.40 to US$96.14.
RBC today moved to put the oil price shock in context, and noted lots of focus on the nominal price of oil (Brent/WTI). The bank said nominal prices matter for inflation, but added the real oil price (i.e. cost per barrel divided by the price level or equivalently the CPI adjusted price of oil) matters for real GDP growth.
Among observations, RBC noted the current real price of oil is around the average since 2006. "Oil is neither low nor high." It also noted that to reach the real oil price high in 2022, the nominal price needs to rise to US$131 (+25% compared to current WTI); to reach the average real oil price between 2011-14, the nominal price of oil needs to reach $143 (+38%); and to hit the 2007-2008 average real oil price, the nominal price needs to hit $164 (+58%).
In looking at what does it potentially mean, RBC said, yes, the nominal price will cause headline inflation and maybe cause a rise in core inflation.
According to RBC, economies generally managed growth "just fine" since 2006 with a similar real oil price as now, and demand destruction is probably a long way off. The bank noted oil intensity, the volume of oil required to generate one unit of gross domestic product (GDP), has been steadily falling over the past 40 years (down 50% since the mid-70s) and particularly in the past 20 years due to improvements in technology & transportation. "Thinking about it another way, the U.S. consumes roughly the same amount of barrels now as in the mid-70s, but real GDP is higher by a magnitude of 3.5x. So, an oil shock has been having a smaller impact on demand/consumption/GDP over time," RBC added.
For policymakers, RBC said "the inflation consequences are real while the demand implications are murkier." To protect against the worst outcome (inflation), policy might need to be tightened, even if reluctantly, the bank added. "Now if a US-Iran deal caused oil to fall materially, the calculus would shift significantly less hawkish. This is a generic conclusion on central bank reaction functions."
Elsewhere, Ethan Currie and Taylor Schleich over at National Bank noted economic data in Canada has "stumbled out the gate" so far in 2026, both in absolute terms (for example, the year-to-date employment decline) and relative terms (compared to consensus expectations).
Indeed, last week, Canada's economic surprise index reached its lowest level since the fall of 2022, they said. "Back then, the Bank of Canada was bludgeoning the economy with rate hikes, after an oil supply shock that began earlier in the year contributed to an inflation surge. Sound familiar?," the National Bank added.
But when it comes to the economic and inflation environment in 2026, this time is different, allowing the Bank of Canada to take a more patient policy approach, according to the National Bank duo.