The Toronto Stock Exchange closed higher on Monday, rising for the eighth time in nine sessions, helped by interest rate sensitive sectors like Information Technology and Financials as Desjardins said its "new path" for oil prices would tend to suggest a slightly earlier tightening in monetary policy in 2027 than previously assumed.
The resources-heavy S&P/TSX Composite closed up 183.48 points to 33,879.24, also buoyed by Base Metals and Energy, even with gold and oil prices off recent highs. Among sectors, Info Tech was up 4.5% and Financials up near 1%, while Base Metals was 1.25% higher.
According to FactSet, as of Friday, the TSX month-to-date was up 2.83% and year-to-date up 1,983.00 points, or 6.25%. This left the index off 2.45% under its record close of 34,541.27 set on March 2.
Desjardins was among those to publish a note looking at Middle East developments and their implications for its oil assumptions. Desjardins economists Jimmy Jean and Marc-Antoine Dumont said their base case forecast for oil prices now assumes a disruption that lasts longer than anticipated in the March Economic and Financial Outlook.
"Shortfalls seem likely to extend through mid-2026 and we believe that they will be only partially offset by emergency reserve releases and incremental gains in production elsewhere," the pair wrote. "On net, we estimate a cumulative supply loss of roughly 550-million barrels over the coming year. Production is expected to recover gradually but with a lag, implying a period of tighter inventories and elevated prices even if tensions cool."
Reflecting this altered supply path, Desjardins now leans towards a revised oil price outlook, seeing benchmark WTI crude at an average US$100 per barrel through April and May vs. US$80 to US$85 in March, before declining gradually. "These projections remain highly sensitive to the volatile and unpredictable nature of the conflict and the actions of the parties involved, which could materially affect our forecasts," Desjardins said.
If this path materializes, Desjardins added, headline inflation in Canada would be pushed higher, but underlying inflation pressures would remain more contained, given the current starting point of excess capacity and soft labor market. "The terms-of-trade and energy capex boost still needs to be weighed against the hit to household finances and confidence, as well as the margin compression in energy-intensive sectors," they noted.
Desjardins said its new path for oil prices would tend to suggest a slightly earlier tightening in monetary policy in 2027 than previously assumed, but not a material shift in the policy path at this time. Desjardins added it will publish its detailed estimates in an Economic and Financial Outlook next week, taking into account latest developments.
Of commodities today, West Texas Intermediate crude oil tested the US$100 per barrel mark before falling back after the United States said it will blockade Iran's ports after weekend peace talks in Pakistan ended without an agreement to end hostilities. WTI crude oil for May delivery closed up $2.51 to settle at US$99.08 per barrel, after earlier touching US$105.63, while June Brent oil was up US$3.92 to US$99.12.
Gold prices weakened for a second session Monday as the dollar rose after weekend talks between the United States and Iran failed to reach a peace deal, leaving the Strait of Hormuz blocked and continuing the largest-ever oil supply shock. Gold for May delivery was last seen down $19.90 to US$4,767.50 per ounce.