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Global markets are under pressure as escalating conflict in the Middle East pushes oil prices higher and raises concerns about inflation and economic disruption.
Crude oil continues to approach US$100 a barrel amid tensions involving the United States, Israel and Iran, fuelling worries about supply disruptions through the Strait of Hormuz, one of the world’s most important oil shipping routes.
Michael Dehal, a senior portfolio manager at Raymond James, said higher energy prices are weighing on investor sentiment and increasing concern about inflation.
Rising oil prices often ripple across the broader economy because petroleum is tied to transportation, agriculture and manufacturing costs.
Victor Kuntzevitsky, a portfolio manager at Stonehaven at Wellington-Altus Private Counsel, said prolonged disruptions to Middle East energy supplies could push inflation higher and complicate central bank decisions on interest rates.
Despite the uncertainty, global markets have not yet shown signs of widespread panic.
The Toronto Stock Exchange slipped 0.54 per cent over the past week but remains up roughly 2.07 per cent for the year. In the United States, the S&P 500 fell 0.64 per cent and is down about 3.30 per cent year to date.
Some market observers say the current reaction resembles early 2020, when global markets initially shrugged off mounting disruptions linked to the COVID-19 pandemic before volatility intensified weeks later.
Meanwhile, strains are emerging in the private credit sector, a rapidly expanding market in which investment funds make loans outside the traditional banking system.
The industry, estimated at about $1.8 trillion globally, has drawn attention after several firms limited investor withdrawals following spikes in redemption requests. Investment firms BlackRock and Cliffwater are among the latest to impose restrictions, highlighting concerns about liquidity risks if investors seek to pull money out quickly.
In commodities markets, the surge in gold prices is also drawing attention. Members of Canada’s Lundin family recently entered the Bloomberg Billionaires Index after a gold mine investment in Côte d’Ivoire generated massive returns, underscoring the renewed rush into precious metals as investors seek safe-haven assets during geopolitical uncertainty.
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