Last week was one of the strongest equity stretches of the year. The S&P 500 gained 4.54%, the Nasdaq rose 6.84%, and the Dow advanced 3.19% for its third consecutive weekly gain. The driver was optimism: Iran’s foreign minister announced on Friday that the Strait of Hormuz was “completely open” to commercial shipping, oil fell more than 10% toward $84/barrel, and markets priced a meaningful probability that the eight-week conflict was approaching resolution. The S&P 500 closed Friday at 7,126.06, within striking distance of its January record high. Then the weekend produced a full reversal.

What the Weekend Did

The U.S. Navy fired on and seized the Iranian-flagged cargo vessel Touska in the Gulf of Oman on Sunday. Iran closed the strait again and vowed retaliation. Trump posted on Truth Social that “Iran decided to fire bullets yesterday in the Strait of Hormuz, a total violation of our ceasefire agreement” and confirmed the ship seizure. Iran’s National Security Council stated Tehran is “determined to exercise supervision and control over traffic through the Strait of Hormuz until the war is definitively ended and lasting peace is achieved.” Shipping advisory group Ambrey issued guidance to vessels to abort planned Hormuz transits and return to port. The ceasefire expires Wednesday, and Iran’s foreign ministry said this morning it has no plans for the next round of negotiations.

The consequence for Monday’s open is a full mechanical reversal of Friday’s geopolitical optimism premium, expressed simultaneously in oil and equities. Brent opened above $95/barrel. WTI traded above $89. Dow futures fell nearly 1%. The week that ended with record-adjacent S&P 500 levels is opening with meaningful downside before the first trade is placed.

S&P 500: A Record Week, Then a Monday Reversal
Approximate daily closes plus Monday pre-market signal, April 13-20, 2026
Mon Apr 13 Tue Wed Thu Fri Apr 17 Mon 6,811 6,898 6,966 7,041 7,126 Futures -0.8% Jan all-time high ~7,140
Source: Trading Economics, Yahoo Finance; Monday reflects pre-market futures signal, not confirmed close

The TSX’s Unusual Position

Canadian markets face a compressed catch-up dynamic on Monday. The TSX last closed at 34,346 on Thursday (the Good Friday holiday left Canadian markets closed Friday). That means Canadian equities did not participate in Friday’s U.S. rally driven by the strait-opening announcement. Monday’s open must price in two contradictory signals simultaneously: the 1.5% Friday U.S. rally that Canadian markets missed, and the geopolitical reversal over the weekend that pushed oil higher and equity futures lower. The net effect will depend on how Canadian energy names, which represent a significant TSX weight, respond to Brent above $95. If energy’s Monday gains are strong enough, they may partially offset the broad equity drag from geopolitical risk repricing.

The Bank of Canada’s April 29 decision is now less than 10 days away, and today’s March CPI data at 2.4%, while slightly below consensus, confirms the energy shock is in the price data. Markets are pricing a hold at 2.25% with near-certainty. Government of Canada bond yields have been sensitive to inflation data and to any shift in BoC language. A stronger-than-expected March print might have pushed yields higher; the slightly-below-consensus number removes that immediate pressure, though the April data, expected above 3%, will test the Bank’s “look-through” posture more directly.

What the Market Is Actually Pricing

The week’s most important variable is the Wednesday ceasefire expiry. Fidelity’s director of global macro research Jurrien Timmer noted in a recent analysis that despite the conflict producing a maximum S&P 500 drawdown of nearly 9%, the market has recovered to near all-time highs, driven by corporate earnings that have continued to beat expectations even as geopolitical uncertainty persisted. Timmer characterized the cyclical bull market as “bent but not broken” after 45 months. That resilience suggests the market is not pricing a severe or extended supply shock, it is pricing a recoverable one.

The binary that markets have been oscillating around for weeks is now concentrated in a 48-hour window. If Wednesday produces a ceasefire extension or a substantive deal, oil likely falls sharply again toward the $80-85 range and equity markets price a relief rally. If Wednesday passes without resolution and Iran’s “no plans for negotiations” language hardens, the conflict enters a phase with no expiry date in view. That second scenario does not automatically produce a market crash: the S&P recovered from a 9% drawdown with earnings intact, and there is no reason to assume the same resilience is unavailable again. But it would extend the energy uncertainty into May and June, deepening the secondary inflation transmission risk that is the Bank of Canada’s and the broader Canadian economy’s primary vulnerability.