The TSX composite shed 241.82 points Wednesday, closing at 34,412.05. The proximate cause was a single news event: Iranian state television reported that Tehran had agreed, in a draft memorandum of understanding with the United States, to restore commercial traffic through the Strait of Hormuz to pre-war levels within one month. WTI crude fell 5.55% on the report, settling at $88.68. The White House called the report a "complete fabrication." By Thursday morning, with the IRGC having struck a U.S. airbase and launched a ballistic missile toward Kuwait overnight, WTI had recovered to $90.75 and TSX futures were indicating a higher open.
The day illustrated, with unusual clarity, the mechanism that has governed TSX performance since March 4: oil moves, and the energy-heavy index follows. Energy names led Wednesday's decline and will lead Thursday's recovery. The S&P 500, less sensitive to the oil-price oscillation and buoyed by chip stocks and consumer discretionary names that benefit from lower fuel costs, closed at a record for the second session running.
The Divergence Between Bay Street and Wall Street
The structural story of 2026 for Canadian advisors is the divergence between the TSX and the U.S. majors, and Wednesday crystallized it again. As WTI fell 5.55%, the Dow added 182 points to a record 50,644. Amazon rose 2.47%, Tesla gained 1.56%, Home Depot climbed on lower input cost expectations. Consumer discretionary, the sector most directly helped by declining gasoline prices, led U.S. gains. The exact forces that weigh on the TSX through its energy weighting are tailwinds for the U.S. index through its consumer orientation.
The GoC 5-year yield closed at 3.14%, up two basis points on the day but essentially flat for the week. The bond market is declining to treat Wednesday's oil move as a signal -- a sensible read given that the White House denial arrived within hours of the Iranian state media report. The 10-year U.S. Treasury sat at 4.48%. The CAD traded near 0.729 against the USD, also largely unmoved on the day, consistent with the market's assessment that no durable regime shift occurred Wednesday.
The chart above shows the TSX composite daily performance against WTI crude over the past ten trading sessions, illustrating the tight mechanical correlation between oil price moves and index direction in the current environment.
The TSX composite and WTI crude have moved in close correlation since May 14, with the composite tracking the oil price oscillation driven by Hormuz deal speculation. Wednesday's 5.55% WTI decline on the denied Iranian state media report produced the sharpest single-day index drop of the current two-week period.
Bank Earnings: Beats That Did Not All Reward Shareholders
All three banks reporting Wednesday cleared the bar. Scotiabank posted adjusted earnings of $2.02 per share against a consensus of $1.93, with provisions for credit losses falling sharply from $1.05 billion to $739 million. The bank raised its quarterly dividend to $1.71 and shares rose 1.2% in Toronto. BMO reported adjusted EPS of $3.67 against $3.45 consensus, with revenue climbing to $9.57 billion from $8.68 billion a year prior. The upside came predominantly from capital markets rather than domestic retail, which underperformed, a distinction flagged by Jefferies. BMO also announced the sale of its Transportation and Vendor Finance businesses to Stonepeak, a move that will trigger a $1.1 billion charge next quarter. BMO shares were flat on the day.
National Bank was the notable divergence. Adjusted EPS came in at $3.23 against a $3.13 estimate, revenue of $3.92 billion exceeded the $3.81 billion consensus, and the bank raised its quarterly dividend by 6.5% to $1.32. Capital markets advisory fees were up 35% sequentially. Shares fell 2.7%. The stock has run hard YTD on the back of the CWB integration and energy-driven earnings upgrades, and the market treated Wednesday's beat as confirmation of a story already priced rather than a catalyst for further re-rating.
What Thursday Opens With
The IRGC's overnight airbase strike and Kuwait ballistic missile launch have reversed the false-MOU oil decline. WTI at $90.75 and Brent at $96.28 mean energy names open Thursday with the tailwind that Wednesday removed. TSX futures are indicating a modestly positive open. U.S. futures, per Investing.com early Thursday data, are floating above the flatline -- resilient against the Iran escalation news in a way that reflects the U.S. index's structural insulation from oil price upside through its consumer and technology composition.
The GDP release due tomorrow morning from Statistics Canada will be the session's governing data event regardless of where energy settles. A Q1 print at or above the Bank of Canada's 2.3% annualized estimate would be modestly hawkish for the rate-sensitive sectors of the TSX -- financials and utilities particularly -- and could limit the upside from today's oil recovery. A softer print opens the door for those sectors to partially recapture Wednesday's losses.