The War Premium Round-Tripped Itself in Five Weeks
WTI crude settled at $89.31 a barrel on Friday, down 3.12% on the session after Reuters reported that Pakistan, backed by China, is working to revive ceasefire talks between the United States and Iran. Brent fell a sharper 3.88% to $96.78. The pullback interrupted what had been the fastest run-up of the conflict's five-month history.
The shape of the move matters more than Friday's dip. WTI closed at $69.23 on June 25, the lowest level since February 27, the day before the war began, after the June 18 memorandum of understanding between Washington and Tehran reopened the Strait of Hormuz and tankers began clearing the queue. By July 15, with strikes resumed and the ceasefire unravelling, WTI had climbed back to $79.60. Five trading sessions later it reached $83.23, and by Thursday, after Iran-aligned Houthi militants struck two Saudi oil tankers in the Red Sea, a second chokepoint alongside Hormuz, it touched a six-week high of $92.19.
WTI's round trip from a post-ceasefire trough to a war-driven peak and back traces the conflict's escalation and de-escalation cycles closely, with the pre-war reference level marking how much premium remains priced in even after Friday's retreat.
The six-week high of $92.19 came Thursday on the Houthi strike against Saudi tankers; Friday's pullback followed reports of Pakistan-brokered mediation. The pre-war reference of about $69 reflects the last WTI close before the February 28 conflict began.
A Record That Did Not Survive Forty-Eight Hours
The TSX Composite closed at a record 35,485 on Wednesday, lifted by the same energy rally that pushed oil toward its six-week high. The record lasted one session. Thursday's close fell 0.82% to 35,193 as broad weakness in mining, technology, and financial shares overwhelmed the energy sector's gains, with Royal Bank down roughly 1.4% and TD Bank down approximately 1.7% as bond market volatility spread through rate-sensitive names.
Friday brought a partial recovery. The index added 176.44 points, or 0.50%, to close at 35,369.10, with energy the only sector to finish in negative territory, an inversion of Wednesday's pattern that reflects Friday's oil reversal more than any change in the broader macro picture. Measured start to finish against the prior Friday's close of 35,263.85, the TSX gained roughly 0.30% for the week, a modest result given that the underlying commodity most tied to the Canadian index posted its strongest week since March.
South of the border, the same week produced steeper losses. The S&P 500 fell 0.6%, the Dow 0.4%, and the Nasdaq 2.1% for the week, weighed down by a selloff in megacap technology names after Alphabet raised its 2026 capital expenditure forecast to a range of $195 billion to $205 billion, reviving concerns about the pace of artificial intelligence spending among hyperscalers.
The Currency the Oil Rally Should Have Lifted
Canada's currency did not participate in the week's energy story the way the historical relationship between oil and the loonie would suggest. USD/CAD closed at 1.4082 on Friday, up from 1.40205 a week earlier, a decline of roughly 0.44% for the Canadian dollar even as WTI gained more than 9%.
The disconnect traces to the bond market rather than the oil market. Canada's 10-year government bond yield closed at 3.60% on Friday, down from an over one-month high of 3.66% on Thursday, as the same energy-driven inflation concerns that have lifted the loonie in past episodes of this conflict are being read differently this time. Statistics Canada's June inflation reading, released mid-month, showed the annual rate cooling to 2.8% from 3.2% in May, while producer prices fell 1.4% month over month, the sharpest monthly decline since December 2023. The Bank of Canada's preferred core inflation measures fell to their lowest levels in more than five years. Each of those figures argues for a central bank with less reason to tighten, not more, even with oil back above $89.
Meanwhile the U.S. 10-year Treasury yield closed at 4.69% on Friday, more than a full percentage point above its Canadian counterpart. When a currency's yield support narrows against its largest trading partner at the same time its commodity backdrop improves, the two forces can cancel out, which is roughly what happened this week.
This week's asset moves split cleanly along two different stories rather than one, with the energy complex posting its strongest week since March while North American equity benchmarks and the Canadian dollar moved the other way.
Weekly percentage change for the seven days ending July 24, 2026. TSX and CAD figures are calculated from Canadian Press wire closes on July 17 and July 24; equity index and gold figures reflect Investrade and Forbes Advisor weekly summaries.
Four Dates in Six Weeks, Pulling in Different Directions
The next six weeks bring a sequence of decisions that will matter more for Canadian portfolios than this week's headlines. The Federal Open Market Committee meets July 28 and 29, with Chair Kevin Warsh's policy statement due at 2 p.m. Eastern on the 29th. A hold is the consensus outcome, but Trading Economics puts the odds of a September increase above 80%, a striking figure for a central bank not previously expected to raise rates again in this cycle.
Three weeks later, on August 19, a 50% tariff on a range of Canadian autos, alcohol, and dairy products takes effect under Section 338 of the Tariff Act of 1930, following the three presidential proclamations President Trump signed on July 20. Prime Minister Mark Carney has called the move a direct violation of the Canada-United States-Mexico Agreement.
Two weeks after that, on September 2, the Bank of Canada holds its own decision, its first since the July 15 hold that kept its policy rate at 2.25% for a sixth consecutive meeting. Bond markets currently price roughly a 4% probability of a hike that day, according to nesto.ca's tracking of rate-dated contracts, essentially the mirror image of the Fed's own September odds. The Fed's next projections meeting follows on September 15 and 16.
What Widens the Gap Between Here and September
None of this week's moves individually forces a reassessment. Together, they describe a mechanism advisors should have in view before Labour Day. If the Fed delivers on even a portion of its priced-in September hike while the Bank of Canada holds at 2.25% for a seventh straight decision, the yield gap that already pressured the loonie this week widens further, independent of anything oil does. Layer the August 19 tariff deadline into the same window and Canadian-dollar-denominated portfolios face two distinct headwinds arriving in sequence rather than as one large shock.
The TSX's resource weighting has offered genuine protection through the geopolitical phase of this conflict, and Friday's energy-only decline shows that protection working exactly as designed. What Friday does not show is protection against a rate story. A portfolio built entirely around the war premium has been right for five months. The next six weeks test whether it is built for the part of this story that has nothing to do with the Strait of Hormuz.