The TSX Capped Energy Index and WTI crude, both indexed to 100 on May 15. The two series tracked closely until Wednesday's oil crash on Trump's "final stages" comment, then diverged Thursday when the Khamenei edict sent WTI surging but energy stocks barely responded -- the gap at Thursday's close is the market pricing a deal outcome that the oil market is simultaneously questioning.

WTI crude (left scale) and the Government of Canada 5-year bond yield (right scale), May 15-21. Despite WTI's intraday spike of up to 4% on Thursday, the GoC 5Y yield moved only 2 basis points -- the bond market's muted response to a news event that sent crude surging signals that fixed income investors are not revising their probability estimate for a near-term deal to fail.

The GoC 5-year yield tracked WTI almost point-for-point from the March 4 Hormuz closure through the April 7 Brent peak at $138, then the two series began diverging as core inflation failed to accelerate. The 4-basis-point decline on May 20 to 3.31% represents the bond market explicitly pricing reduced risk of a June 4 hike.

TSX Materials peaked at 129.4 on April 6 as Brent hit $138; the index has since retraced 23.7% of its Hormuz-driven gain. TSX Financials crossed above the March 4 baseline on April 6 and have accelerated since the BoC hold on April 29, closing today at 112.4 indexed, their best level since the conflict began.

The GoC 10-year spread versus the U.S. 10-year has narrowed since the Hormuz closure began March 4, with Canadian yields pulled higher by U.S. Treasury contagion despite domestically softer core inflation. The April 29 BoC hold is marked; the May 19 CPI release produced no yield relief.

The TSX sector split on May 19 directly inverted the commodity thesis that drove the post-Hormuz equity rally: energy names advanced on oil above $104 WTI while mining names fell sharply as gold lost 2.9% on U.S. dollar strength from Treasury yield pressure. The TSX's net decline of 1.3% reflects the combined weight of that reversal.

Gold and the 10-year Treasury yield tracked inversely through the Iran conflict's early weeks, with gold rising as real yields fell on rate-cut expectations. The correlation broke sharply on May 15 as the bond market repriced the forward rate path upward on the first day of Warsh's Fed chairmanship, with the 30-year yield reaching 5.12%, its highest since June 2007.

WTI has not traded below $94 since the UAE attack on May 4. The IEA warned this week that the global oil market will remain materially undersupplied through October 2026 even if the conflict ends next month, removing the assumption that current prices are temporary. The ceasefire period in mid-April produced a retreat to $96, the lowest since the initial surge; prices have since re-established above $100.

The Q1 2026 EPS miss of 3.75% below consensus coincides with the BoC hold at 2.75%, which has compressed net investment spreads in Manulife's U.S. and Canadian segments since Q4 2025. The BoC rate step line shows the descent from 5.00% in 2024 to the current hold, with the hold zone shaded. Source: Manulife Q1 2026 earnings release; Bank of Canada rate decisions.

The Fed-BoC spread has widened to approximately 163 basis points, the largest gap since 2007. Warsh's June 16-17 FOMC meeting arrives twelve days after the BoC's June 4 decision, creating a sequencing problem: the BoC will set policy before knowing Warsh's direction. The BoC neutral rate reference at 2.50% shows that current policy is just 25 basis points above neutral with inflation still elevated by energy costs. Source: Federal Reserve, Bank of Canada.

The TSX carries 18.1% in energy versus roughly 3.9% in the S&P 500, and 7.4% in technology versus 31.2% in the S&P 500. The gap of 14.2 percentage points in energy exposure is the arithmetic basis for Wednesdays relative outperformance of Canadian equities against US growth indices.

Historical transmission from US producer service price inflation to Canadian consumer prices has run on a two-to-four-month lag. The July-August 2025 PPI acceleration appeared in Canadas CPI by October-November 2025. Wednesdays April PPI print of +6.0% year over year, if it follows the same pattern, would register in Canadian CPI by June or July 2026, straddling the Bank of Canadas June 10 and July 15 decisions.

The April 2026 acceleration to 3.8% represents a 1.4 percentage-point increase from February, the steepest two-month run in U.S. headline CPI since mid-2022; the shelter component's 0.6% monthly rebound in April introduces a secondary inflation driver that persists independently of energy prices.

WTI crude rose more than 45% from its pre-war baseline of approximately $70/barrel while gold gained roughly 6% over the same period; the divergence that opened on May 12 reflects the CPI print's dollar-strengthening effect suppressing gold demand precisely as geopolitical supply risk sustained oil's premium.