Iran strikes cap off a dizzying month of newsflow and volatility causing events

March 2026 Insights & Strategies

The U.S./Israeli attacks on Iran, and subsequent retaliatory strikes by Iran against U.S. assets and other countries in the region quickly became the most impactful event of the month. It is unclear how this conflict ends, but base-case scenarios are typically factoring in 3-5 weeks of military operations. We should at least expect a short-term spike in energy prices, with the extent and longevity determined by the length or extension of operations, and if escalation leads to any significant damage to energy infrastructure in the region, or extreme actions, such as the mining of the Strait of Hormuz.
Canadian GDP contracted by 0.6%, q/q annualized, in Q4, following a 2.4% increase in Q3, although key components suggested a firmer economy. Headline numbers can be volatile, due to variations in imports/exports and inventory distortions driven in-part by tariffs. On an annual basis, real GDP grew by 1.7% in 2025, the slowest pace since 2020, yet a reasonably resilient outcome given elevated trade uncertainty and tariff-related risks throughout the year.
The latest U.S. data showed 92k job losses in February, following a surprisingly good 126k (revised from 130k) gain in January. The U.S. unemployment rate has thus ticked up from 4.3% to 4.4%. New Canadian employment data for February will be released March 13. Canada’s unemployment rate was last reported as 6.5% in January.

In February, the S&P/TSX Composite posted price and total returns of 7.6% and 7.7%, respectively, bringing YTD returns of 8.3% and 8.6%. The S&P 500 recorded price and total returns of -0.9% and -0.8% for the month, and 0.5% and 0.7% YTD. The risk-off sentiment and concerns of escalation in the Iran conflict has led to losses in the first four trading days of the month, with the TSX Composite impacted by 2.1% and the S&P 500 by 0.7%.
Concerns and questions about A.I. disruption in various industries has led to a ‘sell first, ask questions later’ reaction that has impacted sectors like software, cybersecurity and wealth managers, despite what has been a strong earnings reporting season. While we do expect efficiencies and disruptions in many industries, changes are likely to take effect over many years, and likely allow companies that currently look like they’re being disrupted to become even more dominant.
Financial markets mostly shrugged off the impact of the IEEPA ruling, as the outcome was generally expected, the ability of companies to obtain refunds and the process and length of time that would be required to claim any such refunds will likely be questionable, and the fact that the Administration is, as expected, prepared to use alternative authorities to maintain its tariff platform.

The joint review of the USMCA, including the July 1 deadline to confirm if the agreement will be extended for 16 more years, will likely be the most consequential event for Canada this year. While we are optimistic of a reasonably good outcome for Canada, we are also braced for high-priority demands from the U.S. related to rules of origin, digital services, and the dairy industry, to impact various sectors.
The striking down of IEEPA-based tariffs has forced the U.S. Administration to shift tactics, but not to abandon its goals of tariffs as a policy tool and to drive government revenues. This is leading to persistent uncertainty that keeps businesses from longer-term planning and investing. We will be watching ongoing revisions to the tariff strategy.
The Iran conflict is rapidly evolving, and so we will be watching for both short-term and longer-term impacts to energy prices and broader economic impacts, depending on any further escalation and expected duration. Persistence in higher oil prices could stoke inflation concerns and push out the timeline for further Fed rate cuts.

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