Clarity at home, confusion abroad

Are markets underestimating the lasting economic impact of the Strait of Hormuz closure?

Market recap

• Equity markets rebounded this week as the conflict in Iran continues to wind down, clearing a path toward opening the Straight of Hormuz.
• The S&P 500 jumped 4.5% to a record high, led by technology and consumer discretionary.
• That came alongside a sharp pullback in oil prices, with WTI finishing the week just under $85, down from recent highs above $110.

Iran

Last week, the S&P 500 and Nasdaq both reached new record highs as investors began to anticipate an end to the Iran conflict¹. However, significant questions remain, with traffic through the strategically important Strait of Hormuz still well below its normal level. On Thursday, I moderated a webinar for BMO Capital Markets on the market implications of the conflict, and our consensus was that the worst is likely behind us, both in terms of the severity of the conflict itself and markets’ response. The two-week ceasefire between the U.S. and Iran was the defining moment: it proved that a negotiated settlement was possible, showing markets the proverbial light at the end of the tunnel. That gave investors confidence to re-enter the market, pushed stock prices higher, and allowed bond yields to come down. Since the ceasefire, however, progress has been less clear. Oil prices have come down, but not substantially, and we believe it will be some time before they fully normalize. Last week’s Pakistan-mediated negotiations also failed to produce a deal, which resulted in the U.S. administration’s decision to blockade Iranian ports. This increased tensions not only between the U.S. and Iran, but also between the U.S. and countries that rely on Iran for oil, such as China. On Friday, Iran declared the Strait of Hormuz “open,” but the U.S. vowed to keep the blockade in place until a deal is reached.² So far, the fragile ceasefire has largely been maintained, but it is unclear what will happen once the two-week deal has expired. Iran still has significant leverage in any negotiation. The question becomes: is the U.S. prepared to concede on anything substantial enough to convince Iran to back down? That, in our view, is the cloud that is still hanging over global markets.

Bottom line: Markets are seeing through the Trump administration’s bluster, instead returning to the economic fundamentals. What remains to be seen is whether investors will retreat as the impact of higher oil prices becomes clearer. If they do, we think it could be an opportunity to buy on the dips.

Canada

Victories in a trio of federal by-elections last week handed Prime Minister Mark Carney’s Liberal Party a majority government. But does this meaningfully affect Canada’s policy and economic landscape? In our view, its greatest impact will be on the implementation of Carney’s polices rather than the policies themselves. Carney’s high standing among Canadian voters—a recent survey conducted by Leger in late March placed his approval rating at 58%³—has clearly been bolstered by his proactive approach to trade, including the signing of several new bilateral agreements. That popularity is what set the stage for the recent by-election victories and opposition party defections, and the resulting majority government should clear the way for Carney’s policy priorities to be enacted more quickly. Those priorities include new trade deals and strategic partnerships, Canada’s ongoing response to the U.S. administration’s tariffs, and the upcoming renegotiation of the United States-Mexico-Canada Agreement (USMCA). In the meantime, the Canadian economy stands to benefit from higher oil prices. Carney’s decision to temporarily suspend the federal fuel excise tax should also provide some support for the consumer, which could have otherwise been a drag on Canada’s economy. And Canada’s energy resources create an opening for further partnerships with other countries.

Bottom line: While a majority government likely won’t change Mark Carney’s policy priorities, which remain trade-focused, it will make it easier for him to implement them.

A.I.

In addition to posting a solid earnings beat, Taiwanese chip manufacturer TSMC raised its forward guidance in its quarterly announcement last week, causing its stock price to soar.⁴ In our view, there were three key takeaways from this news. For one, the artificial intelligence (A.I.) story is still strong. At the beginning of the year, there were some concerns about A.I. companies’ valuations and capital expenditures. But after March’s market drawdown eased valuations somewhat, those fears have subsided, at least in the near term. Second, A.I. firms are likely to benefit from being less reliant on oil as a major input, and therefore less sensitive to higher oil prices, that companies in some other sectors. And third, TSMC’s positive guidance highlights that prices for computer memory remain elevated, though the company did note that they may have abated somewhat. The question is how much these higher memory prices will affect Tech companies’ earnings and, consequently, their stock prices. Higher input costs won’t be limited to just the major A.I. players like Nvidia and Google—they will affect any company that requires memory for their products, including phone manufacturers like Apple and Samsung, networking companies like Cisco, and personal computer makers like Lenovo and HP.

Bottom line: We view the rest of 2026 as a period of discovery, as markets learn how rising costs, including tariffs and elevated memory and oil prices, will impact Tech companies’ bottom lines—and how much of those costs will be passed along to the consumer.

Positioning

For a detailed breakdown of our portfolio positioning, check out the latest BMO GAM House View Report, titled From crisis to calibration: earnings anchor the next move

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Originally Posted April 20, 2026 – Clarity at home, confusion abroad

Source

¹S&P 500, Nasdaq push to closing records on earnings and Middle East optimism,” The Globe and Mail, April 15, 2026. 

²Blockade on Iran will continue, Trump says, after Iran says it will reopen Strait of Hormuz,” CBC News, April 17, 2026. 

³Canada Politics: Mark Carney Holds Strong Approval While the NDP Faces a New Test Under Avi Lewis,” Leger, April 1, 2026. 

⁴Wen-Yee Lee, Faith Hung and Ben Blanchard, “TSMC lifts revenue forecast, pledges more capital spending to meet AI chip demand,” Reuters, April 15, 2026.