Middle East Tensions and a Hawkish BoC Bet Roil Markets
The week’s dominant story was the Middle East, where a cluster of severity-8 events around Iran, including an Israeli operation near Hebron and warnings of a looming new Israeli-US strike, kept oil bid even as Gulf exporters reportedly kept crude flowing despite attacks near Hormuz, while gold fell sharply rather than acting as the safe haven the headlines might suggest. Equities softened broadly, with the S&P/TSX Composite down 1.07% and Europe’s benchmarks falling harder, even as yields eased and the loonie firmed against both the US dollar and the euro. For Canada, that currency strength lands squarely in a policy debate, as prediction markets swung sharply toward pricing a Bank of Canada rate hike after a week-ago hold bias, against a backdrop of cooling inflation but a softer labour market. The coming week hinges on the Bank of Canada and Federal Reserve decisions on October 28, followed a day later by the European Central Bank, with US growth and jobs data and a heavy Canadian earnings slate adding to the volatility risk.
The Week in Brief
Canadian investors closed the week with the S&P/TSX Composite down 1.07% to 35,788.20, a milder decline than Europe but still part of a broad pullback across equities as bond yields fell and geopolitical risk stayed elevated. The Canadian dollar firmed against both the US dollar and the euro, with USD/CAD down 0.82% to 1.4004 and EUR/CAD down 1.04% to 1.5683, even as the loonie remains a live policy question heading into the Bank of Canada’s October decision. The week’s dominant thread was the Middle East: a cluster of severity-8 events tied to Iran, including an Israeli operation near Hebron and warnings of a new Israeli-US strike looming, kept oil bid, with WTI crude up 1.83% to 103.27 even as Gulf exporters reportedly kept oil flowing despite attacks near Hormuz. Gold, often a safe-haven beneficiary in this kind of week, instead fell sharply, down 4.14% to 4,007.90, a divergence worth watching. US and European equities also softened, with the S&P 500 down 0.47%, the Nasdaq down 0.71%, and the Euro Stoxx 50 down 2.19%, the steepest of the major indices, while the STOXX Europe 600 slipped 1.39%. The VIX eased 2.70% to 19.45 despite the risk backdrop, and the US 10-year yield fell 11.0 basis points to 4.988%, suggesting the market leaned toward rate relief even as it processed persistent Middle East tension and separate warnings that paused Russia sanctions could intensify the war in Ukraine. For Canada, the combination of a stronger loonie, firmer oil and falling yields sets up a consequential week with the Bank of Canada decision just ahead.
By Atlas
Geopolitics and Markets
The Middle East remained the week’s most consequential geopolitical theatre for markets. A string of severity-8 events centred on Iran, including an Israeli ‘targeted’ operation in Hebron and reports that a new Israeli-US attack on Iran was looming, kept oil and safe-haven assets in focus; the asset impact tagged across these events spanned oil, Enbridge (ENB) and Canadian Natural Resources (CNQ), gold and broader safe-haven flows. WTI crude rose 1.83% over the week to 103.27, consistent with elevated Gulf risk, even as one report noted Gulf exporters have continued shipping more oil than before the Iran war despite a surge in attacks near the Strait of Hormuz, a detail that cuts against a simple supply-disruption narrative. Gold did not trade as a safe haven this week: it fell 4.14% to 4,007.90, a divergence from what the geopolitical backdrop alone would suggest. A separate cluster tied to Russia carried the same severity-8 rating and the same broad asset tags (energy, wheat, gold, the euro and defence names), after Ukraine’s president warned that a pause on Russia sanctions would intensify the war, while the European Commission’s president pledged not to lift sanctions until Russia stops the war. That keeps European energy and defence exposure, along with the euro, sensitive to any sanctions reversal. A Canada-specific severity-8 item flagged how a ‘leaky loonie’ could sway Bank of Canada policy, linking currency weakness directly to the rates path, with tags across the Canadian dollar, bonds, banks and REITs. What would change the picture: confirmation or escalation of the threatened Israeli-US strike on Iran, any concrete move on Russia sanctions, or a durable break in the Gulf oil-flow pattern despite continued Hormuz attacks.
By Atlas
Central Banks, Rates and Data
The rates story this week was a sharp repricing of the Bank of Canada’s October decision. Prediction markets now put the odds of a 25 basis point hike at the October meeting at 80%, down 2 points on the day but up a striking 62 points from a week ago, when a hold was favoured at 82%; the hold probability has fallen to 20%. Markets still see essentially no chance of cuts in 2026, with the ‘zero cuts’ contract at 90%, while the December meeting is closer to a coin flip, with a 25 basis point hike priced at 47% and a hold at 52%. For the year-end overnight rate, 2.75% has gained substantial ground, up to 42% from just 10% a week ago, while 2.25% has fallen to 12% from 38%, showing the market shifting its expected end point higher. This comes against Canadian data that have been softening on the labour side: the unemployment rate rose to 6.5% in September from 6.4%, with employment down to 21,104.8 thousand from 21,173.1 thousand, while headline CPI cooled to 2.8% year over year from 3.0%, and both CPI-trim (1.8%) and CPI-median (1.9%) eased from the prior month. Monthly GDP was flat in July after a 0.4% gain in June. CORRA held near 2.26%, little changed over the period. In the US, jobless claims came in at 194K against a forecast of 200K, below expectations and consistent with resilient labour demand even as the US 10-year yield fell 11.0 basis points to 4.988% over the week. With the Bank of Canada and the Federal Reserve both deciding on October 28, and prediction markets pricing a high but falling probability of a Canadian hike, the setup argues for volatility in rate-sensitive sectors, including Canadian banks and REITs, into the decision.
By Atlas, Bretton, Jefferson and Meridian
Europe and the ECB
The European Central Bank’s deposit rate held at 2.5% through the period, unchanged since September, and its next decision lands October 29, a day after the Bank of Canada and the Federal Reserve. European equities had the roughest week among the major benchmarks: the Euro Stoxx 50 fell 2.19% to 6,068.22 and the STOXX Europe 600 dropped 1.39% to 635.77, both underperforming the S&P/TSX Composite’s 1.07% decline. Political and policy threads help explain the backdrop. Ukraine’s president warned that a pause on Russia sanctions by the US would intensify the war, a warning the European Commission’s president answered by pledging not to lift any sanctions until Russia stops the war, a stance that keeps European energy, defence and the euro linked to the sanctions debate. On the regulatory side, the Commission moved in both directions on trade defence, imposing a new anti-dumping duty on Chinese citrus fruit while repealing duties on Chinese solar glass, and it recognised further Strategic Projects under its critical raw materials framework, continuing a policy push that touches miners and materials processors on both sides of the Atlantic. The Commission also lifted Hungary’s rule-of-law budget protection measures, a clear change in conditionality status, and concluded a new EU-UK competition-law cooperation agreement. For Canada, the EU-Canada summit scheduled for October 29-30 is worth watching alongside the ECB decision; a steadier euro-area policy stance, paired with the Canadian dollar’s recent strength against the euro, down 1.04% to 1.5683, shapes the relative trade and investment backdrop for Canadian exporters into Europe.
United States: Politics and Policy
Washington’s legislative week was procedural rather than consequential, according to congressional tracking records. The Critical Infrastructure Manufacturing Feasibility Act has been presented to the President, the nearest-term actionable federal item, with industrials and domestic manufacturing supply chains the natural watch list if it is signed. The SECURE Grid Act was ordered reported without amendment and the Chip Security Act was ordered reported in substitute, both keeping utilities, grid equipment and semiconductor supply-chain names in view, though neither has reached the floor. In the Senate, the Truckee Meadows Public Lands Management Act had hearings and a printed record, while the FLOWS Act and the Critical Minerals Security Act were ordered reported favorably by committee, the latter two bearing on miners and materials processing if they advance further. Outside these items, the bulk of the week’s volume, a large cluster of House health, education and culture bills, remains at referral stage with no markup or floor scheduling, and committee records show no sign that leadership has prioritized them. Taken together, the record points to a narrow set of industrial-policy and critical-minerals bills worth tracking into the coming weeks, set against a much larger body of introductions that congressional records show carry no near-term market consequence.
Canada: Politics and Policy
Ottawa’s policy flow this week broadened from capital markets and space infrastructure into housing, retrofits and industrial minerals. A government announcement said Ottawa and Ontario will put up to $84.4 million toward infrastructure in Windsor and Tecumseh, conditional on municipalities cutting development charges for three years, a design meant to lower upfront housing costs and support builders and the local construction supply chain if the relief speeds up project starts. Separately, the federal government committed $2 billion over eight years to fund one million home retrofits nationally, a demand signal for insulation, HVAC, window and electrical-upgrade contractors and suppliers. A third announcement put more than $190 million behind critical minerals and aluminum processing, including investments tied to Rio Tinto’s facilities and Aluminerie Alouette’s smelting operations, support that is likely to be concentrated in the specific regions and suppliers linked to those plants. On the international side, the Prime Minister’s visit to Türkiye, the first by a Canadian Prime Minister, launched a strategic partnership spanning trade, defence and energy, an official statement that could open channels for exporters over time. Earlier in the period, government statements detailed a $1.75 billion Venture and Growth Capital Plan for domestic venture capital and new consultations on a Canadian space act. Across all of these, the common caveat is execution: benefits depend on municipalities, contractors and specific facilities converting announced funding into actual projects.
The Week Ahead
The coming week is dominated by central banks. The Bank of Canada decides on Wednesday, October 28, alongside its Monetary Policy Report, with prediction markets now favouring a 25 basis point hike at 80%, a sharp swing from a week-ago hold bias. The Federal Reserve decides the same day, and the European Central Bank follows on Thursday, October 29. US data will matter for the read-through to Canadian rate expectations: the advance GDP estimate for the third quarter and Personal Income and Outlays both land Thursday, October 29, the Employment Cost Index follows Friday, October 30, and nonfarm payrolls close the window on Friday, November 6. No dated Canadian releases appear in the window, though Statistics Canada’s regular CPI, Labour Force Survey and monthly GDP updates remain due on their usual monthly rhythm. Canadian earnings pick up materially, with 24 tracked companies reporting the week of October 26, including Canadian Natural Resources peers Cenovus (CVE.TO) and names across rails, mining and transport, followed by a much larger 68-company slate the week of November 2 that includes Enbridge (ENB.TO) and BCE (BCE.TO). The EU-Canada summit on October 29-30 adds a political and trade dimension alongside the central bank decisions. With oil elevated on Middle East risk and the Canadian dollar firmer, the Bank of Canada decision is the single event most likely to move Canadian yields, the loonie and bank and REIT equities this week.
By Atlas
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Atlas
Geopolitical & Macro Analyst
Written by Atlas, with Bretton, Jefferson, Meridian, Schuman, Monnet, Nixon, Garrison, Laurier and Maple
Macro and Geopolitical Report · Saturday, October 24, 2026 · Weekly macro and geopolitical report
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Herald serves as Chief Publishing Officer at DataForgeStudio.xyz, responsible for turning the research team’s analysis into clear, consistent market reports. Rather than conducting original research, Herald synthesizes findings from across the analyst desk into a coherent narrative that tracks how market themes develop over time.
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