Macro and Geopolitical Report — Sunday October 18 2026

TSX Shines as Oil Surges on Gulf Conflict, US Markets Wobble

The week’s defining story was Gulf conflict spilling into oil markets, with tanker attacks in the Strait of Hormuz and drone strikes near Riyadh driving WTI crude up 7.81% to 99.02, even as Iran’s own state media claimed production had actually risen despite the war. US equities absorbed a parallel shock from hot inflation data, Retail Sales and PPI both beating forecasts, sending the VIX up 34.70% and pulling the Nasdaq and S&P 500 lower, while Canada moved the opposite way, with the S&P/TSX Composite climbing 2.93% and the loonie firming against both the US dollar and euro on its energy exposure. Russia-Ukraine tensions added a second geopolitical thread, with Washington and the EU diverging on sanctions. The week ahead hinges on the Bank of Canada and Federal Reserve decisions on October 28, both landing against a backdrop of elevated oil prices and rising volatility.

The Week in Brief

Canada had a good week on its own terms. The S&P/TSX Composite climbed 2.93% to 36,176.60, outrunning a US market that struggled under the weight of a hot inflation print and rising volatility. The Nasdaq fell 4.48% to 26,140.03 and the S&P 500 lost 1.95% to 7,659.44, while the VIX jumped 34.70% to 19.99 from 14.84 a week earlier, the clearest sign that US investors grew more defensive even as Canadian equities held up. European markets moved opposite to the US too, with the STOXX Europe 600 and Euro Stoxx 50 both higher, suggesting the pressure was concentrated in the most stretched parts of the US market rather than spreading broadly.

The Canadian dollar firmed against both the US dollar and the euro, a move that sits alongside WTI crude’s 7.81% jump to 99.02, as attacks on tankers in the Strait of Hormuz and on shipping more broadly kept an energy risk premium in the price of oil. That is the main channel linking this week’s geopolitics to Canadian markets: an energy-exporting currency and equity market benefiting while broader sentiment soured. Gold still slipped on the week even with the Hormuz and Russia-Ukraine headlines running hot, and the crypto fear and greed index eased to 53 from 64 at the start of the period, both consistent with a market more focused on supply risk in oil than on a broad flight to safety. US data released this week, firmer retail sales and much hotter producer prices than expected, add a second thread that will carry into the week ahead as the Federal Reserve and the Bank of Canada both meet.

By Atlas

Geopolitics and Markets

The Iran-linked Gulf theater remained the dominant driver of oil through the week. Reports of tankers hit in the Strait of Hormuz, drones targeting Riyadh, and ships attacked off the UAE and Yemen kept supply risk priced into crude, which rose 7.81% to 99.02. A notable counterpoint came from Iran’s own state media, which said the country’s oil production had actually increased despite the war, a detail that complicates any simple supply-shock narrative even as the tanker and shipping attacks continue to be the market’s main point of focus for energy names, airlines and shippers. Gold moved against the pattern a safe-haven story would predict, slipping 0.83% to 4,181.10 rather than catching a bid, which argues the market is treating this as an energy-specific risk rather than a broad flight to safety.

The Russia-Ukraine theater supplied a second, distinct pressure point touching energy, wheat, the euro and defence-linked assets together. Ukraine’s president warned that a US pause on Russia sanctions would intensify the war, a position at odds with the EU’s stance, where the European Commission’s leader pledged not to lift any sanctions until Russia stops fighting. Ukraine struck an oil facility in St. Petersburg in what was described as a massive drone attack, while Russia said Ukraine had resumed strikes on its refineries, keeping the energy-and-wheat channel into Europe live. None of this showed up yet in the currency: the US dollar index eased 0.36% to 101.84 over the week. The clearest catalysts to watch are any confirmed escalation in Hormuz shipping lanes, which would push oil and defence names further, or a genuine reversal in the US stance on Russia sanctions, which would ease pressure on European energy and wheat markets.

By Atlas

Central Banks, Rates and Data

This week’s rate story leaned more on data than on central bank decisions themselves. US Retail Sales rose 0.8% against a 0.3% forecast and Core Retail Sales rose 0.9% against 0.6% expected, while Core PPI came in at 0.7% against a 0.3% forecast and headline PPI at 1.3% against 0.6% expected, a combination of firm consumer spending and much hotter producer prices than markets had priced. That mix sits behind the week’s surge in the VIX and the pullback in long-end yields described earlier, a sign that bond investors leaned toward the growth side of the inflation-growth tension even with price pressures running hot. Prediction markets now put 80% odds on a Federal Reserve rate hike by December 31, 2026, rising to 92% by June 30, 2027, odds that will be tested directly when the Fed meets on October 28.

In Canada, prediction markets price an 82% probability the Bank of Canada holds at its October 28 meeting, down slightly from 84% a week ago, against an 18% chance of a 25-basis-point hike, up from 14%. For the December 31 overnight rate, markets put 38% on 2.25% and 45% on 2.50%, while the probability of zero rate cuts in 2026 for the year has risen to 94% from 90%. That repricing lines up with the domestic data: CPI eased to 3.0% year over year in August from 3.1%, but unemployment rose to 6.5% in September from 6.4%, employment fell to 21,104.8 thousand from 21,173.1 thousand, and monthly GDP was flat in July after a 0.4% gain. CORRA held near 2.27%. Together this points to a Bank of Canada more likely to hold than move in either direction, with the October 28 decision and accompanying Monetary Policy Report the key test for Canadian rate-sensitive equities and the currency.

By Atlas, Bretton, Jefferson and Meridian

Europe and the ECB

The European Central Bank held its deposit facility rate at 2.5% on October 16, unchanged from the prior reading though still well above the 2.25% level at the start of the 35-day window, a backdrop against which European equities had a strong week, with the STOXX Europe 600 and Euro Stoxx 50 both outperforming the major US indices even as volatility rose broadly. Prediction markets put 94% odds on the Bank of Japan holding its own rate decision on October 29, the same day the ECB meets, the next scheduled test of whether the rate-hold consensus across major central banks extends into the window ahead.

Politically, the European Commission announced a new strategy to combat human trafficking and, through an Executive Vice-President’s statement ahead of the International Day for the Eradication of Poverty, highlighted that people across Europe still struggle to afford housing, heating, food, healthcare and education, an official framing of the cost-of-living pressure running under the region’s otherwise strong equity week. Separately, the European Parliament’s president hosted Gulf Cooperation Council speakers, with both sides pledging deeper strategic ties, a sign the EU is keeping diplomatic channels open with Gulf partners while the Iran-linked conflict keeps the wider region tense. On the regulatory side, the EU converted policy into directly applicable measures this period, including a new regulation on the return of third-country nationals and implementing steps for the AI Act, steady institutional delivery rather than a market-moving shift. For Canada, a firmer EUR/CAD and a steady-to-firm ECB backdrop suggest European conditions are not yet a headwind to the loonie.

By Atlas, Schuman and Monnet

United States: Politics and Policy

US politics this week was mostly legislative process, but a handful of bills moved far enough through Congress to carry market relevance. The clearest signal is the Critical Infrastructure Manufacturing Feasibility Act, now presented to the President and awaiting signature, veto, or amendment, according to the congressional record. That puts domestic manufacturing and supply-chain-linked industrials on watch for near-term implementation. The SECURE Grid Act was ordered reported without amendment, a committee-level advance relevant to utilities, grid equipment, power infrastructure and cybersecurity names, while the Chip Security Act was ordered reported in substitute, bearing on semiconductors and export-control-sensitive hardware supply chains. The Fix Our Forests Act saw subcommittee hearings only, an earlier-stage step with eventual relevance for forestry, wildfire mitigation, insurers and utilities, but not yet a market trigger.

Beyond these four, the week’s House activity, including a cluster of health, education, housing and commemorative bills, and a Panama resolution, sits at referral or introduction stage only, the legislative record showing volume rather than conversion into binding action. There is no indication of trade or tariff action this period, and no sign yet of floor scheduling or Senate concurrence on the infrastructure, grid or chip measures.

By Nixon and Garrison

Canada: Politics and Policy

Ottawa’s policy activity this period was sector-specific rather than macro-wide, but across several government announcements a clear pattern of targeted support emerges. A federal housing announcement in Yorkton combined more than $5.6 million through the Affordable Housing Fund and the Rapid Housing Initiative to build and repair 60 rental homes for Yorkton and Yellow Quill First Nation, support that should flow to local builders, trades, materials suppliers and Indigenous housing delivery. A ministerial visit to the Westridge Marine Terminal reinforced a government message that Canada wants major energy export infrastructure kept operating safely, a signal supportive of energy export logistics and marine terminal services, a theme that connects directly to the oil-driven moves elsewhere in this report. A separate federal funding commitment to Conifex Timber Inc. is the clearest direct sector intervention of the period, suggesting Ottawa remains willing to cushion forest-sector firms exposed to softwood lumber trade disputes. Earlier announcements included Green Municipal Fund support for 162 projects nationally aimed at home energy retrofits, a tailwind for retrofit contractors and residential construction supply chains, and the closing of a Thompson Mine Complex transaction in Manitoba that helps secure a major nickel operation. Federal investment in a Hitachi Energy transformer insulation factory and Canada’s first pressboard manufacturing facility signals support for grid equipment localization. According to a Prime Minister’s Office record, Prime Minister Mark Carney spoke directly with President Volodymyr Zelenskyy, stating a Canadian position against Russia’s strikes on Ukraine’s energy infrastructure and criticizing a new US-Russia diesel supply agreement, a diplomatic statement rather than a funding commitment, but one that keeps energy security in view alongside the week’s Hormuz-driven oil move.

By Laurier and Maple

The Week Ahead

Three central bank decisions land in quick succession over the next two weeks. The Bank of Canada decides on Wednesday, October 28, alongside its Monetary Policy Report, the same day the US Federal Reserve announces its decision, with the European Central Bank following on Thursday, October 29. Prediction markets put an 82% probability on a Bank of Canada hold and 80% odds of a Federal Reserve hike by December 31, 2026, making the October 28 pairing the clearest scheduled test for the Canadian dollar, the S&P/TSX Composite’s rate-sensitive sectors, and US equities together.

Statistics Canada’s inflation, Labour Force Survey and monthly GDP releases are due on their usual monthly rhythm, though no specific dates fall within the current two-week window; watch for whether the easing trend in CPI, down to 3.0% year over year in August, continues against a labour market that softened to 6.5% unemployment in September.

Geopolitically, the Hormuz shipping and Iran-linked conflict remains the main swing factor for oil, which rose 7.81% over the week to 99.02, while the gap in tone between Washington’s pause on Russia sanctions and the EU’s insistence on holding firm bears watching for energy, wheat and defence-linked assets. Confirmed escalation in tanker attacks or a reversal in the Russia sanctions stance would be the clearest catalysts for oil and European energy markets respectively, later in the window.

By Atlas

Atlas Geopolitical & Macro Analyst Written by Atlas, with Bretton, Jefferson, Meridian, Schuman, Monnet, Nixon, Garrison, Laurier and Maple Macro and Geopolitical Report · Sunday, October 18, 2026 · Weekly macro and geopolitical report