, highlighting how uncertain a path to ending the war remains. While Trump has claimed Tehran is eager for a deal, Iranian officials insist there are no negotiations and have only received indirect messages through intermediaries. For now, any agreement appears difficult given wide gaps, as the U.S. proposal includes demands like dismantling Iran’s nuclear program and control over the Strait of Hormuz, while Iran is seeking guarantees, compensation, and sovereignty over the waterway. Meanwhile, the conflict continues to escalate with ongoing strikes across the region, even as its global economic impact deepens.
Stocks rose yesterday as falling oil prices and (tentative) signs of progress on a U.S. proposal to end the Iran war boosted investor sentiment, even as mixed messaging from Iran kept markets on edge. Hopes for de-escalation helped fuel rallies in fuel-sensitive sectors like airlines and cruise lines, while energy stocks lagged as oil dropped more than 2%. Tech also led gains, with chipmakers such as Advanced Micro Devices, Intel, and Nvidia rising, alongside a rally in space-related names on IPO optimism tied to SpaceX. Despite the rally, markets remain highly sensitive to geopolitical headlines, with inflation concerns from earlier oil spikes shifting expectations away from Fed rate cuts this year.
The U.S. and China have rescheduled the much anticipated meeting between Trump and Xi Jinping for May 14–15 in Beijing after it was delayed due to the Iran war. The war isn’t doing any favours for the meeting given China’s ties to Iran and the broader impact of rising oil prices. Still, both sides are trying to stabilize relations following last year’s tariff truce and ongoing tensions over trade and Taiwan . The meeting will serve as a critical test of how aligned the two leaders are on trade policy, geopolitical risks, and energy market disruptions, especially as the U.S. considers new tariffs and both countries weigh the economic fallout from the war.
Flip flopping. Markets have rapidly swung to pricing aggressive rate hikes in response to the Middle East energy shock, but this reaction may be overdone. Traders have quickly repriced expectations as oil and gas prices rise, flipping from rate cuts to multiple hikes across major economies, including a dramatic 125 bps swing in UK rate expectations and new tightening bets for the ECB . However, unlike last time central banks raised rate in 2022, interest rates are already much higher, fiscal stimulus is smaller, and early data show growth is weakening. With this in mind, some economists still expect rate cuts, arguing the inflation spike will be temporary while the hit to growth and employment will be more persistent, making it difficult for central banks to justify tightening if economic conditions deteriorate.
Ottawa and Alberta have reached an agreement in principle that reflects a policy trade-off with Alberta committing to reduce methane emissions by 75% below 2014 levels by 2035 using its own regulatory framework. This means the province would design and enforce its own rules, incentives, and compliance mechanisms rather than apply federal regulations directly, provided it delivers the same outcomes. In exchange, Alberta would be exempt from federal methane rules. The arrangement is part of a broader MOU (memorandum of understanding), a non-binding agreement outlining cooperation on advancing major energy projects, including a proposed West Coast pipeline. Discussions on carbon pricing and carbon capture remain ongoing. The structure reflects a coordinated federal–provincial approach, which some may view as pragmatic in balancing environmental targets with economic development, though execution and equivalency will ultimately determine its effectiveness.
Staying on the theme of federal–provincial coordination, housing policy is also getting a lift through joint tax measures. Ontario has proposed a temporary expansion of the HST rebate that would effectively eliminate the full 13% sales tax on new homes priced under $1 mln, extending eligibility to a broader group of buyers, including some repeat purchasers and investors. For homes valued up to $1.5 mln the temporary measure would see them qualify for the maximum $130,000, decreasing proportionally to homes valued at $1.85 mln, which would qualify for a $24,000 rebate. Announced by program is expected to run from April 2026 to March 2027, with the March 2027, with apparent federal support from Carney to offset part of the fiscal cost, despite no federal representatives present at the announcement. The policy is aimed at stimulating demand and clearing a large overhang of unsold pre-construction inventory following a sharp decline in condo sales, though its effectiveness may skew toward absorbing existing supply rather than driving new construction activity.
Diversion: Not Quite
