Launch Pad

Canada added 18,200 jobs in June, beating expectations, with the unemployment rate falling to 6.5% from 6.6%. Hiring was concentrated in part-time and service-sector positions, led by retail and wholesale trade and accommodation and food services, while goods-producing industries lost 43,700 jobs, including a large decline in manufacturing. Private-sector employment increased while public-sector employment posted its largest monthly decline outside the pandemic since 2015. The data suggests Canada’s labour market remains soft but holding on better than previously thought, supporting the view that the economy is rebounding after two consecutive quarterly contractions. Stronger wage growth and falling youth unemployment are also signs of tightening, and the report is likely to reinforce expectations that the BoC will hold interest rates steady next week. 

The fragile truce appears to be under increasing strain as Iran resumes attacks on shipping in the Strait of Hormuz and the U.S. responds with sanctions and military strikes, although another temporary truce remains possible. Experts believe the base case is a return to a blockade and intermittent strikes as both sides try to build leverage, with a new ceasefire potentially emerging given U.S. political pressures and Iran’s economic and political vulnerabilities. For markets, the key variable remains Hormuz, as continued disruption could push oil toward $90–$120 per barrel or higher, reigniting global inflation and creating pressure on diesel, jet fuel, and shipping. On the other hand, a quick return to the ceasefire could send oil back toward $60–$70. If things do escalate, we could see the U.S. use its military to force the Strait open, greater involvement from Gulf or NATO allies, broader conflicts involving Israel and Hezbollah, or renewed attacks on Iran’s leadership. Despite the risks, markets appear relatively calm, thanks in part to large worldwide inventories, Chinese strategic reserves, and the growth of alternative pipeline routes. 

Renewed tensions in the Middle East have slowed shipping through the Strait of Hormuz, with energy markets now trying to contend with disruptions in the Middle East alongside reduced Russian refining capacity caused by Ukrainian attacks on energy infrastructure. Analysts are noting that there are some who stand to benefit though, with the recent escalation expected to deliver a major earnings windfall for oil producers and refiners, with European energy companies set to lead Q2 profit growth and U.S. oil companies projected to post their strongest quarterly earnings since 2022. Exxon Mobil and Chevron are expected to report profits more than triple their first-quarter levels. The windfall could create political complications for Trump, however, as higher fuel prices raise affordability concerns ahead of the November midterm elections. 

The Bank of Japan warned that higher energy costs stemming from the recent hostilities could prompt more Japanese companies to raise prices later this year, adding to inflation pressures and strengthening the case for interest-rate hikes. Businesses are passing higher fuel and raw-material costs more quickly than after the Ukraine war, with increases in food and everyday goods expected to continue. At the same time, the BOJ said economic risks from the conflict are easing as companies reroute shipments and find alternative suppliers, while growing global AI demand is boosting orders for chips, machinery, and data-centre equipment. The central bank is expected to keep rates unchanged at its July meeting after raising them to a 31-year high of 1% last month, but its updated forecasts could offer clues on the timing of future hikes. The main uncertainty is whether cost pressures spread to other areas and strain smaller companies that are already facing tighter finances. 

Quite the parting gift. NATO leaders left their summit in Turkey with an unusual gift from President Erdogan, a personalized vintage Turkish revolvers fully equipped with live ammunition. The engraved .357 Magnum handguns were intended to showcase Turkey’s growing defense industry, but the gifts created logistical and legal complications as leaders returned home, with several weapons held by airport police, embassies, or customs officials. Mark Carney joked that his gift of maple syrup had been outmatched and reassured Canadians that his revolver had been deactivated and could end up in the national war museum, with other countries also planning to deactivate the revolvers or place them in museums.