04:26 PM EDT, 03/30/2026 (MT Newswires) -- The Toronto Stock Exchange closed lower Monday, even with improved commodity prices as investors remain jittery about an escalation in the U.S-Israel war on Iran and fears over how high oil prices could get.

The resources-heavy S&P/TSX Composite Index closed down 25.71 points to 31,934.94, having been up around 310 points at midday. Most sectors were lower, led by Info Tech, down 1.35%, and Health Care, down 1%. The Battery Metals Index rose 2.9%.

Both the Base Metals and Energy sectors were also among decliners, even with gold up for a second day by late afternoon Monday as it regains ground lost to the dollar and bonds amid fears of rising inflation, with treasury yields falling as the war on Iran continues. Gold for May delivery was last seen up US$18.10 to US$4,542.40 per ounce.

Also, West Texas Intermediate crude oil closed above US$100 per barrel for the first time since July 2022, rising for a third-straight session with no end to the war on Iran in sight amid a widening conflict and concerns the United States will send ground troops into the country. WTI for May delivery closed up US$3.24 to settle at US$102.88 per barrel, while May Brent oil was down US$0.70 to US$111.87.

Market watchers continue to consider all the potential impacts the Iran war may have, with RBC among them in wondering 'will the oil-rates correlation break?'.

In a Canada Rates Strategy note, RBC said "trading (interest) rates has been trading oil". The bank noted "almost everything" in rates space; front end outright, long end, and various curves, has been "broadly correlated, by varying degrees", to oil prices since the outbreak of the Iran war. "Some days the beta has been lower, or non-existent, but it tends to regain its co-movement. There is some nascent evidence the beta is falling, but as long as oil trades within certain bounds we are not convinced that the relationship will truly break down," RBC added.

On oil scenarios and rates implications, RBC said on the US$80 to near $120 range, the oil-rates 'co-movement' should be "reasonably high" in both directions. Unfortunately, the bank noted, for fixed-income investors, this means trading rates is simply a derivative of trading oil for the next near $10-20/bbl in either direction. "But above $120 ... the relationship could break down partially, fully, or even switch signs as the negative growth risks rise and provide a material counterbalance to higher inflation," RBC added.

According to RBC, "slowdown risks are real". The bank said Canada is more insulated than most countries given secure supply and a large net energy trade balance. However, it added, there are various channels where higher oil can hurt the economy. "If oil slows global growth, it will have knock on effects to Canada. Discretionary consumer spending might slow as an increasing amount of disposable income is diverted to energy costs. Financials conditions are tightening, albeit from easy levels, and households are facing a trio of negative wealth effects (housing, stocks, and bonds). Another layer of uncertainty (in addition to the USMCA review) could impair sentiment at a time when the labour market is already on a shaky footing."

In reiterating comments it made last week, RBC said it has "sympathy for the faders", noting it has long thought the Bank of Canada would be on hold this year and hike in 2027, with the risks skewed towards hikes in the second half of 2026. That is still its base case. "But," the bank added, "three hikes priced to year-end seems like a fully baked outcome on a probability-weighted basis, assuming the starting point for hikes is later rather than sooner."

RBC said "the path to delivering hikes would be a slow burn evolution, requiring a marked change in the BoC's rhetoric, supported by an accumulation of evidence that expensive energy is feeding into the broader wage and price setting behavior of economic agents." The bank added with the economy in excess supply, different than in 2022, patience is an acceptable strategy. "But make no mistake, any signs of broader inflation pressures is likely to be met with some hikes, unless the economy is in a deep recession. We prefer to wait for higher conviction levels when there is tangible evidence of the oil-rates correlation breaking down and/or decisive signs growth is being impaired before fading the pricing in front-end rates. Long exposure in 10s or 30s is a better place to hang out for now (a spike in oil will have a lower beta impact on duration this far out the curve)."