04:23 PM EDT, 03/17/2026 (MT Newswires) -- The Toronto Stock Exchange closed higher for a second-straight day Tuesday, but closed well off session highs as Governing Council Members at the Bank of Canada are expected to leave interest rates on hold tomorrow as they wait to see how the Middle East war ends, and what economic implications it will have.

The resources-heavy S&P/TSX Composite Index closed up 52.44 points ,or 0.15%, to 32,929.09, adding to the near 335 points gained Monday. But the index was up 175 points near midday and was above the 33,250 level within the first hour of trade.

Most sectors were higher, led by Info Tech up 1.75% and then Energy up 1% as West Texas Intermediate crude oil closed higher, rebounding from a steep day-prior drop as worries over tightening supplies as the U.S. and Israel's war on Iran continues to block the Strait of Hormuz. WTI crude oil for April delivery closed up US$2.71 to settle at US$96.21 per barrel, while May Brent oil was up US$2.24 to US$102.65.

Base Metals eased less than 0.3% even though gold had risen off a one-month low Tuesday as the dollar fell ahead of Wednesday's interest rate decision from the Federal Reserve's policy committee, while Middle East violence continues to weigh on markets. Gold for April delivery was last seen up US$3.40 to US$5,005.60 per ounce, after testing but sticking above the US$5,000 mark a day earlier.

Desjardins' Royce Mendes and Tiago Figueiredo published a Bank of Canada preview. In it, the duo noted economists have spilled plenty of ink debating the economic impacts of higher oil prices. For Canada, they said, the national level implications are relatively straightforward. "If sustained, higher oil prices represent a positive terms-of-trade shock, lifting both economic output and inflation. That said, given that the spike has been the result of a supply shock rather than a demand shock, the impacts on the economy and inflation will be somewhat more muted."

According to the pair, the BoC's reaction function to higher energy prices is also "fairly clear". Even in a world where central banks are more sensitive to supply shocks, the Governing Council retains substantial flexibility to remain patient, they said, before adding that policymakers will generally look through an oil price shock unless inflation expectations become unanchored, underlying inflation reaccelerates or the output gap closes meaningfully.

"At this stage," they said, "it's far too early for central bankers to conclude that any of those conditions are materializing. That's particularly true in light of the recent deterioration in labour market conditions and very muted inflation readings. Beneath the surface, the labour market looks even weaker."

National Bank of Canada duo Ethan Currie and Taylor Schleich, said persistence of the oil supply shock will need to carefully be assessed by central bankers, but they added the near-term impact will not go unnoticed. In Canada, they noted, the highest pump price in two years could contribute upwards of 60 bps to March's CPI print, to near 2.4%. They don't expect headline inflation to cap there, either, as base effects from last year's carbon tax removal will also provide a boost in April.

"If recent economic data were the sole driver," the National Bank duo said, "it's likely that additional rate relief at the Bank would be priced. Instead, broader volatility and inflation risks will provide a counterbalance to softer indicators, keeping the BoC on the sidelines for 2026."