04:15 PM EDT, 05/06/2026 (MT Newswires) -- The Toronto Stock Exchange closed higher for only the second session in the last nine on Wednesday as National Bank noted markets are rejoicing over news the United States and Iran are nearing a peace deal, and said even though G7 yields may remain high, the overall economic environment "favours Canada as a relative outperformer" given the nation's inflationary and fiscal standings.

The S&P/TSX Composite Index closed up 414.91 points, or 1.2%, to 33,981.82 with most sectors higher, led by Base Metals, up by more than 6%, as gold gained on the possibility of an easing in Middle East tensions. Energy was the biggest loser, down 5%, with oil prices going the opposite direction to gold on the U.S. and Iran news.

National Bank noted markets rejoiced this morning over news the U.S. and Iran are nearing a peace deal. But even with today's bond market rally, advanced-economy yields remain considerably higher than they were before the Iran conflict began, the bank said. In fact, it added, the average G7 10- and 30-year borrowing cost ended April at 17-year highs and Canada remains within a few basis points of these levels today.

Even if a the combatants reach a permanent de-escalation, the risk that the long-end remains high is very real, National Bank said. Certain members of the group, notably the U.S. and U.K, were already contending with overly high price pressures before a single missile was launched. Several members have been overly generous in their spending by subsidizing energy (or cutting taxes), despite the fragility of their public finances, the bank noted. "The lack of fiscal discipline combined with a high level of geopolitical risk will continue to put upward pressures on term premiums going forward," National Bank added.

On the foreign-exchange side, National Bank said markets are increasingly treating the long-term yield moves as risk premiums rather than return premiums. For the U.S. dollar (USD), safe-haven flows are reversing, and the broad USD is now nearly back to where it was before the conflict, leaving it still down 7% from when President Trump first took office. In Japan, higher yields are undermining, rather than restoring, yen support, the bank noted. "While G7 yields may remain high, this environment favours Canada as a relative outperformer given that inflation was much better contained and fiscal policy is on a more sustainable trajectory. We expect some near-term softness through Q2 but look for the currency to strengthen into the second half of the year," National Bank added.

Of commodities, West Texas Intermediate crude oil plunged 7% on Wednesday following reports the U.S. and Iran are close to an agreement to end their war, offering up the possibility the Strait of Hormuz could soon reopen. WTI crude oil for June delivery closed down US$7.19 to settle at US$95.08 per barrel after touching US$88.66 in Asia trade, while July Brent oil was down US$9.13 to US$100.74.

But gold was higher by midafternoon Wednesday as the U.S. dollar and yields were sharply lower on reports of an Iran peace deal, while U.S. private-sector hiring surged last month. Gold for June delivery was last seen up $138.50 to US$4,707.00 per ounce.