TSX Slides 1.3% as Middle East Tensions, Rate Hike Fears Fuel Sell-Off

The S&P/TSX Composite Index fell 1.3% on June 5, 2026, as escalating Middle East tensions and renewed interest rate hike fears triggered a broad sell-off. The decline marked the index’s biggest one-day drop in two weeks, wiping out gains from earlier in the week. Energy stocks led the retreat, even as crude oil prices jumped on supply disruption risks. Investors fled risk assets after reports of a missile strike in the region raised concerns about a wider conflict. Financials also weakened, pressured by stronger-than-expected Canadian employment data that reinforced expectations the Bank of Canada will keep rates elevated. The loonie briefly strengthened versus the U.S. dollar before paring gains. Market volatility spiked, with the CBOE Volatility Index surging over 15%. Analysts warned that the combination of geopolitical uncertainty and a tight labor market could sustain near-term pressure on equities.