The Canadian dollar rose modestly against its US counterpart on Wednesday after the Bank of Canada maintained a wait-and-see approach on interest rates, while investors continued to assess the future of the North American free trade agreement amid ongoing uncertainty.

The Canadian dollar, commonly known as the loonie, gained about 0.2% to C$1.3925 per US dollar after trading in a range between C$1.3900 and C$1.3957 during the session. It had touched a six-month low of C$1.3969 on Tuesday.

The Bank of Canada left its benchmark interest rate unchanged at 2.25% for a fifth consecutive meeting, citing limited evidence that higher energy prices are feeding into broader inflation across the economy.

Swap market data showed investors now expect only around 32 basis points of rate increases by December, down from 37 basis points before the central bank's decision.

Darcy Briggs, portfolio manager at Franklin Templeton Canada, said Canadian economic data "is not strong," giving the central bank room to remain on hold and monitor developments.

First-quarter GDP data had previously shown the Canadian economy slipping into a technical recession.

Briggs noted that Canada is facing three major pressures: higher energy prices, the repricing of a large number of mortgages at higher interest rates, and ongoing trade uncertainty.

In the same context, Donald Trump said on Wednesday that he may not renew the free trade agreement between the United States, Canada, and Mexico.

Global oil prices — one of Canada's key exports — also climbed about 2.5% to $93.78 per barrel following exchanges of strikes between the United States and Iran.

In the bond market, Canadian government bond yields were mixed, while the benchmark 10-year yield was little changed at 3.487%.

Iraq, OPEC’s second-largest oil producer, has less than two months before it risks losing its main crude oil export route, as the agreement governing oil shipments through pipelines to Turkey is set to expire on July 27.

The pipelines have become a vital lifeline for Iraq’s ability to market its crude since the effective closure of the Strait of Hormuz on February 28. Until then, around 95% of Iraq’s oil exports passed through the strait to key Asian markets, led by China.

The closure of Hormuz quickly filled Iraq’s storage facilities to capacity, and with limited alternatives available for transporting crude, Baghdad was forced to shut down a number of producing wells.

Experts warn that prolonged production shutdowns could cause permanent damage to Iraqi oil fields due to reservoir pressure loss, water intrusion, corrosion, and other technical issues.

Baghdad faces a July 27 deadline before losing its primary oil lifeline

The situation is particularly dangerous for Iraq because more than 90% of the state budget has historically depended on oil revenues.

The roots of the current crisis date back to a March 2023 ruling by an international arbitration court ordering Turkey to pay Baghdad $1.5 billion for violating the 1973 crude oil pipeline agreement after Ankara allowed the Kurdistan Regional Government to export oil independently of Iraq’s federal government.

Following the ruling, Turkey activated a clause in July 2025 requiring a one-year notice period to terminate the 52-year-old agreement, with the cancellation set to take effect on July 27, 2026.

Production falls to its lowest level since the 2003 invasion of Iraq

Following the closure of the Strait of Hormuz, Iraq’s oil production fell in April to an average of 1.389 million barrels per day, compared with roughly 3.47 million barrels per day between January 2002 and the end of March this year, and more than 4.1 million barrels per day during the three months preceding February 28.

This marks the lowest level of Iraqi oil production since the US-led invasion of Iraq in 2003.

In an effort to preserve exports, Baghdad has turned to alternative transportation methods, most notably trucking. Around 500 trucks are now being used daily, each carrying between 200 and 250 barrels of crude oil.

However, these volumes remain far from sufficient to meet the needs of the Iraqi economy, prompting the government to accelerate efforts to rehabilitate the old pipeline linking Kirkuk to Turkey’s Mediterranean port of Ceyhan.

The original Kirkuk-Ceyhan system consists of two pipelines with a combined nameplate capacity of 1.6 million barrels per day. Actual operating capacity, however, has ranged between 250,000 and 400,000 barrels per day due to repeated attacks over the years.

Baghdad is currently developing the Kirkuk-Nineveh section as part of a broader effort to restore the federal pipeline network to Ceyhan, independent of the Kurdistan Regional Government’s control.

The Iraqi Oil Ministry is pursuing a phased restart strategy. In the first stage, it aims to transport between 150,000 and 250,000 barrels per day of Kirkuk crude next month before gradually increasing throughput.

Meanwhile, the Kurdistan Region operates its own pipeline system extending from the Taq Taq field through Khurmala to Fishkhabour, where it connects to the Kirkuk-Ceyhan pipeline. The line has a design capacity of up to one million barrels per day, although peak actual throughput has so far reached around 900,000 barrels per day.

The core problem, however, is that both pipeline systems are governed by the same 1973 agreement with Turkey, meaning both could cease operations on July 27 unless a new arrangement is reached with Ankara.

According to sources in Iraq’s energy sector, Turkey is leveraging its strong negotiating position to seek broad concessions, including joint projects in oil, gas, petrochemicals, and electricity, in addition to compensation related to the $1.5 billion arbitration award.

Ankara is also seeking higher transit fees for Iraqi crude shipments and wants Baghdad to commit to large, stable daily export volumes, with penalties for non-compliance.

In the background, the interests of major global powers are increasingly intertwined. The Kurdistan Region enjoys Western support, while Iraq’s federal government has moved closer to both Russia and China.

Part of the negotiations is tied to the $17 billion Development Road project, which aims to connect Iraq to Turkey and Europe in the west while linking to China’s Belt and Road Initiative in the east.

The project envisions an integrated transport corridor stretching from the Grand Faw Port in Basra, passing through Iraq’s most important oil and gas fields, reaching Fishkhabour on the Turkish border, and then extending through road and rail networks toward Europe.

Major Wall Street indexes declined on Wednesday as technology shares extended their losses, while renewed tensions between the United States and Iran overshadowed the impact of US inflation data that largely matched market expectations.

By 9:37 a.m. New York time, the Dow Jones Industrial Average had fallen 285.36 points, or 0.56%, to 50,586.75. The S&P 500 dropped 33.44 points, or 0.45%, to 7,353.21, while the Nasdaq Composite lost 147.78 points, or 0.57%, to 25,531.04.

Financial markets have experienced increased volatility in recent days as investors navigate a growing list of risks, including elevated technology stock valuations, escalating geopolitical tensions in the Middle East, and expectations that the Federal Reserve may be forced to raise interest rates to contain inflation.

The CBOE Volatility Index (VIX), often referred to as Wall Street’s fear gauge, rose 0.78 points to 20.65 after reaching its highest level since April 7 in the previous session.

Inflation and rate concerns weigh on AI and technology stocks

Economic data showed that US consumer prices rose 4.2% over the twelve months through May, marking the largest annual increase since April 2023. The rise was driven largely by higher gasoline and energy prices linked to the Middle East conflict.

However, the figures were broadly in line with economists’ expectations.

Art Hogan, Chief Market Strategist at B. Riley Wealth, said the inflation report matched forecasts but continued to move in a direction that remains uncomfortable for both investors and policymakers.

He added that the report did not materially alter expectations for the upcoming Federal Reserve meeting, with consensus still pointing to no change in interest rates for now.

Markets widely expect the Fed to keep rates unchanged at its June meeting, although investors continue to price in at least one 25-basis-point rate increase before year-end.

Heavy losses for semiconductor and AI stocks

Technology and artificial intelligence stocks remained the hardest hit as investors adjusted to the possibility of tighter monetary policy and growing concerns about stretched valuations across the sector.

Shares of Nvidia, Broadcom, and Micron Technology fell between 1% and 3.8%, resuming their decline after a brief rebound on Monday.

The S&P 500 technology sector also slipped 1.1%.

Super Micro Computer plunged 14.2% after announcing plans to raise $7 billion through equity offerings and related financing transactions to fund component purchases needed to meet growing demand for AI servers.

Meanwhile, profit-taking in high-performing technology names helped support sectors that have lagged the market this year, including healthcare, real estate, and consumer staples.

Six of the eleven major S&P 500 sectors traded higher, with the energy sector leading gains as oil prices climbed more than 1%.

US President Donald Trump said Iran had taken too long to negotiate an agreement and would now “pay the price,” while Tehran announced it would reassess its diplomatic approach toward Washington following overnight military exchanges.

Investors also view the highly anticipated IPO of SpaceX on Friday—targeting a valuation of $1.75 trillion and seeking to raise $75 billion—as a potential source of additional pressure on US equities amid growing concerns about excessive optimism in the technology sector.

In other stock movements, trucking companies including XPO, J.B. Hunt, and Old Dominion fell between 2.5% and 6.2% after Amazon announced an expansion of its less-than-truckload shipping services across the United States.

As a result, the industrial sector declined 1%.

Market breadth was negative overall, with declining stocks outnumbering advancing issues by 1.17-to-1 on the New York Stock Exchange and by 1.05-to-1 on the Nasdaq.

Within the S&P 500, 13 stocks reached new 52-week highs while four hit new lows. On the Nasdaq, 35 stocks posted new highs and 71 registered new lows.

While markets have been focused on the recent sharp decline in gold prices, the broader precious metals sector has also experienced significant selling pressure, with platinum-group metals suffering some of the steepest losses, according to a report from Bank of America.

Both platinum and palladium recently fell to their lowest levels of the year amid continued pressure from the global economic slowdown and geopolitical tensions.

Global economic weakness and Middle East tensions weigh on platinum-group metals

Commodity analysts at the bank said the rally in platinum-group metals lost momentum since late January, largely due to gold’s price action and persistent economic headwinds linked to the conflict in the Middle East, which continue to weigh on industrial metals demand.

Despite the recent weakness, the bank maintained its positive long-term outlook for the sector, noting that it remains constructive on gold heading into the fourth quarter. A renewed gold rally could attract investors back into platinum-group metals and help support prices.

Spot platinum fell to around $1,711 per ounce, down more than 2% during the session, while palladium traded near $1,203 per ounce, up roughly 0.5%.

Since the sharp selloff on Friday, platinum has lost more than 9% of its value, while palladium has fallen over 6%.

Higher price targets despite weak industrial and jewelry demand

Despite current pressures, Bank of America still expects platinum to average around $3,000 per ounce by the fourth quarter of 2026 through the first half of 2027.

Palladium is expected to average around $2,200 per ounce during the final three months of the year.

Platinum-group metals delivered strong gains during 2025 as global trade tensions and threats of tariffs on precious metals created significant disruptions in physical market liquidity.

However, analysts noted that most of those concerns eased after tariff threats failed to translate into broad implementation.

According to the report, the absence of tariffs resulted in more than 200,000 ounces of platinum leaving NYMEX warehouses, roughly half of the inflows recorded during the second half of 2025.

Palladium, meanwhile, saw outflows in late January before flows reversed after the US Department of Commerce imposed final anti-dumping duties of 133% and countervailing duties of 109% on Russian palladium.

Structural shifts in demand

The bank also highlighted structural changes in demand for platinum-group metals.

Platinum is expected to record a modest supply deficit this year, while palladium is forecast to remain in a slight surplus.

Analysts pointed to China’s accelerating transition toward electric vehicles as a major source of market volatility, given the reduced demand for internal combustion engine vehicles that rely heavily on platinum-group metals in catalytic converters.

Electric vehicles are expected to account for roughly 40% of China’s light-vehicle production this year, surpassing conventional combustion-engine vehicles for the first time. Traditional vehicles are projected to represent 36% of production, while hybrids account for 24%.

Production of internal combustion vehicles in China has already fallen to approximately 14 million units in 2025, down from 21 million in 2020.

By contrast, the transition to electric vehicles remains slower in Europe and the United States, particularly after Washington scaled back some of its earlier electrification initiatives.

Weak jewelry demand in China

Demand for platinum jewelry has also slowed, especially in China, where elevated inventories accumulated during the manufacturing boom of mid-2025 continue to pressure the market.

Although some of those inventories have already been recycled, retailers still hold large stockpiles while consumer demand remains weak, raising the risk of a significant contraction in Chinese jewelry manufacturing volumes this year.

Energy costs threaten South African production

Despite uncertainty surrounding global demand, Bank of America believes supply-side risks could become increasingly important.

The bank noted that ongoing Middle East tensions, higher energy prices, and inflationary pressures could negatively affect production, particularly in South Africa, one of the world's largest producers of platinum-group metals.

South Africa relies heavily on imported oil, has limited domestic production capacity, and faces ongoing refining constraints, leaving its mining sector highly exposed to rising fuel costs.

Diesel remains widely used across mining operations, transportation networks, and backup power generation, especially given the country's persistent electricity shortages.

Diesel prices have surged since the conflict began, while state utility Eskom raised electricity tariffs by 8.76% beginning in April 2026, significantly increasing mining costs.

In this context, Sibanye-Stillwater reported a 13% year-over-year increase in unit operating costs during the first quarter, citing persistent inflationary pressures, including higher labor and energy expenses.

In trading on Wednesday, spot palladium rose 1.5% to $1,249 per ounce as of 16:14 GMT.