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TSX drops 2% as Middle East turmoil reignites inflation jitters

Canada's major?stock index fell to a three-week-low in a broader-based sell-off on Monday. Risk sentiment was hit globally as escalating tensions erupted in the Middle East, sending crude prices soaring, increasing inflation fears.

By 10:57 a.m., the S&P/TSX composite index had fallen 1.25%. ET after falling by more than 2% in the earlier session, and in line with an overall decline of more?than 1 percent across major Wall Street indexes.

Iran announced that Mojtaba Khmenei would?succeed the slain father of its supreme leader. This signaled to hardliners that they remain in control and that?the war could last longer than expected.

As a result of the escalating tension, crude oil prices soared to $119 per barrel, a level not seen since mid-2022. Major producers reduced their?supplies, and concerns about a prolonged disruption in shipping shook markets.

The key question is how long and how much damage the energy price spike will cause before it eases. A prolonged rise in energy prices could spark inflation and raise the risk of stagflation.

Canada's benchmark index fell more than 6% from the record highs set just one week ago. Fears that a?prolonged Middle East war and rising crude oil prices would fuel global inflation pushed risk assets.

Materials, including base and precious metal?miners and fertilizer?companies, fell 4.1% while energy rose 1.1% in line with the increase in crude oil?prices.

Shares of Burger King's parent company Restaurant Brands, which fell 4.2%, were among the sector's worst performers.

Lundin Mining, a copper miner, lost 6.1% of its value after J.P. Morgan changed the stock's rating from "neutral" to "underweight". (Reporting and editing by Diti Pjara in Bengaluru. Rashika Singh is based in Bengaluru.

(source: Reuters)