TORONTO, March 6 (Reuters) - Canada's main stock index fell to a two-week low on Friday, with financial and industrial shares leading broad-based declines as investors worried that the jump in oil prices driven by the Middle East conflict would raise inflation pressures.
The S&P/TSX composite index ended down 526.25 points, or 1.6%, at 33,083.72, posting its lowest closing level since February 17. For the week, the index was down 3.7%, after four straight weeks of gains.
U.S. President Donald Trump demanded Iran's "unconditional surrender" in a dramatic escalation of his demands a week into the war he launched alongside Israel, which could make it more difficult to negotiate a swift end to hostilities.
"With the exception of the energy sector, all the other sectors are calculating that the disruption of energy in the Middle East will continue for a long time ... which will lead to higher interest rates and inflation," said Victor Kuntzevitsky, a portfolio manager at Stonehaven, Wellington-Altus Private Counsel.
The price of oil settled 12.2% higher at $90.90 a barrel, with Middle Eastern supply constrained by the effective closure of the Strait of Hormuz.
The U.S. economy unexpectedly shed jobs in February, potentially hinting at a deterioration in labor market conditions that could put the Federal Reserve in a difficult spot amid rising oil prices.
"If we zoom out, it's important to recognize that the TSX is one of the leading indices globally," Kuntzevitsky said. "There is a bigger theme of the petro loonie that is coming back into play and I think could persist for some time."
The commodity-linked Canadian dollar was the strongest Group of 10 currency in the past week. The TSX has added 4.3% this year after climbing 28.25% in 2025.
Nine of the 10 major sectors ended lower, including heavily weighted financials, which lost 1.9%.
Consumer discretionary was down 2.8% and industrials ended 2.4% lower.
Methanex Corporation shares tumbled 13.4% after the methanol producer reported a quarterly loss, helping to drag the materials sector 1% lower.
Shares of Algonquin Power & Utilities Corp were down 11.5% after the company's quarterly results.
(Reporting by Fergal Smith and Utkarsh Tushar Hathi; Editing by Diti Pujara and Will Dunham)
By Fergal Smith
