May 4 (Reuters) - Canada's main stock fell on Monday as the Iran war escalated, increasing investor concerns of a rise in inflation that could lead to interest rate hikes this year.
The Toronto Stock Exchange's S&P/TSX composite index ended down 252.31 points, or 0.7%, at 33,638.87.
The price of oil settled 4.4% higher at $106.42 a barrel as Iran stepped up attacks on the United Arab Emirates and ships in the Gulf over the past 24 hours, the most serious escalation since a U.S.-Iran ceasefire came into force last month.
Last Wednesday, the Bank of Canada said it might have to respond with consecutive interest rate hikes if oil prices stay high and begin pushing up inflation.
"There's growing concern that top-line inflation will continue to inch higher, and that interest rates may move from a pause to rising later in the year, which is unsettling for rate-sensitive investors," said Shiraz Ahmed, founder at Sartorial Wealth.
U.S. sectoral tariffs are another headwind for Canada's economy. The Canadian government announced a C$1 billion ($734.65 million) loan program for industries that manufacture and export products containing steel, aluminum or copper.
The materials group, which includes metal mining shares, lost 1.6%. The price of gold was down 2.2% as heightened U.S.-Iran tensions boosted demand for the safe-haven U.S. dollar.
The consumer discretionary sector fell 2.1%, with shares of clothing retailer Aritzia Inc down 4.7%.
Industrials declined 1.3% and heavily weighted financials ended 1% lower.
Two of the 10 major sectors ended higher, with energy up 1.4% and technology adding 0.6%.
Shares of systems software firm BlackBerry ended up 3.5% after touching their highest intraday level since February 2025.
(Reporting by Fergal Smith in Toronto and Tharuniyaa Lakshmi in Bengaluru; Editing by Shailesh Kuber, Joyjeet Das and Will Dunham)
By Tharuniyaa Lakshmi and Fergal Smith
