Energy ETFs Rise as Iran Talks Falter
Canadian energy ETFs advanced last week as failed US-Iran negotiations, rising bond yields and persistent supply disruptions kept crude prices under pressure.
Stalled Negotiations Keep Supply Concerns Elevated
Negotiations between Washington and Tehran showed limited progress last week, with both sides publicly signalling frustration after weeks of indirect talks. President Trump renewed pressure on Iran over the weekend, warning of resumed military action if Tehran did not move closer to a deal. Iranian semi-official media reported that the US had set demanding conditions while offering little in return, describing talks as heading toward an impasse.
A drone attack over the weekend sparked a fire at a UAE nuclear facility, adding to concerns about the durability of the ceasefire across the Gulf region. Brent crude climbed back above $110 per barrel and WTI moved beyond $106, extending a rally that has pushed oil prices roughly 50% higher since the conflict began in late February. The Strait of Hormuz, through which around a fifth of global oil and LNG normally passes, has remained largely disrupted throughout the conflict.
Bond Markets Reflect Inflation Concerns
A broad selloff in global bond markets ran alongside the moves in energy last week. US Treasury yields rose across the curve, with the 30-year yield reaching its highest level in nearly three years. Japan’s 10-year yield climbed to levels last seen in the mid-1990s, and similar pressure appeared in Australian and New Zealand bonds.
The shift in rate expectations has been significant. At the start of 2026, markets were pricing two Federal Reserve rate cuts for the year. Investors are now assigning near-certain odds to a hike by March, as persistent energy price inflation continues to weigh on the outlook. Higher inflation expectations and sustained supply disruptions are contributing to concerns about a prolonged stagflationary environment across developed economies.
Trump-Xi Summit Produces No Breakthroughs
Investors had looked to last week’s Trump-Xi summit for any indication that China — the world’s largest buyer of Iranian crude — might help facilitate a resolution to the Hormuz standoff. The meeting produced no major outcomes on trade, tariffs or the Iran conflict, and China offered no clear signal that it would weigh in on the dispute.
The Chinese yuan fell to a near two-week low on Monday as investor focus shifted back to the global bond selloff and ongoing Middle East tensions. Chinese equities were broadly flat after declining more than 1% the previous Friday. Capital Economics noted that while the summit helped cement the existing trade truce and reduced near-term escalation risk, the two sides’ positions on the Iran conflict remained publicly divergent.
Analysts at Saxo noted that without clearer follow-through on trade, Taiwan or the Iran conflict, the summit risked being seen as a non-event for markets: supportive for sentiment in the short term, but insufficient to shift the broader backdrop around oil prices, inflation and bond yields.
Canadian Energy ETFs Continue Higher
Canadian-listed energy ETFs extended their strong 2026 run last week as investors continued rotating into oil-sensitive equity exposure.
The broader Canadian energy ETF category gained 6.58% during the week and is now up more than 44% year-to-date, making it one of the strongest-performing segments of the domestic ETF market despite modest net outflows over the week.
The largest product in the category, the iShares S&P/TSX Capped Energy Index ETF (XEG), advanced 7.09% last week and has now gained more than 47% since the start of the year. Despite recording weekly outflows of roughly $36 million, the fund remains firmly positive on a year-to-date flow basis as investors maintain substantial exposure to Canadian oil and gas producers.
Active energy strategies also participated in the rally. The Ninepoint Energy Fund (NNRG) climbed 4.71% during the week and is now up nearly 44% year-to-date, supported by continued strength across upstream and exploration-focused holdings.
Equal-weight Canadian oil and gas strategies also posted strong gains. The BMO Equal Weight Oil & Gas Index ETF (ZEO) rose 6.82%, while the Global X Equal Weight Canadian Oil & Gas Index ETF (NRGY) advanced 6.83% as elevated crude prices continued supporting earnings expectations across the sector.
Commodity-linked exposure remained resilient as well. The Global X Crude Oil ETF (HUC) gained 5.13% over the week and has now advanced nearly 47% year-to-date, reflecting sustained strength in crude futures despite growing volatility across broader financial markets.
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Please note this article is for information purposes only and does not in any way constitute investment advice. It is essential that you seek advice from a registered financial professional prior to making any investment decision.
