Monday 2 November 2026

Monday’s drop is a relief rally on a proposal, not a change in supply. We expect Brent to stay above US$100 a barrel through November, until tankers are moving through the Strait of Hormuz without incident and with Washington’s agreement.

Why we think so. Iran’s plan is a sequence, not a settlement. As Abbas Araghchi described it, the United States would act on the first day and shipping would be restored on the second, but the U.S. measures Iran wants are a long list: lifting recent sanctions, restoring oil waivers, a smaller U.S. military presence and the release of frozen funds. Washington has not replied. The Secretary of State said he knew of no timeframe and the President said he was in no great hurry, which is not the language of a government about to sign. Meanwhile the shipping risk itself has not gone away: the Revolutionary Guards claimed two more tankers struck mines in the strait on Sunday. The claim is unconfirmed, but shipping prices the possibility. On the supply side, OPEC+ holding its December targets for a third month changes little, because Gulf members cannot reach quotas for barrels they cannot ship.

What the market is pricing. Brent for January delivery traded between roughly US$109 and US$112 on Monday against a Friday settlement of US$113.43, and U.S. crude fell to about US$100 to US$103. That is a market marking down the risk premium on hope after a 13.6% rise in October, the fourth monthly gain in a row. We agree that the direction of risk has improved, but the move prices a plan as if it were a deal. Even if the strait reopened, it would take time for flows, freight and insurance to normalize, which is why we see the floor near US$100 rather than far below it.

What it means. Oil was the main reason the Bank of Canada raised its rate last week, so the price of a barrel now reaches Canadian households twice: at the pump and in heating bills, and through the rate path that sets variable mortgage and line of credit costs. A lasting fall would ease both, but we would not budget on it yet. Households that heat with oil or propane, and businesses that run vehicles or move goods, are better served by planning winter costs at current levels and treating any relief as a bonus. If a fixed-price or budget-billing arrangement is on offer, comparing it against today’s lower quote rather than last week’s peak is the fairer test. For investors, high oil supports Alberta, federal revenue and the Canadian dollar, so energy exposure in a portfolio partly offsets the cost in a household budget; it is worth knowing whether that balance is deliberate.

What would change our mind. Verified commercial tanker traffic through Hormuz resuming with U.S. agreement, or Brent settling below US$100 for three trading days in a row, would prove us wrong.

What to watch. Any formal U.S. response to the two-day plan, and independent confirmation or denial of the mine strikes. Tuesday brings the U.S. midterm elections and Governor Macklem’s testimony to the House of Commons finance committee, where he will be asked how much of last week’s hike was about energy. The full OPEC+ group meets on 29 November to set 2027 baselines.

For Canadian borrowing costs, Tuesday matters more than Thursday. The Governor’s tone on a second hike will move short-term rates directly this week, while the budget’s effect on bond yields depends on a deficit figure that is still unknown.

Why we think so. Governor Tiff Macklem and Senior Deputy Governor Carolyn Rogers appear before the House of Commons finance committee on Tuesday, their first appearance since the Bank raised the overnight rate by a quarter point to 2.50% on 28 October. Short-term rates, and with them variable mortgages and lines of credit through the prime rate, respond to what the market expects the Bank to do next, and a committee hearing is a rare chance for the Governor to say whether last week’s hike was a single step or the start of more. The budget works through a slower channel. Larger borrowing tends to push up longer bond yieldsBond yield The annual return an investor gets for lending to a government or company through a bond. Yields rise when bond prices fall. Fixed mortgage rates are priced from the 5-year Government of Canada yield. because the government must sell more bonds, and the five-year yield is what fixed mortgage rates are built on. But the size of that effect depends on how far the numbers move from what investors already assume. The government says it is on track to balance its operating budget by 2027-28; the Parliamentary Budget Officer expects that target to be missed by a year and the deficit to stay above $63 billion as late as 2030-31, with defence spending rising from about $75 billion a year to $95.7 billion. Much of that is already in the public domain.

What the market is pricing. Government of Canada yields ended Thursday 29 October at 3.36% for two years, 3.58% for five years and 3.84% for ten years, a few basis points below the day of the hike. That tells us the bond market has absorbed the hike calmly and is not yet bracing for a large budget surprise. We agree, and expect any repricing this week to come at the short end first.

What it means. Borrowers with variable-rate debt should listen to Tuesday’s hearing more closely than Thursday’s speech, because that is where the next move in prime is signalled. Anyone pricing a fixed renewal should watch the five-year yield after both events. Savers and investors have a different reason to wait for Thursday: the budget may change tax rules people plan around, such as RRSP and TFSA limits, capital gains treatment, housing measures or credits. A tax-driven decision planned for this week, such as realizing a gain or making a large contribution, is safer made after the measures are published. Business owners should look for changes to credits, deductions or sector support that alter the after-tax cost of investment.

What would change our mind. If the five-year yield moves more on budget day than it does on the day of the Governor’s testimony, we will have misjudged which event mattered for borrowers. A deficit figure well above the Parliamentary Budget Officer’s path would be the most likely cause.

What to watch. Tuesday’s testimony from 08:00 to 10:00 PT, with the opening statement posted at the start. Wednesday’s September trade figures. Budget 2026, “Masters of Our Destiny”, on Thursday, and the Bank of England’s decision the same day. Friday’s October Labour Force Survey, after September’s loss of 68,000 jobs and 6.5% unemployment.

The size of this theft will bring tighter custody rules for crypto exchanges over the coming year. That is good for users over time, but in the near term we expect it to limit choice and raise costs.

Why we think so. The scale is hard for regulators to ignore. Binance, the world’s largest crypto exchange, suspended deposits and withdrawals on Thursday 29 October after an attacker moved about US$6.36 billion out of its wallets across 10 blockchains, most of it within about 20 minutes, according to TRM Labs. TRM and Chainalysis attribute the attack with high confidence to a North Korean unit, although Binance says its own investigation has not attributed responsibility. The sum is more than six times the exchange’s US$1 billion emergency fund. When a loss exceeds the cushion built for it by that margin, the question shifts from one company’s security to whether the rules on how exchanges hold, separate and back customer assets are adequate. About US$3 billion has been frozen, including more than US$2.3 billion by stablecoin issuers, which shows that some parts of the system can act quickly, but also that recovery depends on private firms choosing to intervene.

How this has played out before. Large failures in lightly regulated corners of finance tend to be followed by rules that resemble those for established institutions: requirements to keep client assets separate, to hold reserves and to submit to audits. Those rules make the system safer, but compliance is expensive, and some smaller firms leave or stop serving certain markets. That is the trade-off we expect here. Prices react first: bitcoin touched a six-week low of US$76,368 and ether a two-month low of US$2,178, with bitcoin near US$77,850 on Sunday afternoon.

What it means. Anyone holding crypto on an exchange is trusting that exchange’s security and its balance sheet, not the blockchain. Binance says its own funds will cover losses, but a promise to cover losses is only as good as the company making it, and it is not the same as the deposit insurance that protects a Canadian bank account or a GIC. The practical questions are simple: who holds the keys, what protection applies if that firm fails or is hacked, and how much wealth is prudent to keep outside regulated custody. For most households, money needed for near-term goals or an emergency fund belongs in insured deposits, and any crypto holding is best sized as an amount that could be lost without changing the plan.

What would change our mind. If the coming months pass without any major regulator proposing new custody, segregation or reserve requirements for exchanges, and customers are made whole without disruption, we will have overstated the policy response to this event.

What to watch. When Binance reopens deposits and withdrawals, and on what terms. How much of the frozen US$3 billion is recovered, and whether Binance confirms or disputes the attribution to North Korea.