What Moved
March belonged to a war that started somewhere else. The US–Israel–Iran conflict that began in late February 2026 entered its second month with Strait of Hormuz traffic brought close to a standstill, and the consequences rippled straight into Canadian markets. Crude firmed steadily on supply fears, and the Toronto exchange traded with a distinctly risk-off tone. On March 24, TSX futures slid as a brief US "pause" on strikes against Iran faded and oil climbed again — with Canada, an energy exporter and importer both, flagged as especially oil-sensitive. The loonie sat near 1.38 against the US dollar through the month, and Canadian investment-grade corporate spreads continued to widen after roughly twelve basis points of widening in February.
Against that backdrop, the Bank of Canada held its policy rate at 2.25% on March 18 (Bank Rate 2.50%, deposit rate 2.20%), with no Monetary Policy Report attached to the decision. The tone was accommodative but cautious — a Bank watching the downside. The backdrop it described was itself unsettled: fourth-quarter 2025 GDP had contracted 0.6% on a quarterly basis, February CPI was benign at 1.8%, and February unemployment sat at 6.7%. A central bank staring at a stalling economy on one side and a brewing energy-price shock on the other had every reason to do nothing.
Trade policy kept moving underneath. The Section 122 surcharge — a temporary 10% ad valorem duty, with a 15% statutory ceiling — remained in force after taking effect February 24, and USMCA/CUSMA-compliant Canadian goods, energy, and fertilizers stayed exempt. On March 4, Treasury Secretary Bessent signalled the rate "could be raised to 15%," though no formal increase followed. More consequentially, on March 11–12 the US Trade Representative launched two parallel Section 301 investigations designed to build a successor tariff regime before Section 122's July statutory sunset — one targeting excess manufacturing capacity, one on forced-labour enforcement, with Canada exposed on the second track.
Canadian housing stayed frozen at low levels. The national average sale price was $673,084 in March, down 0.8% year-over-year. But the more telling figure was the MLS Home Price Index, the like-for-like benchmark, which fell 4.7% year-over-year — its steepest decline of the cycle so far. Sales ran 2.3% below March 2025, the sales-to-new-listings ratio sat at 47.8%, and inventory held around 5.0 months.
What It Means
The gap between those two housing numbers is the month's most important lesson. A national average price down less than one percent reads like resilience; a benchmark down 4.7% reads like a market under real pressure. Both are correct — the average is buoyed by regional and price-tier composition, while the HPI strips that out to measure the same home over time. For anyone valuing a residential-mortgage book, a mortgage investment corporation, or a development loan, the benchmark is what matters. Reading the average as the headline understates the softness sitting underneath collateral values.
The Bank of Canada's hold reflects a genuine bind rather than complacency. An oil-driven inflation impulse is building on top of an economy that shrank in the prior quarter — the early shape of a stagflation-lite tension. The Bank cannot ease aggressively into a supply shock without risking the inflation flank, and it cannot comfortably tighten against a contracting economy. Holding is the only defensible posture, and it is likely to remain so until the data forces a direction.
For private credit, March reinforced a familiar thesis with a fresh caveat. As banks build provisions against trade and energy uncertainty and pull back from exposed sectors, the displacement opportunity for disciplined private lenders grows — the structural advantage of pricing risk loan by loan rather than applying blanket restrictions. The caveat is the benchmark. A like-for-like decline approaching five percent begins to test the loan-to-value buffers set at underwriting, particularly in Ontario development and bridge exposures. Rising inventory and softer benchmark pricing also lengthen time-to-exit, which is a liquidity question, not just a valuation one. Lenders should stress-test timelines, not only marks.
What We're Watching
Whether the energy shock feeds into Canadian consumer prices in the months ahead — February CPI was still benign at 1.8%, but a sustained crude bid is precisely the kind of pressure that shows up on a lag.
The durability of Canada's USMCA carve-out from Section 122, and how the Section 301 successor investigations develop ahead of the underlying authority's July sunset — the forced-labour track is the one that touches Canada.
Spring housing data, for evidence on whether the benchmark decline stabilizes or deepens, and whether the average-versus-benchmark gap narrows.
Private-credit and MIC portfolio metrics through the first quarter — loan extensions, watchlist additions, and redemption pressure at residential-mortgage funds as housing softness persists.
The Bank of Canada's next scheduled decision on April 29, which will arrive with a Monetary Policy Report and the Bank's first full forecast set against the oil shock.
Closing
March was a month of imported risk. The dominant force acting on Canadian assets originated in the Middle East, transmitted through oil, and left the Bank of Canada holding steady because it had no better option. Beneath the headline calm of a 2.25% rate, the signals worth watching were quieter — a housing benchmark falling faster than the average lets on, corporate spreads widening, and a trade framework being quietly rebuilt for the second half of the year. For private market investors, the discipline is the same as ever: read the benchmark, not the headline, and stress-test the timeline, not just the mark.