Good morning. An escalation of tensions in the Middle East and a historic strike along the United States East and Gulf Coasts threaten to raise the price of oil and reignite inflationary pressures just weeks before the U.S. presidential election. More on that below, along with a look at what’s fuelling the future of convenience stores.
What we’re following
Police are investigating after shots were fired at homes of two executives tied to waste management giant GFL.
Top shelf: A Swedish asset manager has won a hotly contested battle for CCM Hockey, buying the country’s oldest hockey equipment maker as part of a strategy to grow the game among women and first-generation immigrants to North America and Europe.
Buy now, pay later: Online bank Koho Financial has raised $190-million in debt and equity to help boost its lending capacity.
Happening today
- Hard-pants maker Levi Strauss reports after the close.
- In Montreal, dockworkers are on Day 3 of a strike of their own.
Dockworkers on strike yesterday in Portsmouth, Virginia.Jose Luis Gonzalez/Reuters
In focus
How port strikes and Middle East tensions are having a ‘multiplier effect’
This might be the slowest-developing October surprise in the history of United States presidential elections.
Escalating tensions in the Middle East and a historic strike shutting off the U.S. East and Gulf Coasts are presenting the administration of Joe Biden and Kamala Harris with twin problems that threaten the country’s economy just over a month before Americans go to the polls.
Worries of escalating attacks between Israel and Iran turning into wider regional war drove oil prices to a level that could stay elevated for as long as uncertainty persists. And relief in prices for crude oil might not come any time soon from the U.S., where a massive work stoppage is blocking not only billions of dollars in imports ranging from vehicles to food but also the country’s exports of oil and liquefied natural gas.
Analysts have warned the strike will cost the U.S. economy billions of dollars a day, cause months of supply chain stresses and raise the price of goods – all dynamics that would threaten to follow in Canada, which relies on the U.S. for about half of its imports.
In both its handling of the dockworkers’ strike and the volatility overseas, the Biden-Harris administration could risk the chances of a Democratic win on Nov. 5 by moving too forcefully, said Aurel Braun, a professor of international relations and political science at the University of Toronto. Inflaming the tempers of America’s unions, which have largely united behind Harris, isn’t likely in the best interests of the Democrats, and a move against Iran could keep the price of oil elevated if the authoritarian regime were to target Middle East producers.
A rally in Tehran yesterday after Iran fired a barrage of missiles into Israel.ATTA KENARE/AFP/Getty Images
The two issues have the potential to “really create the kind of economic pain that could be very damaging to the Biden-Harris administration and the prospect for Kamala Harris” to win the presidency, said Braun, who is also an associate of the Davis Center for Russian and Eurasian Studies at Harvard University. “Almost a kind of October surprise.”
Either the fighting in the Middle East or the dockworkers’ strike would be significant events on their own. But together, they have a “multiplier effect,” he said.
If the U.S. were unable to move oil and liquefied natural gas overseas in the event Iran decides to disrupt Middle East operations, Tehran would have more leverage.
“So the impact of Iran carrying out attacks amid a dockworkers’ strike would be significantly greater compared to a United States that is free to use its economic strength to counter measures – economic measures that Iran might try to use as retaliation. It makes the United States and its Western allies more vulnerable.”
Jackie Forrest, executive director of the ARC Energy Research Institute in Calgary, told my colleague Jeffrey Jones that oil markets aren’t betting on a major disruption, “because this whole year has been characterized by risks that never materialized in outages.”
“That’s not to say there isn’t a risk, and there’s great potential for the war to go beyond where it is today and Iran to get involved, and it really could have impacts on the oil market,” Forrest said.
But oil isn’t the only U.S. export running into a wall along the East Coast: American-made weapons and equipment such as tanks and light-armoured vehicles are predominantly moved to Western allies like Israel and Ukraine by ships. Braun said the military could move more equipment by plane, but not nearly enough to make up for vessel shipments.
Access to U.S. weapons supply might not be an issue in the short term, Braun said. “But perception is crucial in conflict. And the perception is that, look, the Americans are going to have difficulty replacing heavy equipment and so on. Even if Israel doesn’t need it, even if the flow to Ukraine is, you know, relatively slow, it can create doubt. And in conflict, doubt is deadly.”
That ethos might apply just as much to the markets, which reacted to yesterday’s escalation in ways you’d expect: quickly, and with increased sensitivity.
The same might be said for the American electorate as voting day draws near – and heightens sensitivities around the economic effects of a historic strike, escalating tensions in the Middle East, and how the American dream is dependent on what the world makes it.
Voices
Today, we’ve got questions:
- What can Pierre Poilievre learn from CEOs?
- Why aren’t we shipping natural gas to Europe?
- Why do we rely on U.S. regulators to reveal problems with Canadian banks?
Charted
Is food the new fuel? Convenience stores are looking to become food destinations, Susan Krashinsky Robertson reports. The category is growing in importance for convenience store retailers as the industry grapples with a time of unprecedented change.
Morning markets
Most stocks held steady, suggesting that the market impact of escalating Middle East tensions has been contained for now. Wall Street futures pointed lower as Middle East concerns and the domestic port strike kept investors on edge. TSX futures rose as oil prices climbed.
Overseas, the pan-European STOXX 600 was flat in morning trading. Britain’s FTSE 100 gained 0.1 per cent, Germany’s DAX was down 0.46 per cent and France’s CAC 40 was little changed.
In Asia, Japan’s Nikkei closed 2.18 per cent lower, while Hong Kong’s Hang Seng rose 6.2 per cent.
The Canadian dollar traded at 74.17 U.S. cents.