BJK Financial Group Blog

The Iran Conflict: Market and Economic Implications for Investors

Geopolitical events often create periods of heightened uncertainty in global financial markets, and the current conflict involving Iran is no exception. As investors digest rapidly evolving headlines, it is important to separate emotional reactions from economic fundamentals and to understand how such events typically affect markets in the short term and over the medium term.

Historically, markets have shown resilience through geopolitical shocks, even when volatility rises sharply in the early stages. The present situation, however, carries unique risks due to the strategic importance of energy infrastructure in the Middle East and the critical role of the Strait of Hormuz in global oil and liquefied natural gas (LNG) transportation.

Why the Strait of Hormuz Matters

The Strait of Hormuz is one of the most critical energy chokepoints in the world. According to the International Energy Agency, approximately 20 million barrels of oil per day—around 25% of global seaborne oil trade—transited the Strait in 2025, with roughly 80% destined for Asia. In addition, nearly 20% of global LNG trade passes through this narrow corridor, much of it originating from Qatar. [iea.org]

Recent hostilities and naval restrictions have already disrupted shipping flows. The Federal Reserve Bank of Dallas notes that a full or prolonged closure of the Strait would be three to five times larger than previous historical supply shocks, such as those seen during the 1970s oil crises. Even partial disruptions can materially raise transportation costs, insurance premiums, and global energy prices. [dallasfed.org]

Short‑Term Market Impact: Volatility First, Then Assessment

In the short term, markets typically respond to geopolitical conflict with:

• Higher oil and gas prices
• Increased volatility in equities
• A bid for traditional “safe‑haven” assets such as government bonds and gold

This pattern is already evident. Energy prices have risen sharply as markets price in supply disruption risk, while equity markets have fluctuated alongside changing expectations surrounding ceasefire or de‑escalation talks. [bing.com]

The International Monetary Fund has warned that prolonged disruption to Middle East energy flows could slow global growth and push inflation higher, particularly in energy‑importing regions such as Europe and Asia. These dynamics complicate central bank decision‑making, especially at a time when inflation has not yet fully normalized. [bing.com]

Medium‑Term Outlook: Why Markets Often Recover

While short‑term volatility can feel unsettling, history suggests that markets often stabilize once uncertainty around escalation or de‑escalation becomes clearer. According to multiple asset‑manager analyses, geopolitical shocks tend to have temporary impacts on long‑term market fundamentals, unless they result in sustained supply destruction or structural economic change. [bing.com]

In my view, once a credible peace or de‑escalation agreement is reached:

• Equity markets could experience a relief‑driven rally
• Risk premiums embedded in stock prices may unwind
• Investor focus is likely to shift back toward earnings, interest rates, and economic growth

That said, a return to “normal” may not be immediate.

Oil Prices: Why They May Stay Elevated Longer Than Expected

Even if hostilities subside, oil prices may remain higher for longer. There are several reasons for this:

1. Physical bottlenecks

Shipping backlogs and insurance constraints in the Strait of Hormuz may take time to resolve fully, even after peace agreements are announced. [bing.com]

2. Infrastructure damage

Attacks on pipelines, refineries, ports, and storage facilities across the region have created physical supply constraints. Repairing and safely restarting this infrastructure can take months or years, not weeks. [bing.com]

3. Limited spare capacity

While some producers have alternative export routes, the IEA notes that bypass capacity remains limited relative to the volume typically shipped through the Strait. [iea.org]

As a result, while oil prices may pull back from crisis peaks following a peace announcement, they may not return quickly to pre‑conflict levels.

NATO’s Role: A Clarifying Perspective for Investors

There has been renewed public discussion about NATO in recent months. For investors, it is helpful to understand one key fact:
NATO is fundamentally a defensive alliance.

Under Article 5 of the North Atlantic Treaty, member states commit to collective defence only if a member is attacked. NATO does not mandate pre‑emptive military action, nor does membership automatically obligate countries to participate in conflicts initiated outside the alliance framework. [bing.com]

From a market perspective, this distinction matters. It helps limit assumptions about automatic escalation across developed economies and reduces the probability of NATO‑wide military engagement becoming a base‑case scenario.

What This Means for Investors

Periods like this reinforce several long‑standing investment principles:

• Diversification matters during geopolitical shocks
• Market timing based on headlines is risky
• Staying aligned with long‑term goals is often more effective than reacting to short‑term fear

While volatility may persist, history suggests that patient investors who remain disciplined are better positioned when markets eventually stabilize.

Final Thoughts

The Iran conflict underscores how geopolitical risk can travel quickly through energy markets and into the global economy. In the near term, volatility and elevated oil prices are likely to persist. Over the medium term, a credible peace agreement could support a market rebound—though energy prices may normalize only gradually due to infrastructure damage and logistical bottlenecks.

As always, investors should focus on fundamentals, risk management, and their long‑term financial plan rather than making decisions based on rapidly changing headlines.

As I look back on 2025, the word that keeps coming to mind is resilience—not in the motivational-poster sense, but in the hard, data-driven reality of how markets and the Canadian economy absorbed repeated shocks and kept moving forward.

I’ll be candid: I did not expect this year to play out the way it did. With U.S. tariffs flaring across sensitive sectors and the constant headline risk that comes with President Trump’s approach to trade and policy, I genuinely thought we’d be staring at a market free fall by now. Instead, what we got was a year that forced investors to relearn an old lesson: markets can be remarkably forward-looking, and they can remain buoyant longer than our instincts (or our news feeds) suggest.

Markets: “Bad News” Didn’t Break the Tape

From a Canadian investor’s perspective, the equity story in 2025 was difficult to ignore. By early December, National Bank’s equity monitor noted the S&P/TSX was up roughly 30% year-to-date through November—an eye-catching number given how often the year was framed as a trade-war grind. National Bank TMX also highlighted that Canadian equities showed relative resilience in the face of unresolved tariff threats and trade tensions during the first half of the year. tmxinfoservices.com

What stood out to me wasn’t just the magnitude of returns, but the market’s ability to compartmentalize. Tariffs and geopolitics were treated as real risks, yet not always “systemic” ones—particularly when investors believed supply chains could adapt, governments could negotiate carve-outs, and central banks had room to move if growth softened.

The Economy: Holding Up—But Not Evenly

Canada’s real economy did not glide through 2025 untouched. In fact, we ended the year with a reminder that resilience can include sudden stumbles. Statistics Canada data reported in late December showed GDP contracted 0.3% in October 2025, with a partial bounce expected in November.  Manufacturing and other goods-producing areas were pressured, and tariff effects were specifically cited as a factor weighing on certain industries. Reuters

This is where the story becomes very regional. National headlines can hide how concentrated the pain is.

Ontario: Auto and Steel Felt the Tariff Reality

Here in Ontario, the tariff narrative was not theoretical. The Ontario government’s 2025 Fall Statement explicitly flagged that U.S. tariffs were impacting the competitiveness and viability of automotive and steel manufacturing, along with the livelihoods tied to cross-border trade. Ontario Budget

The Financial Accountability Office of Ontario (FAO) went further with scenario analysis earlier in the year, estimating meaningful job impacts under a tariff scenario and projecting a higher unemployment rate over the 2025–2029 outlook compared to a no-tariff baseline. FAO Ontario Whether one agrees with every assumption in scenario modelling, the direction is clear: Ontario’s manufacturing engine is particularly exposed when tariffs hit autos, parts, steel, and aluminum.

Trade Policy: A Year of Counters, Carve-Outs, and Ongoing Negotiations

On the policy front, 2025 was marked by both retaliation and restraint. The federal government’s own tariff guidance shows that Canada removed many counter-tariffs effective September 1, 2025, while keeping counter-tariffs in place on steel, aluminum, and automobiles. Canada+1 Meanwhile, Global Affairs Canada’s Trade Commissioner resources provide a useful timeline of U.S. actions under Section 232, including tariffs on steel/aluminum and on automobiles and parts—with important nuance around CUSMA compliance and U.S.-content exemptions. Trade Commissioner Service

This push-and-pull is exactly why I keep describing the environment as “volatile.” Even when the direction of policy is known, the scope, the timing, and the exemptions can change quickly—and markets are constantly repricing those probabilities.

The Green Transition: Momentum Delayed, Not Deleted

Another major theme this year was the U.S. shift away from aggressive climate and EV policy, which I believe has contributed to a delay in the green transition—especially in the auto sector that straddles the Canada–U.S. border.

From the Canadian side, there was continued emphasis on Canada’s EV policy framework, including references to Canada’s EV availability standard and the 2035 phaseout objective for new gas-powered vehicle sales. Environmental Defence At the same time, analysis out of Queen’s University noted the U.S. political intent and mechanisms that could be used to unwind or weaken EV-related policies and vehicle emissions standards. Queen's Law In practical terms, when the U.S. hesitates, North American supply chains and investment timelines often hesitate too—because automakers build for scale, and scale is policy-sensitive.

My takeaway is not that the green transition is over; it’s that the path is likely to be less linear than many expected a few years ago.

Looking Ahead: Three More Years of “Trump Volatility”

If 2025 taught me anything, it’s that we should plan as though policy volatility is not a one-off event—it’s a base case for the next several years. The combination of trade measures, negotiation cycles, sector-specific exemptions, and abrupt narrative shifts can keep risk elevated even when markets are trending higher.

For investors, that reinforces the discipline I come back to repeatedly:

• Diversification is not a slogan; it’s a volatility-management tool.
• Time horizon matters more than headlines.
• Risk capacity and risk tolerance should be revisited when the world changes—but not rewritten every time the news changes.

I was surprised by 2025—mostly because the market refused to validate the worst-case script. But I’m not taking that as a reason for complacency. I’m taking it as a reminder to stay structured, stay diversified, and stay realistic about what the next three years could bring.

This commentary is provided for general information and educational purposes only and does not constitute investment advice. Please consult with your advisor regarding your specific circumstances.

I grew up in Sault Ste. Marie, not far from Algoma Steel, so the domestic steel industry is a part of who I am. As a financial advisor, my role is to help clients stay informed—and grounded—when turbulent economic policy impacts Canadian markets. Recent U.S. tariff hikes on Canadian steel, aluminum, and related goods have certainly sparked concern—so let me walk you through what has happened, how Ottawa is responding, and what this means for Sault Ste. Marie, Algoma Steel, and broader Canada.

What happened: U.S. tariff escalation

On August 1, 2025, former U.S. President Donald Trump signed an executive order increasing tariffs on Canadian goods from 25 percent to 35 percent, particularly targeting imports not covered under USMCA, and even imposing 40 percent duties on transshipped goods routed through third parties. This is in addition to a doubling of steel and aluminum tariffs from 25 percent to 50 percent earlier in June 2025

While the tariffs don’t apply to goods compliant with USMCA, key Canadian export sectors—including steel, aluminum, lumber and autos—have been hit hard. Canadian businesses face sharply reduced access to U.S. markets, uncertainty around future trade policy, and elevated cost risk.

Algoma Steel: the local impact

Algoma Steel, headquartered in Sault Ste. Marie, has felt the brunt of these changes. Its CEO, Mike Garcia, confirmed that the U.S. market is effectively closed because of the 50 percent tariffs on steel and aluminum exports. The company has applied for $500 million in support under Ottawa’s Large Enterprise Tariff Loan facility (LETL) to help offset prolonged uncertainty and liquidity challenges.

Algoma acknowledges government negotiators are working “actively” to find a fair, durable trade resolution—including regular feedback on what may support their operations.

Canadian government response: measured and multifaceted

1. Retaliatory tariffs and quotas

Following the March steel/aluminum tariff round, Canada imposed 25 percent retaliatory tariffs on U.S. vehicles and other goods. For items affected by ongoing disputes, Ottawa set tariff‑rate quotas aligned with 2024 import volumes—importing countries beyond that threshold face 50 percent duties. Prime Minister Carney also warned of additional counter‑measures if no agreement is reached by a July‑21 deadline, emphasizing flexibility depending on progress.

2. Suspension of selective tariffs

On April 15, 2025, Ottawa announced a suspension for six months of retaliatory tariffs on key U.S. imports critical to Canadian manufacturing, healthcare, food processing, national security, and public safety. Automakers who continue production in Canada were exempted from punitive tariffs.

3. Financial support: LETL facility

To assist larger companies facing trade-related liquidity pressures—including Algoma Steel—Canada launched the Large Enterprise Tariff Loan facility in March 2025. It provides bridge financing to eligible firms while trade talks continue.

4. Engagement and negotiation

Prime Minister Mark Carney has adopted a diplomatic yet firm posture—negotiating directly with U.S. counterparts, calling for a renegotiated trade deal and rejecting unilateral tariff actions. In a meeting with Trump, Carney stated, “Canada will never be for sale,” and insisted only a fair, durable agreement is acceptable.

How successful have these efforts been?

Positive indicators

1. Financial relief in motion: Algoma Steel’s application to LETL and other firms' enrolment in government supports show that Ottawa’s financial tools are actively helping companies ride out near‑term uncertainty.
2. Diplomatic traction: Cancelling auto tariff deadlines and negotiating through crisis, Carney’s leadership appears to have paused the worst-case expansion of tariff rounds—for now staying trade escalation from spiraling further.
3. Limited domestic fallout from exemptions: Suspension of select retaliatory tariffs—especially for automakers and manufacturing inputs—has softened the blow to domestic suppliers.

Lingering challenges

1. Industry dissatisfaction: Canadian steel producers have stated government measures “aren’t enough” to prevent job losses or stop steel dumping from other nations. Indeed, roughly 1,000 jobs in steel have been lost since tariffs began.
2. Continued closures of U.S. market: Algoma reports that export access remains blocked—meaning government supports are a lifeline, not a long‑term solution.
3. Trade talks remain fragile: Negotiations with the U.S. remain “chaotic” and one‑sided, with no guarantee of comprehensive agreement by deadlines; investment decisions and supply‑chain adjustments continue to be delayed.

Looking ahead: balancing optimism with realism

As a financial advisor—and someone personally invested in our community—I remain cautiously optimistic. Ottawa has moved swiftly to cushion the immediate fallout: targeted tariff suspensions, liquidity support programs, and measured diplomacy. For Algoma Steel, that means meaningful engagement and financial relief are available, and capacity to pivot toward domestic demand and new markets is growing—but challenges remain real.

Clients should consider:

• Diversification: Firms and investors exposed to steel or auto supply chains may reduce reliance on U.S. markets and seek new domestic or global customers.
• Government advocacy: Continued feedback loops between companies like Algoma and Ottawa will be critical in avoiding gaps in support.
• Monitoring trade deadlines: Immediate pressure points include any remaining U.S. deadlines for new deals post‑August 1, 2025—including the potential imposition of yet more tariffs.

Conclusion

In summary, the U.S. has sharply escalated tariffs—doubling to 50 percent for metals and raising some categories to 35 percent—placing pressure on Canadian exporters, especially steel producers like Algoma in Sault Ste. Marie. The Canadian government has responded with a mix of retaliatory duties, strategic suspensions, liquidity support, and diplomacy under Prime Minister Mark Carney. These efforts have provided valuable relief and a framework for negotiations, but structural risks remain. As your financial advisor, I remain hopeful yet vigilant: the path forward will depend on continued government responsiveness, corporate adaptability, and successful resolution of negotiations with the U.S.

Source materials

On August 1, 2025 tariff increase to 35 percent: ir.algoma.com+4Global News+4Delta Optimist+4 The Guardian[Reuters+4The Guardian+4 CTVNews+4|https://urldefense.com/v3/__https://www.theguardian.com/us-news/2025/jul/31/trump-canada-tariffs-order?
Doubling of metal tariffs to 50 percent in June 2025: TIME axios.com AP News
Algoma Steel comments and funding request: Global News, Delta Optimist
Canadian government support measures, quotas, and LETL: Reuters, Global News TT News canadianmanufacturing.com
Industry criticism and job impact: Reuters AP News

If you’ve glanced at your investment statement lately and noticed a few more details than usual—you're not imagining things! A new industry regulation called CRM3 (Client Relationship Model – Phase 3) is here, and it’s shining a brighter light on how financial advisors are paid. While that may sound like something only advisors care about, CRM3 is designed with you, the investor, in mind.

Let’s explore what this change means, the difference between fee-for-service and embedded compensation, and why now might be a great time to chat with your advisor about what’s right for you.

What is CRM3?

CRM3 is the next step in a regulatory journey to improve transparency in the Canadian investment industry. The first two phases (CRM1 and CRM2) focused on helping clients better understand their investments, performance, and advisor compensation.

CRM3 goes a step further by requiring firms to clearly show the total cost of investing, including all management fees, commissions, and other charges—whether they’re paid directly or built into the cost of investment products.

In other words, your statement will now provide a full dollar-and-cents breakdown of what you’re paying for financial advice and investment management. That’s a good thing. When you can see exactly what you’re paying, you can better evaluate the value you’re receiving.

Embedded Compensation vs. Fee-for-Service: What’s the Difference?

Here’s a quick analogy: imagine going out to dinner.

• Embedded compensation is like ordering a prix fixe menu—you get a great meal, but you’re not exactly sure how much the appetizer, main course, and dessert cost individually. Everything is bundled into one price, and the server (your advisor) gets a cut from the kitchen (the investment company).
• Fee-for-service, on the other hand, is like ordering à la carte. You know exactly what you’re paying for, and the server works directly for you, not the kitchen. You’re billed clearly and directly for the advice and service you receive.

Both options can work well—it depends on your preferences, financial needs, and the complexity of your investments.

The Advantages of Fee-for-Service

With CRM3 highlighting the true cost of investing, many investors are wondering: "Is fee-for-service a better option for me?" Let’s break down the advantages:

1. Clarity and Control

Fee-for-service structures make it crystal clear what you’re paying and what you’re paying for. Whether it’s a flat annual fee, an hourly rate, or a percentage of assets under management, there are no hidden costs or surprise charges.

2. Alignment of Interests

Because the advisor is paid directly by you, not the investment company, the advice is more likely to be objective. Your advisor’s compensation doesn’t depend on what products you buy—it depends on the value they provide to you.

3. Flexibility

Fee-for-service arrangements can often be tailored to your specific needs. If you just need a financial plan or investment review, you can pay for that. If you want full ongoing portfolio management, that’s an option too. You only pay for the services you want.

4. Potential for Cost Savings

Especially for larger portfolios or more passive investors, fee-for-service can sometimes be more cost-effective than embedded compensation. Why? Because you're not paying ongoing commissions built into fund expenses, which can quietly add up over time.

Is Fee-for-Service Right for You?

Great question! The answer depends on a few factors:

• Do you want more transparency in your financial plan?
• Are you looking for truly unbiased advice?
• Would you prefer to pay directly for services you value?

If you answered "yes" to any of the above, it might be time to explore whether a fee-for-service model could work better for you.

Keep in mind, this isn’t a one-size-fits-all decision. For some investors, especially those newer to investing or working with smaller portfolios, embedded compensation can still be a cost-effective and efficient way to receive advice and access investment products. But with CRM3 now giving you a clearer picture, it’s worth having the conversation.

Let’s Talk: You Deserve to Know Your Options

Whether you’re a seasoned investor or just starting out, you deserve to understand how you’re paying for advice and what you’re getting in return. With CRM3 now in place, it’s easier than ever to start that conversation.

If you’re curious about how a fee-for-service model might compare to what you’re currently doing, let’s chat! We can walk through your statement, break down the numbers, and help you make an informed decision—no pressure, no obligation.

After all, the more you understand your financial picture, the better decisions you can make—and that’s what good advice is all about.

Sources:

• Canadian Securities Administrators (CSA), CRM3 Requirements
• FP Canada: Fee-for-Service Financial Planning
• Investment Funds Institute of Canada (IFIC): Cost Disclosure & CRM

If you'd like to explore how fee-for-service might work for your situation, give us a call or book a time using the link in my signature. We're always happy to answer questions and help you feel confident about your financial future.

As a committed supporter of the Canadian monarchy, I was deeply moved by the recent visit of King Charles III to Canada. His Majesty's address to Parliament on May 27, 2025—the first by a reigning monarch since Queen Elizabeth II in 1977—was a momentous occasion that underscored our nation's sovereignty and unity. In these times of geopolitical uncertainty, the monarchy stands as a steadfast symbol of our identity and resilience.

A Historic Speech from the Throne

King Charles's throne speech was a powerful affirmation of Canada's independence. In the face of escalating tensions with the United States, particularly under President Donald Trump's provocative rhetoric, the King's words resonated deeply. He declared, "The true north is indeed strong and free," echoing the sentiments of our national anthem and reaffirming our commitment to self-determination.

The speech also highlighted Canada's dedication to democratic values, multiculturalism, and international cooperation. His Majesty emphasized the importance of strengthening our military alliances and diversifying trade partnerships, signaling a strategic pivot towards global partnerships beyond our southern neighbor .m.economictimes.com

Prime Minister Carney's Vision for Canada

Prime Minister Mark Carney's leadership marks a new chapter in Canada's political landscape. Assuming office in early 2025, following the resignation of former Prime Minister Justin Trudeau amid economic challenges and political unrest , Carney has swiftly set a course to fortify Canada's economy and assert its sovereignty.

One of Carney's first actions was to engage with provincial premiers to identify key infrastructure projects that could stimulate economic growth and reduce dependence on U.S. markets. This includes investments in ports, pipelines, and mining, aiming to bolster Canada's energy sector and enhance its global competitiveness .niagaracanada.com+2investmentexecutive.com+2ft.com+2

In contrast to Trudeau's tenure, which was characterized by increased government spending and interventionist policies , Carney advocates for a more balanced approach. He has initiated measures to streamline project approvals and reduce regulatory burdens, seeking to create a more business-friendly environment that can withstand external economic pressures .policyoptions.irpp.orgft.com

A Shift in Canada-U.S. Relations

The relationship between Canada and the United States has been strained under President Trump's administration. His recent threats to impose tariffs and suggestions of annexing Canada have prompted a reevaluation of our foreign policy. Prime Minister Carney has responded by asserting Canada's autonomy and seeking to diversify trade relationships. This includes strengthening ties with European and Asian markets and investing in clean energy initiatives that align with global sustainability goals .theguardian.comrealeconomy.rsmus.com

The monarchy's role in this context cannot be overstated. King Charles's visit and speech served as a unifying force, reminding Canadians of our shared values and history. His presence reinforced the message that Canada is a sovereign nation, capable of navigating challenges independently while maintaining its commitment to international cooperation and peace.

Reflecting on Leadership and Legacy

Comparing the leadership styles of Prime Ministers Carney and Trudeau reveals distinct approaches to governance. Trudeau's tenure was marked by progressive policies and a focus on social issues, but his administration faced criticism for economic mismanagement and an inability to address rising costs of living and housing affordability .theaustralian.com.au

In contrast, Carney brings a pragmatic and experienced perspective to leadership. His background in global finance and central banking equips him to tackle economic challenges head-on. By embracing Canada's energy sector and focusing on infrastructure development, Carney aims to build a resilient economy that can withstand external shocks and ensure prosperity for future generations .ft.com+1pm.gc.ca+1

Conclusion

As a financial advisor, I recognize the importance of stability and confidence in our national institutions. The monarchy, through King Charles's visit and speech, has reaffirmed its role as a pillar of Canadian identity. Prime Minister Carney's leadership promises a future where Canada stands strong and free, guided by principles of sovereignty, economic resilience, and international cooperation. Together, we move forward, united in purpose and proud of our heritage.