Sadiq Adatia, Chief Investment Officer at BMO Global Asset Management, addresses three compounding pressures on markets in his September 8, 2026 'This Week with Sadiq1 — a U.S.-Iran stalemate pushing oil toward US$100, growing public resistance to AI infrastructure, and consumers on both sides of the border who may be running out of cushion.
Oil at the Precipice
Military flare-ups in the Strait of Hormuz have oil prices again approaching US$100 per barrel, and markets are beginning to price in a scenario that many had hoped to avoid: a protracted stalemate with no clean exit. Bond yields have risen, inflation risks are creeping back, and rate hike expectations are being repriced in real time.
The political calculus offers little comfort. Many investors hold to the theory that President Trump would prefer resolution before the November U.S. midterms, unwilling to hand voters a high-cost-of-living narrative at the polls. Adatia is skeptical. "We think the stalemate could continue beyond November," he says, "as there is no obvious lever Trump can pull to simply make the issue go away." Recent strikes in the Strait, he notes, are consistent with the tit-for-tat pattern that has defined the Washington-Tehran standoff from the outset.
Layered on top of this is the ongoing U.S.-Canada schism, unresolved USMCA renegotiation, and a strong earnings season that is now firmly in the rearview mirror. The combination leaves BMO GAM seeing few catalysts for upside and several credible risks for downside. The team has responded by trimming equity allocation, while maintaining a slight overweight position.
The AI Infrastructure Reckoning
Polling data now shows roughly three-quarters of Americans oppose data centre construction in their local communities, and opposition is proving bipartisan. The backlash raises a pointed question for investors: does public resistance threaten AI company valuations?
Adatia's answer is measured but clear: yes, to a degree. "The longer it takes to build out AI infrastructure, the costlier it becomes," he says. Political lobbying costs could rise materially as tech companies work to preserve government support for construction timelines. The uncertainty compounds the fact that AI remains a relatively new phenomenon, and where public sentiment ultimately settles is genuinely unknown.
That said, Adatia does not see construction stopping. Data centres create jobs, and the U.S.-China AI competition functions as a structural accelerant. "Delaying could cause the U.S. to fall behind," he observes, and that geopolitical reality is likely to smooth approval paths for projects that might otherwise stall. Canada, in Adatia's view, may face fewer obstacles. Land constraints are less acute, economic growth imperatives are more pressing, and Prime Minister Mark Carney has shown a willingness to deploy Canada's resources in service of greater economic independence, even when it costs political goodwill. The parallel to critical minerals and mining approvals is apt: Canada has the inputs; the question is whether it will capitalize on them at scale.
The Consumer: Still Standing, But For How Long?
Despite the noise around tariffs, their direct impact on consumer behaviour has been modest. Spending has held up, and the labour market, while not generating significant new hiring, has not seen meaningful job losses either. The picture, however, is becoming more complex at the edges.
In the United States, the tax refunds that cushioned consumers from rising pump prices earlier in the year will not return. As oil prices climb again, the full weight of higher energy costs lands directly on household budgets. If equity markets fail to advance and the wealth effect stalls, there is no secondary buffer. Adatia notes that the holiday season may temporarily mask any deterioration in consumer sentiment, "so any changes in consumer behaviour may not show up in the data until Q1 of 2027."
Canada's picture is more fragile. Household debt is already elevated, housing is stabilizing rather than rebounding, and job creation is not expected to accelerate. The TSX has held up reasonably well, and higher oil prices benefit the Canadian economy broadly, but they sting at the pump. "Our expectation is that Canadians will be a bit more cautious about their spending going forward," Adatia says, with interest rate risk and rising mortgage costs as additional headwinds. "We could start to see some softness show up in the data sooner than in the U.S."
5 Key Takeaways for Advisors and Investors
- The U.S.-Iran conflict in the Strait of Hormuz does not have an obvious political resolution before the U.S. midterms, and may persist well beyond them. Elevated oil prices and inflation risk are not short-term noise.
- BMO GAM has trimmed equity exposure in response to the convergence of geopolitical risk, stretched valuations, and limited near-term catalysts. The slight equity overweight remains, but the posture has grown more defensive.
- Public opposition to AI data centre construction is a legitimate valuation risk, not a sideshow. Longer build timelines translate directly into higher costs, and tech companies' political overhead is likely to rise.
- Canada may emerge as a relative beneficiary of AI infrastructure expansion, given available land, government support, and economic need. Advisors should watch this theme as it develops.
- Canadian consumers are more vulnerable to a spending slowdown than their U.S. counterparts. If weakness materializes, expect it to surface in Canadian data first, potentially as early as Q1 2027.
Footnote:
1 Adatia, Sadiq. "Will Data Centre Controversy Hurt Tech Valuations?" BMO Global Asset Management, 8 Sept. 2026, https://bmogam.com/ca-en/insights/weekly-commentary-september-08-will-data-centre-controversy-hurt-tech-valuations/.
