Canada's main stock index tumbled 2.38% Tuesday, with the S&P/TSX Composite falling 822 points to 33,714.36 as investors grappled with escalating Middle East tensions. The selloff erased Monday's gains when the index had hit a fresh all-time high of 34,541.27, buoyed by surging energy prices amid Strait of Hormuz supply concerns.

Energy stocks led the decline, with the sector spiking to its highest level since September 2008 before reversing course. U.S. markets mirrored the weakness, with the S&P 500 dropping 2.1% and the Dow Jones falling 2.4%. The tech-heavy NASDAQ slid 2.3% as investors weighed inflation risks from higher energy costs against slowing economic growth.

Geopolitical fears intensified after Iranian officials threatened to block shipping through the Strait of Hormuz, raising supply disruption risks. Oil prices surged, with Brent crude jumping 8.6% to $84.36 and WTI climbing 8.3% to $77.12. The inflationary shock has dampened expectations for Federal Reserve rate cuts, with policymakers scheduled to speak later today as investors await key economic data later this week.