Oil shock from Iran conflict lifts global crude above US$100 and pushes Canadian fuel prices higher
Oil has blasted back above US$100 a barrel, and this time the shock is hitting Canada’s inflation outlook, fiscal plans and energy exposure all at once.
According to CTV News, Brent crude recently jumped to about US$107.97 a barrel after trading resumed, up 16.5 percent from US$92.69, while West Texas Intermediate (WTI) climbed to about US$106.22 from US$90.90, a 16.9 percent gain.
CBC News reports that Brent briefly spiked as high as US$119.50, its highest level since the summer after Russia invaded Ukraine in 2022, before plunging back below US$90 in the same day.
West Texas Intermediate also surged above US$119.48 before dropping, still well above the roughly US$70 level before the US and Israel launched the war against Iran.
The bottleneck is the Strait of Hormuz.
CTV News says roughly 15m barrels of crude — about 20 percent of the world’s oil — usually move through the strait daily.
CBC News reports that fears of Iranian missile and drone attacks have “all but stopped” tankers carrying oil and gas from Saudi Arabia, Kuwait, Iraq, Qatar, Bahrain, the United Arab Emirates and Iran.
Iraq, Kuwait and the UAE have already cut production as storage tanks fill, while Iran, Israel and the United States have attacked oil and gas facilities, worsening supply concerns.
CBC News reports that Cornell University’s Nicholas Mulder calls this “the largest oil supply shock ever,” estimating roughly three to four times as many barrels lost as during the 1973 and 1979 oil crises.
The conflict is now in its second week, with no clear end in sight.
Risk assets are feeling it.
According to CTV News, US stock index futures fell late Sunday, with the S&P 500 future down 1.6 percent, the Dow down 1.8 percent and the Nasdaq down 1.5 percent.
On Friday, the S&P 500 dropped 1.3 percent, the Dow plunged as many as 945 points before closing about 450 points lower, and the Nasdaq sank 1.6 percent.
For Canada, the macro channel runs straight through inflation and growth.
The Financial Times reports that BMO chief economist Douglas Porter says the oil spike “inflames inflation and threatens global growth,” and warns that a true oil shock raises the risk of “stagflationary forces — higher inflation, weaker growth.”
The same article notes that energy accounts for six percent of Canada’s CPI, so even a temporary jump in oil prices can significantly lift headline inflation.
As per the Financial Times, Capital Economics economist Bradley Saunders estimates that if oil averages around US$85 for the next three months before dropping back, Canada’s headline inflation would rise by about 0.3 percentage points.
But if the conflict escalates into a prolonged regional war and WTI stays above US$100, he says the direct boost to headline inflation alone would be almost 1 percentage point, with larger indirect effects.
He also notes that the Bank of Canada is already worried about supply disruption, and that market expectations of a rate hike this year have increased since the Iran conflict broke out.
On the fiscal side, Alberta’s sensitivity is back in focus.
CBC News reports that WTI rose above US$90 and ended one recent Friday just over US$91, compared with budget assumptions of US$60.50 for the coming fiscal year and US$61.50 for the current one.
ATB Financial chief economist Mark Parsons told CBC News these prices could bring short‑term revenue gains for Alberta, Saskatchewan and Newfoundland, but he stressed that the province relies on “a very volatile revenue base.”
Alberta is running a $4.1bn deficit this year, and Budget 2026 forecasts a $9.4bn deficit ahead.
Parsons said higher prices would lead to “an uplift in revenues in the energy producing provinces of Alberta, Saskatchewan, Newfoundland,” while non‑producing provinces would mostly face higher costs.
He also said Western Canadian Select could benefit from a shortage of heavy crude from the Middle East.
Consumers are already seeing the impact.
According to CAA data cited by CBC News, gas prices averaged 144.3 cents per litre across Canada on Friday, up from 127.6 cents per litre last month.
CTV News reports that Montreal drivers have faced increases of roughly 15 to 20 cents per litre, with analyst Dan McTeague saying similar net gains have occurred across the country and warning that prices could top $2 per litre in Montreal if the conflict drags on.
BNN Bloomberg reports that prices have hit about 173 cents per litre in British Columbia and 166.6 cents per litre in Newfoundland.
Enverus analyst Al Salazar has already raised his 2026 WTI forecast “well past” an average of US$70 from a previous US$61, calling a major upgrade “a given” and saying he does not expect the conflict to wrap up in the four‑to‑five week timeline suggested by US President Donald Trump.
