Experts flag lasting war‑driven crude shock as threat to Canada’s prices and portfolios
Oil has lurched from roughly US$70 to more than US$119 a barrel since late February, a swing that economists say is reshaping inflation risks, interest‑rate expectations and long‑term assumptions about where crude will settle.
According to The Canadian Press, crude traded near US$70 before the US‑Israeli war against Iran began on February 28, spiked above US$119, then closed Friday at US$82.59 for US oil and US$90.38 for Brent.
Prices then jumped again Sunday, with US crude up 6.4 percent to US$87.90 and Brent up 5.8 percent to US$95.64, after Tehran reversed an earlier decision to fully reopen the Strait of Hormuz and fired on several vessels while the US seized an Iranian‑flagged cargo ship.
BNN Bloomberg said benchmark US crude had plunged 9.4 percent on Friday after Iranian foreign minister Abbas Araghchi posted on X that passage for all commercial vessels through the strait “is declared completely open” for the remaining period of a ceasefire in Lebanon.
Brent fell 9.1 percent to US$90.38 that day.
Even after that drop, the outlet noted both benchmarks stayed above about US$70 from before the war, suggesting markets still price in significant geopolitical risk.
Reuters reported that Brent futures were around US$95.16 on Monday as rising tension kept Gulf shipping “to a minimum,” even though Kpler data showed more than 20 vessels carrying oil products, metals, gas and fertiliser passed through the chokepoint Saturday, the busiest day since March 1.
Analysts cited by The Canadian Press warned that the longer the strait remains constrained, the worse prices could get, and said that even if a deal to reopen holds, backed‑up tanker traffic, wary shipowners and damaged infrastructure could keep shipments and fuel prices elevated for months.
Against that backdrop, several Canadian economists and strategists now see a structural risk premium in crude.
As per the Financial Post, Avery Shenfeld, chief economist at CIBC Capital Markets, said “the new normal is not likely to be US$60 a barrel,” and forecast a remaining risk premium that could keep prices “between US$75 and US$80 a barrel in the course of the fourth quarter.”
The Post noted that West Texas Intermediate was about US$60 before the war, rose nearly 70 percent to US$112.95, and has since eased to around US$90.
The same article reported that Oxford Economics estimated Iran’s effective closure of Hormuz removed about 10m barrels a day of supply from global markets.
In the same article, BMO Capital Markets analyst Randy Ollenberger said that when the war ends, “that risk premium will be higher,” putting it at US$10 per barrel versus US$5 previously.
Scotia Capital Markets added that oil futures signal “higher oil prices through 2026 and 2027,” with Derek Holt noting that the futures curve “remains elevated at sustainably higher prices throughout 2026–27” and WTI futures above US$70.
Douglas Porter, chief economist at BMO, told the Financial Post that near‑term prices reflect the clampdown in Hormuz, but that the real discussion about a risk premium is “two years from now, or maybe even a year from now.”
He said the one‑year forward price for Brent is US$80, up from US$67 just before the war.
Porter also pushed back on the idea that higher prices are guaranteed .
The Financial Post quoted him saying an elevated premium is not a “foregone conclusion,” even if “that is the signal markets are sending to us.”
He pointed to 2008, when WTI hit US$150 before crashing, and to 2014, when fears over ISIS drove prices above US$100 without a permanent shift.
Porter argued that oil markets are “finely balanced” and that even a slight drop in demand could move prices significantly, adding that “you could definitely come up with a scenario where prices retreat very quickly over the next year.”
For Canada’s inflation path, the near‑term impact is already visible.
The Financial Post said gas prices jumped 21 percent between February and March as the war and near‑closure of Hormuz squeezed supply and pushed up global energy prices.
Porter called that the largest month‑over‑month gain on record back to 1950 and warned that it will be “a bit of a shock” in the next CPI.
BMO, RBC, and National Bank, as reported by the Financial Post, still expect the Bank of Canada to look through this temporary pressure and hold its 2.25 percent policy rate through the rest of 2026, even as they acknowledge that the oil shock is eroding purchasing power, particularly for lower‑income households.
