West Texas Intermediate climbs over 7%, though experts see limited long-term impact
A sharp rise in crude oil prices following Israel’s strikes on Iranian nuclear and military facilities may prove to be temporary, analysts said Friday, urging caution amid growing uncertainty in the Middle East.
BNN Bloomberg reported that the escalation, which prompted a swift missile retaliation from Iran, caused crude futures to surge by Friday afternoon. West Texas Intermediate crude for August delivery climbed to US$71.50 per barrel, an increase of more than 7%.
“I would see this as a bit of a knee-jerk reaction,” said Al Salazar, a commodities analyst with Enverus. “Over time, should there be no impact on supply or energy infrastructure, price spikes like this fade as it really doesn’t impact the supply and demand balance.”
The conflict marks the most serious assault on Iranian territory since its war with Iraq in the 1980s, with Israeli officials claiming the action was aimed at preventing an imminent nuclear threat. Iran’s counterattack has intensified fears of broader instability in the region.
Canadian fuel prices show modest uptick
Fuel prices in Canada were already inching upward, though the national average for unleaded gasoline remains relatively stable at 136 ¢/L, according to data from GasBuddy.com. Patrick De Haan, the company’s head of petroleum analysis, expects short-term increases of 5–10 ¢/L, particularly if tensions persist.
Diesel could see a bigger jolt, as inventories are about 20% below the five-year average for this time of year, said De Haan, noting the potential burden on sectors such as trucking and agriculture. “This situation could be short or it could be very lengthy … a lot remains to be seen as this is a very fresh situation and it’s unfolding in front of us.”
Energy stocks gain ground
Market reaction was swift, with the energy subindex on the S&P/TSX composite rising 1.7% Friday, even as broader equities declined.
While the situation remains fluid, Jackie Forrest, managing director of energy research at Arc Financial Corp., outlined a range of possible price trajectories. She said prices may quickly retreat if hostilities de-escalate. However, any disruption to key oil transit routes – such as the Strait of Hormuz – could push crude beyond US$100 per barrel.
That’s the extreme and unlikely case, Forrest noted. A more plausible risk, she added, is the loss of Iran’s oil exports – roughly 1.8 million barrels per day – though she noted the Organization of the Petroleum Exporting Countries (OPEC) has about six million barrels a day in spare capacity.
According to Forrest, prices probably stay more moderate because the OPEC group is able to offset the loss of Iranian supply if that were to occur.
Iran ranked as the world’s ninth largest oil producer in 2023, while Canada was fourth, according to the US Energy Information Administration. Analysts noted the conflict could prompt renewed attention on Canada’s energy role, particularly its potential to serve as a stable global supplier.
“But our issue is we don’t have very many barrels that hit the international market,” Forrest said. “The vast majority of our crude oil goes to the United States. If we had more pipelines to tidewater and had higher production, then people would be interested in our supply.”
