Economists warn gas‑driven CPI spike could pressure Canadian households and portfolios
Oil has swung from record daily drops to fresh spikes in a matter of days as Iran repeatedly opens and closes the Strait of Hormuz, while equities grind to record highs and Canadian inflation forecasts edge higher on the back of surging gasoline prices.
According to BNN Bloomberg, oil prices fell back to levels last seen in the early days of the Iran war on Friday after Iran said the Strait of Hormuz was open again for commercial tankers carrying crude from the Persian Gulf.
Benchmark US crude dropped 9.4 percent to settle at US$82.59 per barrel, while Brent fell 9.1 percent to US$90.38.
Brent remains above its pre-war level of about US$70, which shows that caution is still embedded in markets.
The Canadian Press reported that crude rebounded in early trading Sunday after Tehran reversed its decision, fired on several vessels and again restricted tanker traffic.
US oil rose 6.4 percent to US$87.90 per barrel and Brent climbed 5.8 percent to US$95.64, wiping out much of Friday’s declines.
Crude traded near US$70 before the US and Israel attacked Iran on February 28, then spiked above US$119, before settling Friday at US$82.59 for US oil and US$90.38 for Brent.
Financial Post reported that West Texas Intermediate, the North American benchmark, traded around US$60 per barrel before the war, then rose nearly 70 percent to a high of US$112.95 and has since eased to about US$90.
The Post cited Oxford Economics Ltd. as estimating that Iran’s effective closure of the Strait of Hormuz removed roughly 10m barrels a day of supply from global markets.
The Strait of Hormuz now acts as a real‑time barometer of geopolitical risk.
BNN Bloomberg reported that Iranian foreign minister Abbas Araghchi said on X that, “in line with the ceasefire in Lebanon, the passage for all commercial vessels through Strait of Hormuz is declared completely open” for the remaining period of the ceasefire.
Minutes later, the same outlet said US President Donald Trump wrote on his social network that the US Navy’s blockade of Iranian ports remains “in full force” until both sides reach a deal, even as he said the process “should go very quickly in that most of the points are already negotiated.”
According to the Canadian Press, Trump also said the US attacked and seized an Iranian‑flagged cargo ship that allegedly tried to get around the blockade, and Iran’s joint military command vowed to respond.
Reuters reported that Iran has re‑imposed its de facto closure of the Strait, although ship‑tracking data still showed more than 20 vessels passing through on Saturday, the busiest day for the chokepoint since March 1.
On the macro side, Canadian inflation expectations are shifting.
Financial Post reported that gas prices in Canada jumped 21 percent between February and March as the war in Iran and the near‑closure of the Strait reduced Middle East oil flows and pushed up global energy prices.
Douglas Porter, chief economist and managing director at Bank of Montreal, told the Post that this month‑over‑month increase is the highest on record since 1950 and tops the 17 percent rebound from pandemic lows in 2020.
He said “even during Russia’s invasion of Ukraine, we never had a month that was (higher than) a 12 percent increase,” and called it “a bit of a shock” for the next CPI print.
Canada’s headline inflation rate rose 1.8 percent year over year in February.
The Post said BMO forecasts 2.6 percent in March and above 3 percent in April, while RBC expects 2.5 percent in March and above 3 percent in April, and National Bank of Canada projects 2.6 percent in March and 3.2 percent in April.
Porter told the outlet that temporarily suspending the 10‑cent‑per‑litre federal fuel excise tax on gasoline starting April 20 is a “big step in the right direction,” but he warned the savings will only offset part of the run‑up.
Food costs are the next concern.
Porter said that the energy spike threatens “modest progress” on grocery inflation and that BMO expects food prices to rise a little more than four percent this year, with risks on the high side.
Nathan Janzen, assistant chief economist at Royal Bank of Canada, told Financial Post that food would be among the first items affected by sustained high oil prices, but that pass‑through tends to take months because businesses hesitate to raise prices.
He noted that Statistics Canada has already reported grocery prices climbing 30 percent over five years and warned that “the longer this conflict drags on, the more risk you have of adding to that.”
Despite this, BMO, RBC, and National Bank all expect the Bank of Canada to look past what they see as temporary inflation pressure and hold its benchmark rate at 2.25 percent on April 29, and to keep rates unchanged for the rest of 2026.
National Bank senior economist Alexandra Ducharme told Financial Post that while high energy prices could spill into core measures later in 2026, the bank expects inflation to remain “contained” because the labour market, housing, credit growth and household finances all point to a weak underlying economy.
Equity markets have so far leaned into the optimistic scenario.
BNN Bloomberg reported that the S&P 500 jumped 1.2 percent on Friday to a record 7,126.06, its third straight week of strong gains and its longest such streak since Halloween.
The Dow Jones Industrial Average rose 868.71 points, or 1.8 percent, to 49,447.43, and the Nasdaq climbed 1.5 percent to 24,468.48.
Reuters said the S&P 500 has rallied about 12 percent from its late‑March low and has never before returned to all‑time highs so quickly after a 5 to 10 percent pullback.
Financial Post added that futures pricing suggests oil will likely stay above US$70 through 2026 and 2027, with Scotia Capital’s Derek Holt saying “the futures curve remains elevated at sustainably higher prices.”
Porter told the Post that one‑year Brent futures now trade at about US$80, up from US$67 before the war.
Avery Shenfeld, chief economist at CIBC Capital Markets, said in a podcast cited by Financial Post that “the new normal is not likely to be US$60 a barrel,” and that CIBC’s base case is for a risk‑premium‑driven range of US$75 to US$80 later this year.
