A gas station in Toronto in April, 2024. Canadians could pay between three and six cents more per litre at the pump as early as Wednesday, analysts say.Chris Young/The Canadian Press
From shuttered airports to rising oil prices and volatile stock markets, the global economy is feeling ripple effects after the U.S. and Israel launched strikes on Iran, and Iran retaliated on targets across the Middle East.
Here are the main ways the recent military conflict – and the risk of a prolonged standoff – could affect Canadian consumers and investors.
Travel
The strikes have severely disrupted travel through Dubai and Abu Dhabi in the United Arab Emirates, as well as in Doha, Qatar. The three cities are global transit hubs that connect Asia, Europe, Africa and North America.
As of Monday evening local time, UAE airports had resumed a limited number of flights to take stranded passengers to their destinations, while Qatar’s airspace remained closed.
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Major airlines, including Air Canada, have adopted flexible policies that allow passengers who are set to travel through airports affected by the conflict to rebook their flights at no cost or obtain refunds within certain dates.
Air Canada also said in a Monday post to X that it had cancelled flights from Canada to Israel and Dubai until March 22, with service resuming the day after.
The conflict has prompted Ottawa to issue what’s known as Level 4 advisories urging Canadians not to travel to countries including Iran, Israel, the UAE, Qatar, Kuwait and Bahrain. The federal government is also warning visitors to avoid non-essential travel – a Level 3 advisory – to destinations including Saudi Arabia and Oman.
Travellers with trip cancellation or interruption insurance are typically eligible to file claims under those policies when Ottawa issues a Level 3 advisory or higher.
Gas prices
The war in Iran could push up gas prices, and fast. The conflict has sent oil prices surging, with Brent crude, a global benchmark for the commodity, rising as much as 13 per cent to US$82.37 a barrel in the futures market before closing up 6.7 per cent at US$77.74 a barrel.
Canadians could pay between 3 and 6 cents more per litre at the pump as early as Wednesday this week, analysts told The Globe and Mail.
Oil prices jumped on Monday as the U.S., Israel and Iran stepped up their conflict in the Middle East, with attacks damaging tankers and disrupting shipments from the key producing region.
Reuters
The saving grace for motorists is that gasoline prices have been decreasing since last spring in Canada, a decline that reflected both Ottawa nixing the consumer carbon levy and an oil price drop in early April because of uncertainty around U.S. President Donald Trump’s tariffs.
It also helps that the world currently has large stockpiles of oil stored at sea on tankers in what’s called “floating storage.” That floating inventory could provide a buffer against supply disruptions, said Brooke Thackray, research analyst at Global X.
The stock market
Markets had a relatively muted response to the news out of the Middle East on Monday, with both the S&P/TSX Composite Index and the S&P 500 bouncing back from early losses over the course of the day, and the Canadian index closing at a record-high.
The jump in oil prices has so far buoyed energy stocks, providing a silver lining for Canadian investors.
“As long as there’s conflict going on and it doesn’t look like there’s a resolution ... I think the Canadian energy sector will be the winner here,” said Mr. Thackray.
But Philip Petursson, chief investment strategist at IG Wealth Management, cautioned investors against making rash decisions, given the high degree of uncertainty over how the conflict will evolve.
“Embrace your diversified portfolio and ride it out.”
The loonie
Currency markets also served up a subdued response. While oil-price upswings often push the value of the loonie higher, on Monday that effect was offset by markets’ rush toward safe havens, including the U.S. dollar. Overall, the Canadian dollar weakened only slightly against the greenback, hovering around 73 cents US.
However, there was a silver lining here, too. Concerns about the impact of higher oil prices hit the currencies of countries that depend heavily on energy imports, including the euro and the yen. The loonie appreciated against both on Monday.
Inflation
Oil prices that remain elevated for a protracted period could push inflation back up, economists are warning.
The good news is that Canada, as an energy exporter, is relatively sheltered from these effects. Higher oil prices also cause the loonie to appreciate, which helps offset the impact of higher prices on imported goods.
But a drawn-out conflict could also drive up the price of fertilizer, analysts say.
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A range of plant food, including 45 per cent of global sulphur exports and 35 per cent of urea shipments transit through the Strait of Hormuz, a key global maritime thoroughfare between Iran and Oman.
Pricier fertilizer, in turn, could put renewed upward pressure on food prices, which have remained a sore point for Canadian shoppers, even as other types of inflation have cooled.
Interest rates
Worries about inflation have prompted investors to push up bond yields and pare back expectations that the Bank of Canada will lower its trendsetting policy rate this year.
This is bad news for anyone who was hoping for declines in either fixed mortgage rates, which are influenced by bond yields, or variable ones, which tend to follow movements in the central bank’s rate.
In a post to X, Ron Butler, founder of Toronto-based Butler Mortgage, cautioned mortgage shoppers against making decisions based on short-term bond-market gyrations linked to geopolitical events.
Instead, borrowers should focus on securing a rate hold, he wrote. With a mortgage pre-approval, lenders often guarantee a mortgage rate for up to 120 days, which protects borrowers from the risk of rising costs.
If rates don’t rise during that period, customers can let the rate hold expire at no cost.
