Gas prices in Canada saw a slight increase overnight due to the North American oil market’s response to heightened tensions in the Middle East. The joint U.S. and Israeli attack on Iran over the weekend has raised concerns about potential disruptions to the Strait of Hormuz, a crucial naval shipping route. Experts suggest that as long as this conflict persists and impacts oil tanker movements, consumers can expect elevated gas prices.
Rory Johnston, an oil markets researcher based in Toronto, emphasized the significance of the duration of any potential closure of the Strait of Hormuz. Short-term closures may have minimal effects, but prolonged disruptions could significantly impact the market. Canada’s oil sector may benefit from these higher prices, as the country’s stability is viewed positively by buyers during geopolitical uncertainties.
As of 12:30 p.m. ET on Monday, Brent crude oil prices reached $78.04 US before settling at $75.79 US, while West Texas Intermediate crude oil stood at $70.60 US by midday. Retail gasoline prices in Canada rose to 135.3 cents per litre by Monday morning, higher than the previous month but lower than a year ago, according to GasBuddy.com data.
While there have been no immediate supply disruptions, the ongoing U.S.-Iran conflict poses risks of increased volatility and premiums in the oil market. Any threats to Iran’s oil production or continued shipping disruptions could further drive up gas prices. Patrick De Haan, head of petroleum analysis at GasBuddy, anticipates heightened upward pressure on gasoline prices in the upcoming week due to seasonal trends and evolving geopolitical circumstances.
The Strait of Hormuz plays a critical role in global oil trade, with about 20% of the world’s crude oil passing through this narrow waterway. Recent incidents, including attacks on oil tankers and vessels dropping anchor in the Persian Gulf, have already affected oil supply routes. Jorge Leon, an expert at Rystad Energy, highlighted the substantial impact of any sustained disruption in the strait on global crude oil markets. Unless the conflict is resolved, the potential loss of oil supply could lead to sustained higher prices.