Oil markets ended the week with a familiar source of anxiety back in focus: the Middle East. Brent crude settled near US$94 a barrel as renewed pressure on Iran and continuing disruption around the Strait of Hormuz revived fears that global supplies could tighten again. For Canadian motorists, the timing is uncomfortable. Gasoline prices are already well above year-ago levels in many cities, fuel has become a major contributor to inflation, and temporary federal excise-tax relief is scheduled to end after Labour Day.
Canada’s position as a major oil exporter means higher crude prices can support energy revenues and the Canadian dollar, but that does not shield households from higher pump prices. The next few weeks will depend heavily on shipping flows, refinery availability, geopolitical escalation and how quickly wholesale fuel costs move through Canadian markets.
Brent Ends the Week Back Above US$94
Brent crude finished Friday at US$94.39 a barrel, while West Texas Intermediate settled at US$87.06. Those levels were not simply the result of ordinary summer demand. Brent gained more than 6% over the week after the United States threatened new economic sanctions on countries that continue trading with Iran, raising concern that already-constrained Iranian exports could tighten further. The move pushed both benchmarks to their strongest weekly levels since late July and reminded traders how quickly geopolitical headlines can add a risk premium to crude. Markets also reacted to the collapse of recent diplomatic progress, which increased the perceived chance that supply restrictions could last longer than previously expected.
For Canadian drivers, the important point is not whether oil is exactly US$94 on any given day, but whether it stays elevated. Pump prices usually reflect a chain of costs that begins with crude and runs through refining, transportation, wholesale markets, taxes and retail margins. A short-lived oil spike can fade before it fully reaches consumers. A sustained period near current levels is different. It gives refiners and fuel wholesalers less room to absorb increases and raises the likelihood that higher replacement costs will work their way into gasoline and diesel prices across Canada. That is why a stable-looking crude quote can still matter to household budgets if it persists through several wholesale pricing cycles.
The Strait of Hormuz Remains the Market’s Biggest Pressure Point
The Strait of Hormuz remains the central vulnerability. The narrow waterway connects the Persian Gulf with the Gulf of Oman and has historically handled roughly one-fifth of global oil supply. Earlier in 2026, the U.S. Energy Information Administration said the strait had become effectively closed to most shipping because threats of attack and lost insurance coverage were keeping tankers away. That matters because several major exporters, including Saudi Arabia, Iraq, Kuwait, Qatar and the United Arab Emirates, rely on routes through or near the strait. In normal conditions, the route is so important that even a modest interruption can force traders to reassess global balances and shipping schedules within hours.
The disruption is still visible. Reuters reported on August 22 that Iran had allowed several Iraqi oil tankers to pass through Hormuz after repeated requests from Baghdad, while Iraq continued examining alternative export routes. The fact that individual permissions are newsworthy shows how abnormal the shipping environment remains. Even when oil is technically available, uncertainty over whether tankers can move safely, secure insurance and reach customers on schedule can increase freight and financing costs. Markets therefore price not only barrels lost today, but also the possibility that a new military or political escalation could remove more supply tomorrow. Iraq produced roughly 4 million barrels a day before the war, making its search for alternative routes through Turkey, Syria and Jordan economically significant as well as symbolic.
Canadian Gasoline Prices Still Respond to Global Crude
Canada produces far more crude oil than it consumes, but Canadian motorists still buy gasoline in a market shaped by global prices. Natural Resources Canada identifies crude oil as one of four major components of the retail gasoline price, alongside refining, retailing and taxes. Because crude is traded internationally and much of North American fuel pricing is linked across borders, a supply shock in the Persian Gulf can affect a filling station in Ontario, Alberta or British Columbia even when that station is nowhere near imported Middle Eastern oil. Canadian refineries may source crude domestically or from North America, yet the opportunity cost of those barrels still reflects international markets and competing demand.
The Canadian dollar also matters because global crude benchmarks are quoted in U.S. dollars. A stronger loonie can partially soften the Canadian-dollar cost of a barrel, while a weaker currency can amplify it. On August 20, the Canadian dollar reached its strongest level in nearly three months as oil prices climbed and trade optimism improved, trading around C$1.379 per U.S. dollar. That currency move offers some cushioning, but it is not a complete offset. Refining margins, regional supply constraints and taxes can still push retail prices higher even when the exchange rate moves in Canada’s favour. The same dynamic works in reverse when the loonie weakens, which is one reason Canadian motorists can experience a different price path than American drivers facing the same crude benchmark.
Drivers Were Already Paying Far More Than a Year Ago
Canadian drivers were already seeing elevated prices before Brent returned to the mid-US$90s. CAA’s national tracker showed an average of 167.9 cents per litre on August 18, up from 163.1 cents a week earlier and 131.9 cents a year earlier. Local prices can diverge sharply from that national figure. Ottawa was expected to hold at 173.9 cents per litre on August 22, while Victoria was around 205.9 cents. These gaps illustrate why a single national average can hide very different household experiences. Vancouver-area prices were also around the $2-per-litre mark, reinforcing how sharply location can shape what a family pays for the same basic commodity.
Taxes are one reason for the regional spread, but they are not the only one. Natural Resources Canada points to local competition, transportation costs, station volumes, refinery access and regional supply conditions. British Columbia often carries higher pump prices than parts of the Prairies, while regulated Atlantic markets can adjust on different schedules. For a commuter filling a 55-litre tank, every 10-cent move changes the bill by $5.50. That may look modest in isolation, but repeated fill-ups turn small daily movements into a noticeable monthly expense, especially for households with long commutes or multiple vehicles. For drivers who cannot easily reduce mileage, such as tradespeople, rural residents or shift workers, those recurring differences are especially difficult to avoid.
Refinery Disruptions Are Making the Problem More Complicated
Crude oil is only part of the problem. The current Middle East crisis has also damaged or constrained refining capacity, which can make finished fuels expensive even when crude itself stops rising. Reuters reported this week that more than 20% of the Middle East’s roughly 9.6 million barrels per day of refining capacity was offline and that global refinery runs in the second quarter were down sharply from a year earlier. That has tightened supplies of gasoline, diesel and other refined products in several markets. European diesel and U.S. gasoline prices have also risen sharply since the conflict began, illustrating how refinery damage can spread cost pressure well beyond the region itself.
This distinction matters because drivers buy gasoline, not crude. A barrel of oil must be processed into usable fuels, and the difference between crude costs and wholesale fuel prices can widen when refineries are damaged, offline for maintenance or operating below normal rates. The Bank of Canada has specifically highlighted elevated gasoline refinery margins as a reason pump prices remained high even after crude fell from its spring peak. If Brent holds near US$94 while refining margins also stay elevated, Canadian retail prices can remain stubbornly high rather than tracking crude in a simple one-for-one relationship. That helps explain why motorists can sometimes see pump prices rise even on days when crude futures are flat or slightly lower.
Gasoline Has Become a Major Inflation Driver Again
Fuel prices have already become an important inflation story in Canada. July’s Consumer Price Index rose 3.0% from a year earlier, with gasoline prices up 25.7% year over year. That put headline inflation at the top of the Bank of Canada’s 1% to 3% control range, even as the Bank’s preferred core measures remained near 2%. The contrast helps explain why officials are watching energy closely: gasoline can move headline inflation quickly without necessarily signalling that every part of the economy is overheating. Gasoline’s large year-over-year increase also means household perceptions of inflation may feel hotter than core measures suggest, because fuel prices are highly visible and purchased frequently.
The Bank of Canada’s July outlook assumed oil prices and gasoline refinery margins would decline, allowing inflation to ease toward target. Its later summary of deliberations made the risk explicit: renewed Middle East hostilities could push oil higher, broaden cost pressures and make inflation more persistent. Higher fuel costs can also reach beyond service stations through trucking, aviation, agriculture and other energy-intensive activities. So far, the Bank has said broader spillovers have been limited. The longer oil and refined-fuel prices remain elevated, however, the greater the chance that businesses eventually pass more of those costs to consumers. Persistent energy pressure would also complicate the trade-off between supporting a still-recovering economy and preventing temporary price shocks from becoming embedded in expectations.
Ottawa’s Temporary Fuel-Tax Relief Is Approaching Its End
Canadian motorists are currently receiving an unusual buffer from federal tax policy. Ottawa temporarily reduced the federal excise tax on gasoline, diesel and aviation fuels to zero beginning April 20 in response to fuel-price pressure linked to the Middle East conflict. The normal federal gasoline excise tax is 10 cents per litre, while diesel is normally taxed at 4 cents per litre. The measure was enacted as temporary relief rather than a permanent change to the fuel-tax system. Finance Canada estimated the suspension would provide more than $2.4 billion in total tax relief during 2026, underscoring the scale of the intervention.
That relief is scheduled to remain in place only through September 7. Under the current law, the full federal excise tax returns on September 8, meaning gasoline would again carry the 10-cent-per-litre federal levy and diesel the 4-cent levy unless Ottawa changes the policy. The timing matters because the tax restoration could arrive while crude and refining costs are still elevated. It would not necessarily translate into an identical overnight pump-price increase everywhere, because inventories, wholesale contracts and competitive conditions differ. Still, it represents a clearly defined upward cost change that drivers and businesses can already see on the calendar. In a market already being driven by geopolitics, that domestic policy deadline could become one of the most visible September price events for Canadian motorists.
Higher Oil Helps Canadian Exports, but That Does Not Protect Households
Higher oil prices create a complicated Canadian trade-off because the country is also a major producer and exporter. The Canada Energy Regulator says crude oil and equivalent production averaged a record 5.35 million barrels per day in 2025. Canada exported about 4.3 million barrels per day of crude that year, with roughly 90% going to the United States, and crude exports were valued at about $140 billion. Higher world prices can therefore lift export receipts, corporate revenues and government resource income in producing regions. Energy products sent to the United States alone were worth tens of billions of dollars, so changes in crude prices can meaningfully influence Canada’s trade balance.
Statistics Canada saw that effect earlier this year. In April, exports of crude oil rose largely because prices increased during the Middle East conflict, helping lift the value of Canadian energy exports. Yet the benefit is distributed very differently from the cost at the pump. An oil producer in Alberta may gain from a stronger realized crude price while a household in Toronto, Halifax or Vancouver simply sees a larger fuel bill. A firmer Canadian dollar can soften some imported inflation, but it does not erase refinery, distribution or retail pressures. Canada can economically benefit from expensive oil and still have consumers feel squeezed by it. That split helps explain why higher oil can look positive in national export data while still feeling negative in household budgets and business operating costs.
What Could Push Fuel Prices Higher—or Finally Bring Relief
Several developments could decide whether US$94 becomes a temporary plateau or the start of another leg higher. On the upside, traders are watching U.S. sanctions enforcement against Iran, the security of tanker traffic through Hormuz, further military strikes and the condition of Gulf refineries. A material reduction in shipping or another refinery outage could quickly tighten both crude and finished-fuel markets. The International Energy Agency has already warned this year that inventories could become critically low if heavy stock draws persist into peak seasonal demand. Freight rates, insurance availability and tanker behaviour are equally important because physical barrels have little value to buyers if they cannot be moved safely and predictably.
There are also forces that could pull prices down. Reuters noted that U.S. shale production, additional exports from the United Arab Emirates and Venezuela, and alternative shipping arrangements are helping offset some lost supply. Iraq’s recent tanker permissions through Hormuz are another sign that limited flows can resume even in a high-risk environment. For Canadian drivers, the practical indicators are straightforward: Brent and WTI prices, wholesale gasoline and diesel margins, the Canadian dollar, and local pump-price trends. If geopolitical risk eases while refinery output improves, relief could arrive quickly. If the disruption persists, the current fuel-cost pressure may prove much harder to shake. The next major signal will be whether current tensions disrupt physical flows further or merely keep an elevated risk premium attached to otherwise adequate supply.
