FIRST EDITION
The Middle East oil shock
Oil is sold on a world market, so Canadian refiners pay the world price. No official negotiations to end the war are under way.
The story so far.
Drivers in Canadian cities paid an average of C$1.87 a litre for regular gasoline in the week ending September 15, 2026. It was C$1.40 in the week ending February 24, 2026, four days before US and Israeli strikes on Iran began a war. Canada exports oil, but its refiners pay world prices, and oil-producing provinces collect more revenue. The International Energy Agency put the Persian Gulf's August oil exports at nearly half the prewar level. No official negotiations are under way.
A little background
Less oil has been leaving the Persian Gulf since a war that began on February 28, 2026 with US and Israeli strikes on Iran. The White House says its aims include destroying Iran's missile arsenal and keeping Iran from a nuclear weapon. Israel's military says it aims to remove threats to Israel, and Iran calls the strikes illegal aggression. A ceasefire ran from April 8 to July 10, 2026, by the US Congressional Budget Office's account, and fighting resumed. In the first half of September 2026 ships were attacked near the Strait of Hormuz, the sea route out of the Persian Gulf. A Saudi pipeline that bypasses the strait was shut. The war reaches Canadians at the pump, in the Bank of Canada's next rate decision and in the budgets of oil-producing provinces. One question is why a country that exports oil pays the world price for it. Another is who in Canada gains when that price rises. A third is what each government says about talks. Two benchmark prices recur, both quoted by the barrel. Brent is the main world one, and West Texas Intermediate is the US one.
Where things stand
As ofLess oil is leaving the Persian Gulf than before the war that began on February 28, 2026. US oil futures closed above US$100 a barrel on September 10, 2026, and Saudi Arabia said the next day that its East-West Pipeline was shut. Some physical cargoes traded above US$130 a barrel on September 15. Canadians are paying more for gasoline while oil-producing provinces collect more revenue. The US-funded broadcaster Radio Free Europe/Radio Liberty reported that the United States and Iran had held no official negotiations since late June 2026.
- Where the oil is held up
- The Strait of Hormuz carried about a fifth of the world's oil and liquefied natural gas before the war. The International Energy Agency put Gulf exports in August 2026 at nearly half their prewar level. In the second week of September the United States and Iran each reported strikes on the other's ships. In the Red Sea, Yemen's Houthi movement declared a naval blockade against Saudi Arabia in July 2026, by the account of Australia's ABC. Reuters describes the movement as aligned with Iran. The pipeline Saudi Arabia uses to reach the Red Sea has been shut since attacks on September 10, and the Saudi statement named no attacker.
- What it costs and pays in Canada
- Gasoline averaged C$1.87 a litre in Canadian cities in mid-September 2026, up from C$1.40 just before the war. By then markets were betting on a Bank of Canada rate increase by the end of 2026. The Bank had held its rate on September 2 and said higher energy costs had yet to show up in other prices. Radio-Canada reported that oil money could make up what US tariffs cost Canada. Alberta's government forecast a surplus for 2026-27 in August 2026, where its budget had a deficit.
- No negotiations under way
- President Trump says Iran wants a deal, that the United States is open to engaging and that he will decide whether it does. Iran's security council secretary says there will be no talks until Iran's conditions are met, and no negotiations are under way. The US Congressional Budget Office puts each further month of the war at US$2 billion to US$3 billion for the Defense Department.