Oil markets have been reminded how quickly the Strait of Hormuz can turn from a shipping route into an inflation risk. Brent crude pushed above US$97 a barrel on September 7 as renewed U.S.-Iran clashes involving commercial vessels intensified concerns about the reliability of Middle Eastern energy supplies. The move adds another layer of uncertainty for Canadian motorists already dealing with gasoline prices well above year-ago levels.
Canada is a major oil producer, but that does not isolate its drivers from global fuel shocks. Crude prices, refinery margins, inventories and transportation costs ultimately feed into what appears on service-station signs. Ottawa’s newly extended fuel-tax relief offers some protection, but if Hormuz traffic deteriorates further, market-driven increases could again test household budgets across the country.
Brent Is Back Above US$97
Brent crude climbed to roughly US$97.37 a barrel in September 7 trading, while West Texas Intermediate was around US$92.57. That extended a sharp rebound already underway before the latest maritime clashes. Brent finished the previous week at US$96.28, up 7.6% for the week, while WTI gained almost 10% to US$91.48. For energy markets, those are substantial moves over only a few sessions and show how quickly geopolitical risk has returned to prices.
The distinction between Brent and WTI matters for Canadian motorists. WTI is closely connected to the North American crude market, while Brent is the leading international benchmark and often reflects the price consequences of disruptions affecting globally traded barrels. Neither translates directly into a particular gasoline price in Toronto, Calgary or Vancouver. Still, when both benchmarks climb together because traders fear tighter physical supplies, the raw-material cost facing refiners rises and the risk of higher wholesale gasoline prices follows.
The Latest Hormuz Clashes Changed the Risk Calculation
The latest move was not driven simply by diplomatic rhetoric. U.S. forces targeted three Iranian tankers, while Iran’s Revolutionary Guard carried out attacks involving U.S.-linked vessels and tankers using routes Tehran considered unauthorized. That escalation matters because commercial shipping itself is becoming part of the confrontation. A tanker operator deciding whether to enter a dangerous waterway is making a commercial calculation involving crews, cargo values, insurance and the possibility of being struck or detained.
The impact is already visible in traffic data. Over a recent 10-day period, commodity-vessel transits through Hormuz averaged about 10 per day, the lowest rate since May. Traffic reportedly fell from more than 15 ships on one Friday to only two the next day. Reuters also reported that no very large crude carriers had exited the strait since the previous Wednesday. Even when oil production remains physically intact, fewer available voyages can constrain the amount reaching refiners and encourage buyers to bid more aggressively for barrels elsewhere.
Why One Narrow Waterway Can Move Global Fuel Prices
Hormuz carries an extraordinary amount of energy through a remarkably narrow space. The International Energy Agency says an average of about 20 million barrels per day of crude oil and petroleum products moved through the strait in 2025, representing roughly one-quarter of global seaborne oil trade. At its narrowest point, the passage is only about 29 nautical miles, or 54 kilometres, across, with designated shipping lanes considerably narrower than the full waterway.
There are alternatives, but not enough to replace Hormuz completely. Saudi Arabia and the United Arab Emirates have pipelines capable of moving some crude without using the strait. Other major Gulf producers have far fewer options. Iran, Iraq, Kuwait, Qatar and Bahrain depend heavily on Hormuz for exports. That is why markets react before a complete shutdown occurs. Traders do not need to see 20 million barrels disappear overnight; a rising probability that future cargoes could be delayed, damaged or blocked is enough to increase the risk premium embedded in crude prices.
Being an Oil Producer Does Not Give Canadian Drivers Immunity
Canada produces considerably more crude oil than it consumes, yet retail gasoline remains connected to continental and global markets. Natural Resources Canada identifies crude costs, refining margins, retail margins and taxes as the principal components of gasoline prices. Inventory levels, transportation costs, refinery outages and local competition also matter. A barrel produced in Alberta therefore does not automatically become discounted gasoline for a motorist filling up a few kilometres from an oil-industry headquarters.
Canadian crude is also sold into competitive export markets rather than reserved for domestic consumers at a fixed price. In 2025, Canada exported about 4.3 million barrels of crude per day, with roughly 90% going to the United States. Refiners and fuel distributors respond to market values and replacement costs. If crude becomes more valuable internationally, Canadian producers may benefit, but refiners still face higher costs for the feedstock needed to make gasoline. The same economy can consequently experience stronger petroleum-export revenues and painful service-station prices at the same time.
Canadian Gasoline Was Already Expensive Before This Jump
The renewed crude rally is arriving after Canadian motorists had already absorbed a sizeable energy shock. Statistics Canada reported that gasoline prices were 25.7% higher in July than a year earlier, accelerating from a 20.5% annual increase in June. Higher gasoline helped push the overall Consumer Price Index to 3.0% year over year in July, while the CPI excluding gasoline rose a much milder 2.2%. The agency specifically linked the increase to Middle East conflict and restrictions affecting Hormuz and Red Sea shipping.
More recent retail data also illustrated the pressure. In mid-August, CAA data cited by Global News put the national average for regular gasoline near C$1.67 per litre, compared with approximately C$1.64 a week earlier and C$1.33 a year before. A typical 50-litre fill at C$1.67 costs C$83.50. At C$1.33, the same quantity would have cost C$66.50. That roughly C$17 difference makes movements in global oil markets tangible for households that commute daily or drive long distances outside major transit networks.
Ottawa’s Tax Extension Gives Drivers an Important Cushion
Canadian motorists received one piece of favourable news just before the latest crude-price surge. On September 2, Ottawa announced that the temporary suspension of the federal fuel excise tax would be extended through January 31, 2027. The government also published legislative proposals applying half the normal excise-tax rate from February 1 through March 31, 2027. The regular federal excise levy is 10 cents per litre on gasoline and 4 cents per litre on diesel.
That timing is significant because the original tax holiday was scheduled to expire after September 7. Without the extension, Canadian fuel markets could have faced both rising crude costs and the return of the federal levy at almost the same time. The measure does not freeze retail gasoline prices; crude, refining and distribution costs can still push them higher. But it removes one identifiable source of an immediate increase. For a 50-litre gasoline purchase, keeping the 10-cent federal excise levy suspended represents C$5 before considering the interaction with applicable sales taxes.
A US$97 Barrel Does Not Produce the Same Increase Everywhere
Drivers should not expect every service station to respond identically to a rise in crude futures. Natural Resources Canada notes that gasoline prices reflect much more than the barrel itself. Refinery margins can widen or narrow, inventories can temporarily cushion shortages, transportation expenses differ and retailers compete differently from one market to another. A refinery problem in one region can therefore push local prices up even when crude is stable, while healthy inventories elsewhere can slow the effect of a crude-market rally.
Taxes create another layer of regional variation. Provincial fuel taxes differ, and some municipalities also impose fuel levies. Sales taxes are percentage-based in many jurisdictions, meaning the dollar amount collected can increase when the underlying fuel price rises. Competition, station location and the cost of moving finished gasoline into remote markets also produce noticeable differences between communities. The practical result is that a Hormuz shock may appear at Canadian pumps unevenly: the direction can be national while the timing and number of cents per litre vary significantly by province and city.
The Bigger Economic Risk Runs Through Diesel and Inflation
Gasoline attracts attention because motorists encounter its price on giant roadside signs, but diesel can transmit an oil shock more broadly through the economy. Trucks, agricultural machinery, construction equipment and delivery fleets all depend heavily on diesel. International markets are already showing unusual stress: U.S. diesel prices recently reached a record US$5.85 per gallon as Middle East disruptions, refinery constraints and other supply problems tightened the market. Those pressures can eventually influence freight and production costs beyond the fuel sector itself.
The Bank of Canada is watching precisely that possibility. On September 2, it said Canadian inflation had been hovering around 3%, mainly because of persistently high gasoline prices, although inflation excluding gasoline was 2.2% and there was still little evidence of broad spillovers. Earlier Bank estimates suggested the direct gasoline shock added roughly 1.4 percentage points to inflation at its second-quarter peak. War-related costs spreading through supply chains could contribute an additional peak impact of about 0.4 percentage points in early 2027 if businesses pass those expenses along.
Higher Oil Creates Winners in Canada, but Households Still Feel the Bill
Canada enters an oil-price shock differently from countries that import almost every barrel they consume. The country exported roughly 4.3 million barrels of crude per day in 2025, worth about C$140 billion, according to the Canada Energy Regulator. Approximately 3.9 million barrels per day went to the United States. Higher world prices can therefore lift revenues for producers, improve cash flow in petroleum-producing provinces and increase the value of Canadian energy exports.
That macroeconomic benefit is real, but it does not make an individual gasoline purchase cheaper. A family commuting between suburban communities experiences the oil shock through a household expense, while an energy company experiences it through the selling price of its output. Higher crude has also sometimes supported the Canadian dollar, which can partly moderate the Canadian-dollar cost of internationally traded commodities, but that relationship is not automatic. In August, the loonie strengthened as oil climbed, yet currency moves can be overwhelmed by interest rates, trade disputes and broader investor sentiment. Pump-price protection is therefore incomplete.
Tanker Traffic Now Matters More Than Any Single Oil-Price Target
The next move in gasoline costs will depend heavily on what actually happens to ships in and around Hormuz. If traffic normalizes and regional exports recover, some of the geopolitical premium built into crude could unwind. If attacks intensify, tankers retreat further or Iran’s planned restrictions constrain more vessels, the market could price in a much larger shortage. OPEC+ added another variable on September 6 by leaving its October production policy unchanged rather than announcing a fresh increase designed to counter the latest surge.
The possible range is unusually wide. Goldman Sachs has said oil could reach roughly US$120 a barrel if attacks on vessels intensify and cause greater supply disruption. The same analysis suggested prices could retreat toward about US$80 if regional exports return to normal. Those are scenarios, not promises. For Canadian motorists, they illustrate why a US$97 Brent price is less important than the direction of travel. The most revealing indicators in the days ahead may be tanker counts, physical export volumes, refinery margins and whether the latest exchange of strikes escalates or fades.
