Brent crude remained above $94 per barrel Tuesday morning, holding near a level that is simultaneously good news for Canada's energy sector, bad news for Canadian consumers, and a direct complication for the Bank of Canada. This is what geopolitical risk looks like in a country that is both an energy producer and an inflation-targeting central bank with an economy under tariff pressure.
The mechanism of the Hormuz disruption is by now well established. Since February 28, when the US and Israel launched air operations against Iran and the IRGC responded by forbidding commercial passage through the strait, roughly 20% of global seaborne oil trade has been rerouted or delayed. Saudi Arabia has diverted some production through the East-West Crude Oil Pipeline to the Red Sea port of Yanbu, and the UAE has used the Abu Dhabi Crude Oil Pipeline to reach Fujairah on the Arabian Sea, but the combined alternative pipeline capacity of approximately 9 million barrels per day falls well short of the roughly 20 million barrels that normally transit the strait.
Where the Ceasefire Actually Stands
The April 8 ceasefire paused active military operations but did not resolve the underlying dispute over strait navigation. Iran has continued to resist full commercial reopening, demanding that the US end its naval blockade of Iranian ports and ease sanctions before restoring transit rights. Trump rejected that formulation on Monday, calling Iran's latest proposal unacceptable and declaring the ceasefire on "massive life support."
Goldman Sachs noted in a Monday market update that global oil inventories are not yet at critically low levels, but that the pace of drawdowns and uneven distribution across regions is raising concerns about localized shortages. Chevron CEO Mike Wirth warned publicly that fuel shortages were a growing concern in some regions as the strait remains effectively closed. Brent prices have surged more than 55% since the war began on February 28, rising from approximately $72 per barrel to a peak near $120 before retreating to the current range as the ceasefire held partially.
The chart above shows Brent crude price history from January through May 12, illustrating the conflict-driven price surge and the partial reversal following the April 8 ceasefire.
Brent crude surged from approximately $72 per barrel before the February 28 conflict to a peak near $120 in late March before the April 8 ceasefire provided partial relief; prices have since fallen to the $94-$95 range as the ceasefire holds nominally but Hormuz remains largely closed. Source: Trading Economics, CNBC.
The Canadian Portfolio Implication Is Not Simply "Buy Energy"
The instinct among advisors when oil rises is to overweight energy. That instinct is understandable but incomplete in the current environment. Canada's energy sector has already priced in a significant portion of the oil shock: Canadian Natural Resources and Suncor both gained more than 1% Monday, and the sector has outperformed meaningfully since late February.
The more consequential and less-priced implication for Canadian investors is what sustained elevated oil does to the Bank of Canada. The BoC's April 29 statement was explicit: inflation is projected to peak near 3% in April and then ease back toward 2% on the assumption that oil prices moderate. If Brent stays at $94 or higher through June, that assumption fails. Governor Macklem's language about "consecutive rate increases" becomes the base case rather than a tail risk.
The June 10 decision is now genuinely live for the first time in this tightening cycle as a question of direction, not just magnitude. Advisors with clients in variable-rate mortgages, floating-rate preferred shares, or rate-sensitive equity sectors need to prepare for that possibility in the weeks between now and June 10.