Oil fell more than 7% on Monday, November 2, as talks between Iranian and Qatari officials lifted hopes for an end to the US-Israeli war with Iran, Reuters reported. The relief is real but narrow. Flows through the Strait of Hormuz still run about 43% below pre-conflict levels, and the same energy shock pushed the Bank of Canada to raise its policy rate to 2.5% last week.
How Hormuz Reaches the Canadian Portfolio
Before the war, 20 million to 21 million barrels a day of petroleum moved through the strait, about one-quarter of global seaborne oil, according to Motley Fool Canada. When that route is constrained, the consequence runs in three steps.
The first step is price. Brent gained about 13% in October and ended the month at its highest in six months, according to Kalkine and Reuters. The second step is inflation. Governor Tiff Macklem told the House of Commons finance committee on November 3 that higher gasoline, diesel and heating oil prices are adding to household expenses and to the cost of producing and moving goods.
The third step is policy. The Bank of Canada raised its rate on October 28 and said further increases may be needed. Energy is also about 19% of the S&P/TSX 60 by market capitalization, according to Motley Fool Canada, so the same price move is a cost to Canadian households and revenue to Canadian producers. The S&P/TSX Composite closed at 35,532.28 on November 3, down 0.75% on the day.
The series ends October 27, the last session in the source table. Brent then peaked at $117.64 on October 30 and fell back to about $104 this week as Qatar-mediated talks progressed, so the latest prices sit outside this window.
Base Case: Another False Dawn, With Barrels Still Constrained
Raymond James analyst Pavel Molchanov told Reuters that skepticism is warranted after many false dawns over the past several months. Foreign Minister Abbas Araghchi said negotiators in Qatar are developing a proposal to reopen the strait if Washington ends its naval blockade and lifts oil sanctions on Tehran. A senior Iranian official said the two sides remain far from an agreement. President Donald Trump said on November 2 that a deal could happen.
HDQ base case is that talks continue through November without a full reopening, and that flows recover only gradually. The market data supports that reading. The Brent-WTI spread stands at $10.35 a barrel against a prewar norm of $3 to $5, according to Discovery Alert, which places the stress in seaborne Gulf crude. The same analysis argues that the binding risk is shipping, insurance and diesel supply rather than vanished barrels.
Prices have already retraced part of the October rally. FinanceFeeds reported Brent near $104 this week, its lowest close since October 7, after a peak of $117.64 on October 30 and a drop of 7.6% on Monday.
Two Tail Risks, Pointing in Opposite Directions
The first tail risk is escalation. Reuters reported that Brent ended October at a six-month high on concerns that the conflict could escalate again after the US midterm elections. Democrats won both the House and the Senate, according to CBS and CNN, so the vote is now behind the market. Attacks on tankers near the strait have also increased recently. HDQ treats renewed escalation as a non-trivial risk but not the expected outcome, since the pattern this year has been talks, setbacks and renewed talks.
The second tail risk is a signed reopening. A one-day drop of more than 7% shows how much risk premium the market is carrying. A durable deal would likely push Brent lower quickly, which would help Canadian households and weigh on energy producers. It would also undercut the main argument the Bank of Canada gave for its increase, which was that energy prices are higher and expected to stay higher.
Ottawa and Washington Move Toward a Trade Deal
Prime Minister Mark Carney said on Tuesday, while attending the Commonwealth Heads of Government Meeting, that more intense negotiations with the United States have started since his call with Trump last weekend. He said American negotiators are asking less and offering more, and that progress has been made but talks are not finished. Some Canadian red lines, including language, culture and the ability to negotiate trade deals with other markets, have been taken off the table.
Trump told Fox News on Tuesday that a deal with Canada would come very soon and that Canada would supply fertilizer to the United States without tariffs. BNN Bloomberg noted that Canada does not charge export tariffs on fertilizer or its components, including potash. The remark is therefore a signal of intent rather than evidence of terms.
Carney called off formal talks in August, before a new round of US tariffs on nearly $28 billion of Canadian goods. The next checkpoints are Budget 2026 on November 5, the October Labour Force Survey on November 6 and the next consumer price index release on November 16.