The US–Iran War Is Hitting Your Wallet: What Every Canadian Needs to Know Right Now
A conflict thousands of kilometres away has quietly become one of the biggest threats to your household budget in 2026. The war between the United States, Israel, and Iran — now stretching into its third month — is reshaping global energy markets, and Canadians are paying the price at the pump, the grocery store, and everywhere in between.
How We Got Here: The Strait of Hormuz Is Closed
On February 28, 2026, the United States and Israel launched coordinated airstrikes against Iran in what was dubbed Operation Epic Fury, targeting military facilities, nuclear sites, and key Iranian leadership — resulting in the death of Supreme Leader Ali Khamenei. Iran's response was swift and punishing: missile barrages on Israeli cities, US military bases across the Gulf, and the formal closure of the Strait of Hormuz to international shipping.
The Strait of Hormuz is not just a geographic chokepoint — it is the world's single most critical artery for energy. Roughly one-quarter of all global seaborne oil trade and 20% of liquefied natural gas (LNG) passes through this narrow passage between Iran and Oman. When Iran declared the strait "closed" on March 4, 2026, and began attacking merchant vessels attempting to transit it, the International Energy Agency immediately characterized the situation as "the largest supply disruption in the history of the global oil market."
Commercial traffic through the Strait dropped by more than 90% after the outbreak of hostilities. Even after the United States and Iran agreed to a ceasefire on April 7–8, brokered by Pakistan with a last-minute nudge from China, ship traffic through the waterway remained far below pre-war levels. As of today, May 12, 2026, negotiations over the strait's future remain deadlocked — and global energy markets are still on edge.
The Direct Cost to Canadians
For Canadians, the conflict has translated directly into higher prices on virtually everything that moves, grows, or gets manufactured. Dan McTeague at Canadians for Affordable Energy has reported that the average price of a litre of regular gasoline has risen by 51 cents since the war began on February 28. Diesel is up 74 cents per litre. Jet fuel has surged by more than $1.05 per litre. In Newfoundland and Labrador, the retail price of gas reached 203.5 cents per litre in early April. Montreal and parts of British Columbia crossed the $2 mark around the same time.
In Ontario, economists from McMaster University have noted that gas prices were averaging $1.25–$1.30 before the war started, and are now sitting in the $1.50–$1.70 range across the province, with diesel consistently above $2. With diesel prices more than 30% higher than just a few months ago, economists are warning that every product delivered by truck — which is nearly every product sold in Canada — will feel the pressure.
Beyond the Gas Pump: Groceries, Travel & More
The hit to Canadians extends well beyond what they see on the fuel pump display. University of Calgary economist Trevor Tombe has warned that Canadians should prepare for a prolonged high-inflation cycle if the conflict drags on. Airlines have already begun hiking fees and fares in response to elevated fuel costs. Amazon, FedEx, and the United States Postal Service have all implemented fuel surcharges. BC Ferries is actively monitoring its fuel deferral accounts to manage the spike.
Food inflation is the sleeper concern. The Strait of Hormuz is also central to the global fertilizer trade — over 30% of global urea, widely used in agriculture and produced from natural gas, is exported from Gulf countries through the Strait. Higher fuel costs raise the cost of production for farmers and the cost of transportation for truckers bringing food to market. The British think tank The Food Policy Institute has warned of long-term increases in food prices as a result.
In Toronto, small business owners are already feeling the squeeze. Luke Champion, owner of Good Cheese, told CP24 that some of his international suppliers have already started increasing prices. "There was the war in Ukraine that also impacted food prices. Now Iran. There's a lot of volatility," he said. "That's the trickiest thing with the rising cost of food — we still have to be able to pay our bills."
The Global Picture: Oil at $90+ and Diplomatic Paralysis
On the global stage, Brent crude oil prices surged 10–13% to around $80–82 per barrel in the immediate aftermath of the conflict's outbreak, and have since climbed above $90 per barrel according to UNCTAD data. Analysts have warned that if the Strait of Hormuz blockade persists, prices could cross the $100 per barrel threshold — a scenario that Goldman Sachs says would add 0.8% to global inflation and raise the US recession risk to 30%.
The UN Security Council has failed to act. In early April, Russia and China vetoed Bahrain's proposal calling on states to ensure the safety of shipping through the strait — with both nations citing concerns that the resolution could justify further military action against Iran. Meanwhile, East Asian economies, which depend on the Middle East for up to 70% of their energy imports, are scrambling to diversify supply routes. Both the Japanese yen and the South Korean won hit multi-year lows against the dollar in the fallout.
As of today, May 12, 2026, U.S. consumer prices have risen 3.8% year-over-year — a direct consequence of energy market disruption. President Trump has rejected Iran's latest de-escalation proposals as "totally unacceptable," though both sides continue to explore possible compromises involving Iran's enriched uranium stockpile and phased sanctions relief. A Trump-Xi summit scheduled for May 14–15 is expected to address the Iran issue, with analysts hoping Beijing uses its leverage as Iran's largest oil customer to nudge progress.
What the Canadian Government Is Doing
Prime Minister Mark Carney has acknowledged the squeeze, stating that the government is actively exploring ways to "cushion the blow for Canadians." The federal government has introduced measures including suspending federal taxes on fuels. Canadian oil producers, ironically, are seeing strong profits as global buyers scramble for alternatives to Middle Eastern supply — Alberta royalty revenues are expected to rise as a result.
The Bank of Canada, however, is caught in a difficult position: the conflict-driven inflation makes it extremely difficult to cut interest rates to stimulate the slowing economy. Tombe warns that "the central bank's job is complicated because it's impossible to predict the future of the war in Iran — if the shock to the oil market is temporary or long-lasting." That uncertainty means rate relief for Canadian households with mortgages and lines of credit may be delayed well into late 2026.
💰 MoneySavings.ca Tips: How to Protect Your Wallet Right Now
You can't control global oil markets — but you can control how much of this crisis lands on your budget. Here's how:
- Use GasBuddy.com daily — Prices are volatile and vary widely station-to-station. Even saving 5¢/litre adds up fast if you drive regularly.
- Stock up on pantry staples now — Grocery expert Sylvain Charlebois advises: if you see something on sale, grab it. Food inflation is expected to worsen before it improves.
- Consolidate errands and car trips — With gas above $1.65/litre across most of Canada, every unnecessary trip has a real dollar cost. Batch your errands into single trips.
- Avoid flying in Q2–Q3 if possible — Jet fuel is up 95% in North America since the war began. Airfare will reflect this for months. Book refundable fares or postpone non-essential travel.
- Shop multiple grocery stores — As Charlebois notes, Canadians have become far more strategic shoppers since 2022. Use flyer apps like Flipp or PC Optimum to maximize savings across stores.
- Lock in fixed utility and heating rates — If your energy provider offers a fixed-rate option, now may be the time to consider it before further volatility hits.
- Hold off on large financed purchases — With the Bank of Canada likely to hold or even raise rates, borrowing costs will remain elevated. Delay major credit-financed purchases if you can.
The Bottom Line: Prepare for a Long Summer
The ceasefire of April 7–8 offered brief hope, but the economic damage from the Strait of Hormuz disruption is far from over. Supply chains do not snap back overnight. Insurance premiums for shipping remain elevated. LNG terminals in Qatar were struck by Iranian forces in March and could take years to fully restore. The cascading effects on fertilizer supply, food production, and consumer goods will ripple through the global — and Canadian — economy for months to come.
University of Calgary economist Trevor Tombe puts it plainly: "Higher fuel costs raise the cost of production for farmers, the cost of transportation for truckers bringing that food to market." That means higher prices at every layer of the supply chain, feeding into inflation that the Bank of Canada is powerless to quickly extinguish with rate cuts.
Canadians emerged from the pandemic and the 2022 food-inflation shock as more financially savvy consumers — shopping around, comparing prices, building pantry buffers. Those same habits will serve you well over the coming months. The conflict may be out of your control; your financial preparation is not.
📌 Stay informed: MoneySavings.ca will continue tracking fuel prices, grocery inflation, and Bank of Canada decisions as the situation evolves. Bookmark this page and follow us at moneysavings.ca daily and weekly updates tailored to Canadian households.
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