West Texas Intermediate (WTI) crude oil prices climbed to around $95.60 during Asian trading hours on Friday, rebounding after earlier losses as supply concerns mounted due to stalled US-Iran peace negotiations and the ongoing closure of the Strait of Hormuz [2]. The situation escalated after the US military intercepted two Iranian oil supertankers attempting to evade its blockade, with US officials preparing contingency plans to target Iran’s capabilities in the Strait if the current ceasefire collapses [1][2]. US President Donald Trump warned that Iran’s infrastructure could be targeted if it does not move its oil, while Iranian officials denied agreeing to any truce extension and accused Washington of violating the agreement by maintaining a naval blockade [1][2].
Iran further demonstrated its control over the Strait of Hormuz by releasing footage of commandos boarding a large cargo vessel following the breakdown of peace talks [2]. The Strait is a critical chokepoint for global energy, with approximately 20% of global oil and gas supplies passing through it [2]. According to Mingyu Gao, chief researcher for energy and chemicals at China Futures, prolonged disruptions in the Strait could push global crude and refined product inventories below five-year seasonal lows by late May or early June, potentially reintroducing a supply-risk premium into oil prices [2].
The Canadian Dollar (CAD) remained steady against the US Dollar (USD), with the USD/CAD pair trading around 1.3700 after a three-day winning streak for the Greenback [1]. The US Dollar found support from safe-haven demand amid the geopolitical uncertainty, as well as from resilient US economic data: weekly Initial Jobless Claims rose to 215,000 from 212,000, and S&P Global PMIs surprised to the upside, with Manufacturing at 54.0 and Services at 51.3, indicating ongoing expansion in business activity [1].
In Canada, higher energy prices contributed to a 0.6% increase in annual consumer inflation, reaching 2.4% in April, consistent with Bank of Canada (BoC) warnings that rising energy costs are feeding into inflation expectations [1]. The elevated energy prices have increased the likelihood of a more hawkish response from the BoC [1]. Oil and refined product prices surged as commercial vessels transiting the Strait of Hormuz came under attack from both the US and Iran, reinforcing the risk of prolonged disruptions to tanker flows from the region [1].
CONCLUSION
Geopolitical tensions between the US and Iran, particularly around the Strait of Hormuz, have driven up oil prices and contributed to higher inflation in Canada. The Canadian Dollar has steadied as the US Dollar benefits from safe-haven demand and strong US economic data. Prolonged disruptions in the Strait could further tighten global oil supplies and impact markets in the coming weeks.