Canadian motorists are feeling the pinch at the pump as gasoline prices have surged sharply since the outbreak of war in Iran, with federal officials warning the ripple effects could weigh on the broader economy.Blacklock's Reporter says new figures from the Department of Natural Resources show average spot prices for regular gasoline have climbed 24%, rising from $1.41 per litre on February 28 to $1.75. Diesel prices have jumped even higher, increasing 28% from $1.69 to $2.16 per litre over the same period.The spike comes as global oil markets react to geopolitical instability, with crude recently trading around US$96 per barrel — well above earlier federal projections.Finance Minister François-Philippe Champagne pointed to the conflict as the primary driver, saying the fastest way to stabilize prices would be a de-escalation in hostilities.“There’s been a swing in the price of commodities and oil in recent days,” Champagne said, adding Ottawa is closely monitoring the situation as it weighs potential impacts on growth and inflation.The surge in fuel costs threatens to complicate the federal government’s economic outlook, which had anticipated lower oil prices. .In its “Canada Strong” budget released last November, Ottawa forecast crude would average about US$65 this year before gradually rising to US$71 per barrel by 2029.At the time, officials suggested energy inflation would remain moderate following the removal of the consumer carbon price, though higher refinery margins driven by tight supply and strong demand were expected to offset some of that relief. The same outlook projected inflation would hold at 2% in 2026.That forecast is now under increasing pressure as global uncertainty mounts.The Bank of Canada is set to release an updated Monetary Policy Report, its first since cutting its 2026 growth outlook. Governor Tiff Macklem has warned that uncertainty remains elevated, citing growing geopolitical risks and a widening range of possible economic outcomes.The central bank has steadily downgraded its growth projections, from 1.8% to 1.4%, and most recently to 1.1% for 2026, reflecting concerns about external shocks and domestic headwinds. Its benchmark interest rate currently sits at 2.25%.Prime Minister Mark Carney has previously tied future government spending plans — including social programs and military commitments — to stronger economic growth, underscoring the stakes as energy prices continue to climb.
