WIECHNIK: Oil surge from possible US-Iran conflict could boost Canada, if infrastructure allows

CALGARY — Oil markets are on edge as the United States and Iran prepare for a third round of talks regarding the Islamic country’s nuclear program, set to take place in Geneva later this week.On Monday, US crude futures rose to $67.28 a barrel, with Brent crude marking its highest level since July 31 at $72.50 a barrel, representing seven-month highs, and continued to trade at $70.84 on Wednesday morning. Now, the question on everyone’s mind is not if the US-Iran talks succeed; it’s what happens if they fail.With the Trump administration already having the USS Abraham Lincoln situated in the Arabian Sea near Oman and the USS Gerald Ford docking at the island of Crete, Greece, on Monday, it’s looking like geopolitical and military escalation could possibly be on the cards in the near future.Iran, for its part, has also warned that American bases in the region would come under retaliatory attack if the situation escalates.However, the Geneva talks may be a sign that both sides are willing to play ball and avoid further conflict.US President Donald Trump recently took to Truth Social, posting that he would rather have a deal than not, but if “we don’t make a deal, it will be a very bad day for [Iran].”.He again stated in his State of the Union speech on Tuesday night that, the US was in negotiations with the Islamic regime and that "they wanna make a deal, but we haven't heard those secret words, 'We will never have a nuclear weapon.'""My preference is to solve this problem through diplomacy," Trump said. "But one thing is certain, I will never allow the world's number one sponsor of terror, which they are by far, to have a nuclear weapon.".If Washington does launch military strikes against Iran, oil prices could very well surge, and Canada may face a test it might not be prepared for.Iran’s most powerful leverage is currently the Strait of Hormuz, where roughly 20 million barrels per day (bpd), or about 20% of global petroleum liquids consumption, passed through it in 2024, making it one of the most critical oil chokepoints on the planet, according to the US Energy Information Administration.Currently, China, India, Japan, and South Korea are the top destinations for crude running through the Strait, accounting for roughly 69% of all Hormuz crude oil and condensate flows.Iran has already demonstrated its ability to disrupt traffic through the area.During recent military drills last week, Tehran partially closed Hormuz, causing Brent prices to sharply increase.If military conflict makes Hormuz unsafe for commercial traffic, oil prices could move quickly above US$100 per barrel..Alberta oil production reached record levels in 2025.In theory, that could be good news for Canada.Canada is the world’s fourth-largest oil producer, and Alberta sits atop one of the largest proven reserves on the planet.When global buyers scramble for a secure supply, Canada should be an obvious alternative.However, Canada currently exports roughly 97% of its crude oil to the United States, with only a small share reaching Asia and Europe.If Asian refiners lose their Middle Eastern supply, they cannot simply turn to Canadian barrels unless export infrastructure allows it.Prices would rise globally — including for Canadian crude such as Western Canadian Select (WCS) — if the US and Iran decide to escalate militarily.Higher oil prices would strengthen Alberta’s revenues, improve producer margins, and royalty flows would increase.However, Canada’s ability to capture the full benefit of that price surge depends entirely on whether the country can move barrels beyond the US market.“Without additional pipeline and terminal flexibility, Canada cannot rapidly scale exports to meet sudden global demand shifts, no matter how high prices rise,” Rashid Husain Syed, an energy and politics analyst, has said.“Canadians must ask themselves why the country is not capable of taking advantage of the opportunity such conflict creates.”.Trump’s Iran order roils oil markets.Earlier this month, data from the Alberta Energy Regulator (AER) showed provincial oil production surpassed 4.1 million barrels per day (bpd) in 2025, representing a record and approximately a 4.2% increase from 2024.On top of that, the American Petroleum Institute shows that Canada’s crude oil exports to Asia and the US West Coast have also risen significantly since the expanded Trans Mountain pipeline (TMX) started operating in 2024.From January to April 2025, Canada exported nearly 400,000 bpd to non-U.S. markets — up sharply from around 80,000 bpd a year earlier.With that said, the possibility still remains that without sufficient infrastructure flexibility, Canada cannot scale exports to meet a sudden, rapid global demand shift.If Hormuz were blocked off, international buyers — in particular from Asian markets — would immediately seek politically stable suppliers whose export routes remain operational.A crisis could expose whether Canada’s years of regulatory delays, pipeline cancellations, and infrastructure constraints have left it unprepared for a massive shift.There is a possibility Canada could watch other producers fill the gap while the Canadian market remains largely tied to a single, longtime buyer with whom the current geopolitical situation is uncertain.The real question now is whether Canada is positioned to respond when the world comes knocking.

WIECHNIK: Oil surge from possible US-Iran conflict could boost Canada, if infrastructure allows

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