Ottawa spent a decade fighting pipelines and now Canada can’t cash in if the oil supply tightens
A U.S. strike on Iran would not just rattle oil markets. It will expose how strategically unprepared Canada remains to capitalize on sudden disruptions in global oil supply.
Canada exports roughly 97 per cent of its crude oil to the United States, leaving only a small share reaching Asia or Europe because of limited pipeline capacity and constrained access to tidewater. Over the past decade, regulatory delays, pipeline cancellations and shifting federal energy policies have constrained Canada’s ability to ship oil to overseas markets.
The country has talked for years about diversifying its energy customers. A major disruption in oil flows through the Strait of Hormuz would test whether that ambition is achievable. If global buyers scramble for alternative supply, can Canadian oil reach them in meaningful volumes, quickly and reliably?
Whether U.S. President Donald Trump launches strikes against Iran and how forcefully Tehran responds will determine not only the scale of market disruption but the size of the opportunity and risk facing Canada. These decisions carry billion-dollar consequences, and oil markets have a direct stake in the outcome.
If military conflict makes the Strait of Hormuz unsafe for commercial traffic, crude prices will surge. The Strait is the world’s most critical oil chokepoint, with more than 14 million barrels per day, about one-third of global seaborne oil exports, passing through it in 2025.
Most of that oil flows to Asia, particularly China, the world’s top crude importer. If those shipments are disrupted, buyers will look elsewhere for politically stable suppliers with large reserves and reliable legal systems.
In theory, Canada looks like an obvious alternative supplier. In practice, export capacity determines whether that matters.
Canada still sends the overwhelming majority of its crude to the U.S., and refiners in Asia and Europe cannot access Canadian barrels without sufficient export capacity on the West and East coasts. Without additional pipeline and terminal flexibility, Canada cannot rapidly scale exports to meet sudden global demand shifts, no matter how high prices rise.
Canadians must ask themselves why the country is not capable of taking advantage of the opportunity such conflict creates.
The scale and duration of disruption to oil flows will depend on how Iran responds and how far Washington goes. Trump has signalled he will decide within days whether to authorize strikes and has indicated he is considering limited military action.
Even a limited confrontation could send prices above US$100 per barrel and force lasting changes in where the world buys and ships its oil.
Markets are already uneasy. Oil prices recently approached six-month highs as geopolitical tensions offset concerns over slower U.S. economic growth. A wider conflict could push prices into triple digits.
Iran’s Revolutionary Guard has demonstrated its capacity to pressure the Strait. It partially closed the passage during military exercises earlier this month, sending Brent prices sharply higher.
“Iran could disrupt Hormuz for a lot longer than many market participants think,” Reuters reported, citing Bob McNally, founder of Rapidan Energy and former White House energy adviser to President George W. Bush.
Insurance markets may ultimately determine whether oil flows at all. “Lloyd’s is not going to allow or insure tankers to go through Hormuz in that kind of environment,” McNally said.
Without marine insurance, tankers do not sail and oil does not move. Buyers will favour exporters whose routes remain insurable, operational and politically stable, advantages Canada could offer if its export infrastructure were sufficient.
Iran may calculate that it can damage the U.S. economy ahead of the midterm elections in November. Rystad Energy projects oil prices could rise by $10 to $15 per barrel in a wider conflict scenario.
The Trump administration appears unconcerned. “The world is very well supplied with oil right now,” U.S. Energy Secretary Chris Wright told CNBC in a Feb. 6 interview.
Supply, however, is not just about reserves in the ground. It is about the ability to move oil to global markets when conditions change.
A Hormuz crisis would expose whether years of domestic infrastructure and regulatory decisions have left Canada unable to respond when global demand turns its way.
Energy-rich Canada could benefit from global instability, or it could watch other producers fill the gap while Canadian crude remains tied to a single customer.
If that happens, the limiting factor will not be Tehran or Washington. It will be choices made at home long before any missile is launched.
Toronto-based Rashid Husain Syed is a highly regarded analyst specializing in energy and politics, particularly in the Middle East. In addition to his contributions to local and international newspapers, Rashid frequently lends his expertise as a speaker at global conferences. Organizations such as the Department of Energy in Washington and the International Energy Agency in Paris have sought his insights on global energy matters.
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