Gulf air hubs disruption forces cancellations and new advisories
Canadian households and investors are beginning to feel secondary effects from the U.S. and Israel strikes on Iran and Iran’s retaliation across the Middle East, with disruption showing up first in travel routes, oil prices, and financial markets. The risk of a prolonged conflict is adding uncertainty to planning for spring travel and to expectations for inflation and interest rates in Canada.
Air traffic disruptions have been concentrated in major transit hubs in the Gulf. Dubai and Abu Dhabi in the United Arab Emirates and Doha in Qatar are key connectors between North America, Europe, Asia, and Africa. As of Monday evening local time, airports in the UAE had restarted only a limited number of flights aimed at moving stranded passengers, while Qatar’s airspace remained closed.
Airlines have introduced flexible rebooking and refund policies for affected itineraries. Air Canada said it cancelled flights from Canada to Israel and Dubai until March 22, with service planned to resume the next day. Ottawa also issued Level 4 travel advisories urging Canadians not to travel to Iran, Israel, the UAE, Qatar, Kuwait, and Bahrain, and issued Level 3 advice to avoid non-essential travel to Saudi Arabia and Oman. Trip cancellation and interruption policies often allow claims when a Level 3 advisory or higher is issued.
Brent surge points to higher pump prices, with some buffers
Oil markets moved sharply after the strikes. Brent futures rose as much as 13% to US$82.37 per barrel before settling up 6.7% at US$77.74. Analysts told The Globe and Mail that Canadian drivers could see gasoline prices rise by about three to six cents per litre as early as Wednesday.
There are offsetting factors for consumers. Gasoline prices in Canada have been falling since last spring, helped by Ottawa removing the consumer carbon levy and by an early April oil price drop tied to uncertainty around President Donald Trump’s tariffs. Another cushion is inventory. Brooke Thackray, a research analyst at Global X, said large volumes of crude stored at sea in floating storage could help absorb supply disruptions in the near term.
Markets steady so far, with energy stocks supported
Equity markets in North America were relatively calm on Monday despite early declines. Both the S and P TSX Composite Index and the S and P 500 recovered through the session, and the Canadian index closed at a record high. Higher oil prices have lifted energy stocks, providing support for Canadian portfolios with commodity exposure.
Thackray said the Canadian energy sector could benefit if the conflict continues without a clear resolution. Philip Petursson, chief investment strategist at IG Wealth Management, warned against reacting too quickly, urging investors to rely on diversification during periods of elevated uncertainty.
Loonie muted as safe havens offset oil support
Currency markets also showed a measured response. Oil price gains often strengthen the Canadian dollar, but that effect was tempered by demand for safe-haven assets, including the U.S. dollar. The loonie weakened only slightly against the greenback and hovered near 73 cents US. At the same time, the Canadian dollar strengthened against the euro and the yen as investors worried higher energy costs would be more damaging for economies that import most of their fuel.
Inflation and mortgage rates become the key household channel
Economists warn that if oil prices remain high for an extended period, inflation pressures could re-emerge. Canada is partly insulated because it exports energy and because a stronger currency can reduce imported goods inflation. Still, analysts pointed to fertilizer as a separate exposure. About 45% of global sulphur exports and 35% of urea shipments transit through the Strait of Hormuz. Higher fertilizer costs can feed into food prices, an area that has remained sensitive for Canadian consumers.
Bond markets have already adjusted. Investors pushed yields higher and reduced expectations for Bank of Canada rate cuts this year. That matters for borrowers because fixed mortgage rates are influenced by bond yields, while variable rates often move with the central bank’s policy rate.
Ron Butler, founder of Toronto-based Butler Mortgage, cautioned on X against making decisions based on short-term bond-market swings linked to geopolitics. He urged borrowers to secure a rate hold, noting that lenders often guarantee a mortgage rate for up to 120 days through a pre-approval. If rates do not rise, the hold can typically expire without cost.
