Oil Price Forecast 2026: Surging Amid Iran War Crisis

On February 28, 2026, unexpected U.S.-Israeli strikes on Iran, which resulted in the death of Supreme Leader Ayatollah Ali Khamenei, escalated into a full-scale regional conflict. This has initiated one of the most severe global energy crises in decades. Iran promptly blocked the Strait of Hormuz, a critical passageway that handles approximately 20% of the world's oil supply. This blockade has halted the flow of Middle Eastern crude, pushing Brent crude prices over $112 per barrel by the end of March 2026, with peaks reaching $119. Dubai crude has seen record highs, briefly hitting $166. Consumers across the globe are feeling the impact, with increased household expenses, elevated travel costs, and central banks facing significant challenges.

In Canada, the energy price shock is severely affecting consumers, as captured by the Financial Post’s video series. Retail sales saw a minor increase in January, but the soaring oil prices are pressuring consumer finances at gas stations, in the air, and in the housing market. Airlines have significantly raised ticket prices due to the steep hike in jet fuel costs, with domestic and international fares climbing between 15-25% within weeks. Supply-chain expert John Gradek from McGill University mentioned that airlines are readily passing increased costs onto passengers. The Bank of Canada, amid this turmoil, has kept its overnight rate at 2.25% as of mid-March. Benjamin Tal, deputy chief economist at CIBC World Markets, highlighted that the rising oil prices are fueling inflation despite a weakening domestic economy. Governor Tiff Macklem acknowledged the conflict's direct influence on inflation but noted the overall economic impact remains unpredictable.

Meanwhile, Australia's reliance on imported refined fuels, primarily from Asian refineries dependent on Middle Eastern crude, is causing acute challenges. Following the February 28 strikes, unleaded petrol prices have exceeded 230 cents per litre and diesel 240 cents in many regions—marking a more than 30% increase. Reported price surges strike a severe note globally, with local prices in Sydney, Melbourne, and other major cities hitting new highs.

Energy Minister Chris Bowen has assured no fuel shortage, although delivery cancellations from Asia and slowed refinery operations suggest otherwise. Panic buying surged in early March, exacerbating temporary shortages. Transport unions are urging for measures such as free public transit, while policy experts like Professor Samantha Hepburn emphasize Australia’s energy vulnerability due to limited domestic refinery capacity.

As oil prices remain elevated, household budgets, consumer confidence, and national economies are under strain. Until the conflict de-escalates and supply normalizes, the market remains unpredictable, affecting budgets, travel, and lending rates across continents.