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Opinion: Is Middle East conflict a crosswind or seismic shift for Canada’s oil and gas industry?

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The United States and Israel recently launched Operation Epic Fury against Iran, effectively removing the regime’s leadership and cratering its weaponry infrastructure. The consequence — intended or otherwise — has now shut the Strait of Hormuz, sending Brent crude and WTI to more than $90 a barrel.

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U.S. President Donald Trump’s administration has made its bet clear: this is the last realistic window to eliminate any credible Iranian nuclear capability before it becomes irreversible. A nuclear Iran would not merely threaten Israel, it would hand Tehran a permanent, atomic-backed veto over 20 per cent of the world’s seaborne global oil supply. The balance of power over global energy security would shift dramatically — and permanently — away from the United States and its Gulf allies.

For Canada, the fallout is immediate and double-edged. After 11 years of federal Liberal policy impeding fossil-fuel growth — tanker bans, pipeline delays, ever-tightening emissions caps and regulatory uncertainty — Canadian voters are now feeling the consequences at the gas pump. Higher fuel prices are inflationary and will bring pressure to bear on the Bank of Canada, with an increased likelihood of higher interest rates — the last thing needed by a country already wrestling with housing affordability and record immigration.

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Prime Minister Mark Carney’s response to the U.S. strikes has been a case study in incoherence: initial support for preventing a nuclear Iran, followed by hand-wringing about “a failure of the international order,” regret and a refusal to rule out future Canadian involvement.

It reads like a government still banking on the anti-oil narrative it sold so effectively to urban voters, now confronted with the hard math of global energy reality.

Meanwhile, Alberta finds itself caught between a rock and a hard place. Rapid population growth is straining social services to the breaking point. The provincial budget had already pencilled in a $9.4-billion deficit for 2026-27 on the assumption of $60.50 WTI. Every dollar above that budgeted oil price now pours hundreds of millions in extra royalties into provincial coffers.

That windfall can blunt the need for tax hikes or service cuts. Yes, consumers will pay more at the pump, but the province’s balance sheet gets breathing room precisely when it needs it most.

And here’s the bigger story that predates the Middle East flare-up. Even before Hormuz went quiet, Canadian energy equities had been sharply re-rating. CNRL, Suncor, Tourmaline, Whitecap and TC Energy all posted double-digit, year-to-date gains by early March.

Institutional money is also rotating back in, reversing a decade of net capital outflow under the Trudeau-Carney era. Investors are finally noticing that geological plays such as the Montney and the oilsands represent decades of long-life reserves and predictable cash flow.

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Add exploding demand from AI data centres (natural gas-fired power) and LNG export ramps, and the fundamentals look structural, not cyclical.

So, crosswind or seismic shift? I am leaning toward seismic. The geopolitical floor under oil prices is real and likely to be persistent. The structural demand tailwinds (AI, LNG, domestic power) were already arriving. Federal policy may still try to stand in the way, but markets and global necessity have a way of overriding ideology. For the first time in years, Canadian energy feels like an investable growth story again, not just a legacy industry to be managed into decline.

The coming months will test that thesis. If prices hold and institutional flows continue, the “seismic” label just might stick. If Ottawa doubles down on the old playbook, it will simply re-accelerate the very capital flight it now claims to regret.

Either way, Alberta’s oil and gas sector is no longer whispering in the winds. It is reminding the country, loudly, that energy security is not optional and that a sound and resilient energy industry still matters more than political slogans.

Moreover, what’s left for the federal government is to remove the industrial carbon tax. Such a move will immediately lower and stabilize fuel prices — a win-win for everyone.

Robb Moss is a local retired oil and gas analyst and CFA.

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