Statistics Canada releases March GDP data on Friday, offering the first complete monthly snapshot of how the Iran war has reshaped the country's economy. The report lands as oil prices hover near US$90 per barrel, down from a wartime peak of $116 but well above the pre-conflict level of $65. Bank of Canada Governor Tiff Macklem has already signaled the impact on overall growth will be small, but the composition of that growth is shifting fast.
A Bank of Nova Scotia forecast from March puts a number on the oil dividend. If West Texas Intermediate crude stays US$10 above its baseline price, Canada's GDP would rise by 0.3 percent this year and 0.5 percent in 2027, according to Olivier Gervais, the bank's director of Modelling and Forecasting. Double that for every additional $10 surge.
The math is straightforward. Canada is a net energy exporter. When oil prices climb, the country's terms of trade improve.
But the headline is not the whole story. A Deloitte report from April paints a darker picture. It warns the same Iran war could push down Canada's GDP growth by as much as 20 percent.
The drag comes from slowing business investment and cautious consumers, even as energy revenues provide a modest lift. The net effect depends on which force proves stronger. Here is what the study actually says.
Gervais' model assumes a specific scenario: oil prices stay consistently elevated above where they would have been without the war. It does not account for the kind of volatility that has defined crude markets since the conflict began at the end of February. WTI spiked to nearly $116 in early April before retreating to around $90.
That is a $26 swing in a matter of weeks. Predicting GDP from oil prices is notoriously difficult. The GDP report encompasses far more than energy exports.
Manufacturing, services, construction, and consumer spending all feed into the final number. A surge in oil revenue can be offset by a pullback elsewhere. Royal Bank of Canada Economics released its own estimate on May 22.
The team expects GDP to show a 0.1 percent increase in March compared to February. That would mark the third consecutive report for 2026, allowing the first quarter to be assessed as a whole. RBC projects first-quarter growth of 1.7 percent compared to the same period last year.
A trade surplus recorded in March offers an early signal. It was Canada's first surplus in six months. Exports were concentrated in gold and oil products, Global News Canada reported.
Governor Macklem addressed the conflicting forces directly after the Bank of Canada held interest rates steady on April 29. "The conflict in the Middle East will affect the composition of growth, but the impact on overall growth is expected to be small because higher global oil prices increase the value of our energy exports even as they squeeze consumers and many businesses," he said. Higher oil prices mean more expensive gasoline, costlier transportation, and elevated input costs for industries that rely on fuel. Those pressures ripple through the economy, dampening spending in other areas.
The Bank of Canada's decision to hold rates reflects this uncertainty. Cutting too soon could fuel inflation. Waiting too long could choke growth.
Behind the energy calculus lies a larger economic storm. Canada is already grappling with a trade war and U.S. tariffs. Negotiations over the Canada-United States-Mexico Agreement review are intensifying.
The Iran war adds a layer of unpredictability to an already fragile trade environment. "Ongoing military actions in Iran have increased the likelihood of broader regional conflict and raised the probability of future oil supply disruptions, pushing oil prices higher in early trading," Gervais said. That probability is the wild card. A broader regional conflict could send oil prices soaring far beyond current levels.
That would amplify the energy export boost but also deepen the consumer squeeze. The Deloitte scenario of a 20 percent GDP hit is not a baseline forecast. It is a warning about what happens if the negative channels dominate.
The GDP report will not resolve this tension. It will provide one data point in a rapidly evolving picture. March was the first full month after the conflict began.
April and May data, still months away, will show whether the initial patterns held. The Bank of Canada's next move hinges on how these cross-currents play out. Inflation remains the central bank's primary concern.
If higher oil prices feed into broader price increases, rate cuts become less likely. If consumer spending weakens faster than energy revenues rise, the bank may need to ease. Oil markets are watching the Strait of Hormuz.
Any disruption there would change the calculus overnight. For now, the baseline assumption is that oil flows continue, prices stay elevated but not extreme, and Canada's economy absorbs the shock with a modest net gain. The GDP release on Friday will test that assumption.
It will show whether the energy export boost materialized quickly enough to offset the drag from higher costs. It will also reveal how other sectors performed under the weight of wartime uncertainty. Why It Matters: The Iran war is not just a geopolitical crisis.
It is an economic stress test for Canada. The country's status as a net energy exporter means it can benefit from oil price spikes that hurt most other advanced economies. But that benefit is unevenly distributed.
Energy-producing provinces gain. Consumers and non-energy businesses lose. The GDP report will show which side is winning, and that balance will shape Bank of Canada policy for the rest of 2026.
Key takeaways: - Bank of Nova Scotia forecasts a 0.3% GDP boost this year if oil stays $10 above baseline, with the effect doubling for each additional $10 surge. - Deloitte warns the same conflict could cut GDP growth by up to 20% through weaker business investment and consumer spending. - RBC expects March GDP rose just 0.1% from February, with first-quarter growth of 1.7% year-over-year. - The Bank of Canada held rates steady in April, watching whether energy export gains offset the consumer squeeze from higher oil prices. What comes next: Friday's GDP report will be dissected for clues about which sectors are gaining and which are losing. The Bank of Canada's next rate decision will weigh the March data alongside incoming April and May indicators.
Oil markets remain on edge over any escalation that could threaten Strait of Hormuz shipping. The CUSMA review talks add another layer of trade uncertainty that could amplify or blunt the oil price effect on Canadian growth.
Key Takeaways
— - Scotiabank forecasts a 0.3% GDP boost this year if oil stays $10 above baseline, doubling for each additional $10 surge.
— - Deloitte warns the same conflict could cut GDP growth by up to 20% through weaker business investment and consumer spending.
— - RBC expects March GDP rose just 0.1% from February, with first-quarter growth of 1.7% year-over-year.
— - The Bank of Canada held rates steady in April, watching whether energy export gains offset the consumer squeeze from higher oil prices.
Source: Global News Canada
