Middle East Tensions Stir Oil Markets, Canada’s Oil Sands Offer Stability
In June 2025, escalating tensions in the Middle East triggered renewed volatility across global oil markets. Although fears of supply disruptions surged - particularly around the Strait of Hormuz, a vital chokepoint for approximately 20% of the world’s oil trade - market fundamentals and diplomatic overtures helped moderate the initial spike in prices. Meanwhile, Canada’s oil sands sector continued to offer steady output, helping cushion the market from sharper shocks.
Uncertainty followed reports of increased military hostilities between the United States and Iran, raising concerns that shipping through the Strait of Hormuz could be disrupted. While no formal blockade occurred, the potential threat to global flows of crude and LNG prompted precautionary responses across the energy sector. Major international firms reportedly evaluated their operational exposure in the Gulf region, and Gulf producers - including Qatar - were said to be in close coordination with international partners to secure supply continuity.
Initial market reactions were swift. Brent crude jumped nearly 7%, temporarily climbing above $81 per barrel. But as diplomatic backchannels signaled potential de-escalation, prices retreated, settling within the $64 to $68 range by midweek. Analysts noted that ample spare capacity - particularly OPEC+’s estimated 5 million barrels per day - and growing non-OPEC supply from producers like the U.S., Brazil, and Canada, tempered upward price pressure.
Canada’s oil sands stood out as a source of stability amid the uncertainty. Production is expected to reach a record 3.58 million barrels per day in 2025, underpinned by the commissioning of the Trans Mountain Expansion pipeline and improved operational efficiencies. Canadian producers, including Canadian Natural Resources, have maintained output levels even amid softer prices and operational challenges such as recent wildfires. However, Alberta has faced criticism for exceeding natural gas flaring limits for a second consecutive year, underscoring the balancing act between energy security and environmental commitments.
Despite the geopolitical flare-up, global oil demand growth projections remain subdued. According to the International Energy Agency (IEA), demand is forecast to increase by just 720,000 barrels per day in 2025 - one of the slowest rates in years - due to economic headwinds, particularly in China, and accelerated adoption of electric vehicles and renewable energy solutions.
While the current situation has not led to physical supply disruptions, analysts caution that a sustained crisis in the Strait of Hormuz could disrupt as much as 15 million barrels per day of crude flows. This would have far-reaching consequences for energy prices, inflation, and trade - particularly across Asia and Africa, where reliance on seaborne crude remains high.
As global energy markets walk a fine line between risk and resilience, the importance of diversified supply sources, spare capacity, and reliable infrastructure becomes ever clearer. Canada’s steady output provides some reassurance in a volatile landscape - but the geopolitical risks remain.
