WTI posted its first settle over US$100 in about a month and Brent touched US$110. For Canada, higher crude is a net economic positive and a bigger inflation problem.

Oil prices jumped on Friday, pushing West Texas Intermediate above US$100 a barrel for the first time in about a month and Brent crude to a settle of US$109.86, its highest since mid-May. WTI closed at US$101.41, up 3.5% on the day and more than 10% on the week. Brent gained 4.9% on the week after briefly touching US$110.

What drove the move

Several pressures hit at once. Iranian attacks on shipping in the Strait of Hormuz continued, and U.S. Central Command confirmed this week that a container ship that sank in the strait was struck by an Iranian projectile. Houthi strikes on Saudi Arabia added to supply fears, including a ballistic missile aimed at Yanbu, the Red Sea port Saudi Arabia uses to export crude without going through Hormuz, which a Saudi-led coalition intercepted. A Ukrainian drone strike on a Russian refinery and a large draw in U.S. crude inventories added to worries about diesel supply.

Emergency supply isn't keeping pace

The International Energy Agency agreed Thursday to release more than 20 million barrels of diesel, and the U.S. Department of Energy asked for proposals to exchange up to 17 million barrels from the Strategic Petroleum Reserve, on top of the G7 pledge earlier this month to release 100 million barrels of oil and diesel. Markets have treated these as modest. One analysis using Kpler tanker data estimated that the IEA's 20 million barrels covers less than four days of the Hormuz shortfall.

Wholesale diesel has climbed above US$200 a barrel in Singapore and around US$220 in Europe and the United States, and the IEA has said supply will stay tight into the second half of 2027.

Canada gains and pays

Higher crude is a net positive for the Canadian economy as a whole, according to a TD report, even as it strains households. The effects showed up in Friday's markets: the S&P/TSX energy index rose 2.77%, the broader composite finished at 36,176.55, and the Canadian dollar edged up to 70.65 US cents from 70.44.

But the same prices feed inflation. Canada's annual rate has held at 3.0% for two months, Natural Resources Canada put average diesel at $2.61 a litre earlier this month, and Bank of Canada Governor Tiff Macklem said Saturday that persistently high crude and petroleum product prices will force the Bank to raise its inflation forecast significantly.

What to watch

The near-term risks run both ways. One market analysis laid out a range in which a calm weekend in the Gulf and faster delivery of emergency barrels could pull Brent back toward US$100, while a successful strike on Gulf export infrastructure could push it toward US$115. For businesses with heavy fuel use, the practical question is whether surcharges and contracts set when diesel eased this autumn still make sense. Fuel had been falling from its April peak in CFIB's survey of cost concerns, and that trend now looks at risk.