Oil prices climbed about $3 per barrel at the start of the week as military tensions between the US and Iran intensified and conflict in the Middle East broadened, Scotiabank strategists said in a Monday note.
Analysts said both WTI and Brent crude advanced after the US and Iran exchanged attacks, while Israel expanded military operations in Lebanon, reducing the likelihood of a diplomatic breakthrough.
Iran continues to resist demands related to uranium enrichment and control of the Strait of Hormuz, keeping energy markets focused on the risk of supply disruption.
A broad commodity rally could support Canada's economy because stronger export prices typically boost national income and economic activity over time.
Commodity-producing economies rarely enter recession during periods of widespread strength in resource markets, although positive effects often emerge with a delay.
Rising commodity prices could contribute to stronger growth and inflation, factors the Bank of Canada is expected to monitor closely as it assesses future policy decisions.
Strategists continue to expect Bank of Canada rate increases later this year, though they now see policymakers delaying tightening until September or later, then extending moves into Q4.
Scotiabank previously projected 50 basis points of tightening in the third quarter and another 25 basis points in Q4 before rates reached 3%, but it now favors a later timeline.