We’ve been getting quite a few questions lately on oil and gas markets, especially with regards to the latest conflict in Iran. At the start of the year, oil wasn’t on anyone’s radar. Now, it’s at the center of the macro story.

The conflict involving Iran didn’t just push prices higher, it changed how the oil market works. A meaningful portion of global supply was disrupted, forcing the system to adjust quickly. Even as the Strait of Hormuz begins to reopen, oil doesn’t simply snap back to normal. Production takes time to recover. Logistics remain strained. And some lost supply may not fully return anytime soon.

But the more important shift happened beneath the surface.

To offset the supply shock the market leaned heavily on inventories. Those inventories have now been drawn down, leaving less cushion in the system. At the same time, spare production capacity remains limited and slow to respond. That combination makes the market more fragile – and keeps upward pressure on prices.

We’re already seeing it. Oil hasn’t just spiked, it’s holding higher, with demand starting to soften at the margins. That’s typically what happens when the market is finding a new equilibrium, not reverting to an old one. And producers aren’t rushing to add supply – years of capital discipline, combined with ongoing geopolitical risk, means higher prices won’t immediately translate into higher production.

Source: LSEG [Light Crude CL/1-NM]. Data as of market open Apr 24, 2026.

All of this points to a simple conclusion: oil has likely been reset to a higher range.

Even if tensions ease, several forces will keep prices elevated – inventory rebuilds, slow supply recovery, cautious investment, and a persistent geopolitical risk premium. For investors, that matters. Energy feeds directly into inflation, influences central bank policy, and ripples across asset classes.

The takeaway is straightforward: the oil market we’re in today is not the same one we started the year with – and it’s unlikely to revert any time soon.

We remain constructive on oil in our models and continue to maintain our current positioning.

I have also included a piece from our CIBC Economics team entitled “Wherever the Canadian consumer goes...”.

As always, if you have any questions, please feel free to give us a call at any time.

Have a great weekend.

Milan