Bank of Canada warns global resilience 'under strain' amid oil prices and trade wars

Global economic resilience is increasingly "under strain," Bank of Canada Governor Tiff Macklem warned at International Monetary Fund meetings in Bangkok this weekend, pointing to Middle East conflict, damaged refining capacity in the Gulf region, and closure of the Strait of Hormuz as factors driving sustained pressure on oil markets.

While the global economy has performed better than expected despite ongoing wars in Iran and Ukraine and sweeping trade disruptions, Macklem said the situation is deteriorating. Houthi attacks on Saudi Arabia, damage to Gulf refining infrastructure, and strait closure have persisted, leaving global oil prices under pressure with "no relief in sight," he said.

"You can only release strategic energy, oil reserves so many times, but that has helped contain this energy price shock," Macklem told the IMF. Strategic oil reserve releases have buffered price spikes so far, but have limits.

Those global oil prices feed directly into Canadian fuel costs. Canadians pay at the pump what global markets charge—gasoline, diesel, and heating oil all track international crude.

The Bank of Canada will get a look at how domestic prices are responding to global cost pressures when Statistics Canada releases its September inflation report on Monday. Macklem signalled the inflation outlook will be "quite a bit higher" than earlier projections.