A sustained oil price increase could lift Canada's economic growth by 0.5% by the end of 2027, according to Bank of Nova Scotia analysis. The war in Iran has already pushed petroleum prices higher, benefiting Canada as a major crude producer through increased export earnings relative to import costs.

A $10-a-barrel boost in West Texas Intermediate prices would raise Canada's real GDP while also lifting inflation by 0.2 percentage points, said Olivier Gervais, Scotiabank's director of modeling and forecasting. The analysis suggests the Bank of Canada's policy rate could end up 30 basis points higher by the end of next year.

Higher energy sector profits and investment would support employment and household spending, though the benefits would be partly offset by weaker purchasing power as gasoline prices rise. The Canadian dollar would appreciate about 3%, dampening imported inflation but weighing on non-energy exports. The economic strain from US tariffs has already pressured Canada's economy, with output contracting at a 0.6% annualized pace in the fourth quarter despite firmer domestic demand.