The recent escalation between the United States, Israel, and Iran could reshape the Middle East and global energy markets more than any event since the Arab-Israeli wars and oil embargoes of 1967–1973, whether it ends in victory for one side or an uneasy truce. This confrontation pits American and Israeli economic strength and military expertise against Iran’s persistence and capabilities in asymmetric warfare. What does this mean for global energy security, and for Canada? As the Strait of Hormuz remains treacherous and Gulf infrastructure has already been significantly damaged, it is still unclear how this will end and who will hold the military, geopolitical, and economic advantage. What is clear is Canada’s inability to adapt to this new paradigm.
Canada and the United States, individually and jointly, are exporters of crude oil and natural gas. Our plentiful basins and advanced technology are strategic assets of enormous value for both countries. Norway exports about 1.6 million barrels of oil and an impressive 12 Billion Cubic Feet (BCF) of gas each day. Canada’s partially untapped potential exceeds these levels, and does so without the risks associated with contested waterways.
The evolution of oil prices in North America illustrates the advantages that accrue to energy producers that embrace their full potential. In our work evaluating upstream oil and gas markets at GLJ, we observe that the price in Cushing, Oklahoma, for West Texas Intermediate is lower than for Brent crude. Despite strong access to the Gulf, North American light oil trades at a persistent discount because regional supply exceeds regional market demand. This was not the case during the “Tanker War” of the 1980s, which was the last major conflict in the Strait of Hormuz.
Meanwhile, Europe is now paying the price for what many consider overly idealistic energy policies and finds itself in an unenviable position. Aside from Norway, Western Europe relies on a mix of domestic production, pipeline gas from Algeria and Azerbaijan, and LNG imports from the United States, Qatar, and other exporters, with smaller volumes still arriving from Russia. Russia is widely perceived as a geopolitical risk. Qatari gas shipments must pass through the Strait of Hormuz and could be disrupted again during regional tensions. While the United States will sell gas to Europe, its exports could one day come with expectations for geopolitical or other concessions.
Viewed from North America’s position of strength, the conflict raises three important questions first for Europe, then for the United States, and finally for Canada.
WILL THIS WAR PROMPT EUROPE TO REDO ITS ENERGY APPROACH?
Norway is the only European country whose energy policy reflects its position as a major exporter. Much of Western Europe still behaves as though its structural energy deficit carries few strategic consequences. These policy choices have long puzzled energy market participants, because the vulnerabilities were obvious. Imagine if other energy-endowed nations followed Norway’s lead and fully embraced the value of their natural resources. Similarly, imagine if energy-dependent European countries adopted Norway’s realistic approach to evaluating their energy needs and potential. What could shifts like these mean for stabilizing markets amid ongoing tensions?
If Europe’s problem is energy vulnerability, America’s challenge may be strategic overreach.
WHY IS THE UNITED STATES DEFENDING SEA LANES IT NO LONGER NEEDS?
The shale revolution and Canadian oil sands have quietly shifted the center of gravity of global energy supply toward the Americas. This realignment has changed the geopolitics of energy.
North American consumers already benefit from a high degree of energy security and are likely to do so for a generation or more. The combined resources of Canada and the United States (and potentially Argentina and Brazil) give the Western Hemisphere the capacity to supply most of its own energy for decades.
Yet the United States is committing significant resources and placing servicemembers at risk to maintain an energy corridor that no longer serves core U.S. energy needs. Washington has stated that the current war addresses strategic nuclear threats beyond energy. Operation “Epic Fury” (the U.S. component of the joint American-Israeli attack) far exceeds the scope and stakes of Operation “Praying Mantis” in 1987, which was an important step in ending the Tanker War during the Iran–Iraq conflict of the 1980s. If the United States succeeds militarily, the high stakes policy will be considered a success.
If Europe faces vulnerability and the United States faces possible strategic overextension, Canada faces a different challenge: underused advantage.
WHY DOES CANADA PERSIST IN REFUSING TO TAKE FULL ADVANTAGE OF TWO EXTRAORDINARY STRATEGIC ASSETS?
Canada is geologically and geographically situated to be an important and secure gas and oil supplier to Asia and Europe. Our Strait of Juan de Fuca is not the Strait of Hormuz. Belligerents will not simultaneously build refineries and missile batteries on forested Canadian shorelines to attack energy shipments. Our gas and oil are unlikely to come with geopolitical expectations or be interrupted by regional proxy wars. A strategic asset has little value if it is not fully utilized.
Our Prime Minister was right to state that Canada does not need a strategic petroleum reserve, because we are a net exporter. Canada does not need vast rows of white storage tanks with floating roofs or underground caverns filled with oil to protect us from energy shortages. Our strategic reserve is already in natural underground storage. It is the Oil Sands, the Montney and Deep Basin formations, and one day may include the Horn River and Liard Basins, enhanced by Canadian technology. But Canadian policy often overlooks the fact that Eastern Canada is a major energy importer of both oil and gas. In an energy emergency, much of Canada’s oil and gas cannot be efficiently delivered to Canadian consumers. An energy reserve is not a strategic reserve if it is not well-connected to markets.
In 2025, Mr. Carney stated that Canada is the “most European of non-European countries.” If he is referring to Norway’s approach, which maximizes its energy export opportunity for the benefit of all Norwegians, we couldn’t agree more. However, Canada’s refusal to optimally use its energy power for peaceful and socially beneficial purposes, like Europe’s energy policy, remains difficult to explain.
We hope that the human cost of this violent confrontation in Iran and its many neighbors is minimized as much as possible. However, the realities of realpolitik cannot be ignored.
No matter how this conflict resolves, the strategic geography of global energy is shifting. Countries that recognize and act on their energy advantages will shape the next phase of global markets.
Canada is unusually well positioned. It possesses vast energy resources in a politically stable and geographically secure setting. Rapid approval of energy projects and clear rules for the industrial carbon tax would be a strong start. The impact on Canada’s standard of living, environment, and strategic posture could be immediate and lasting.
A strategic asset is only valuable when effectively put to work.
