Canada’s collision repair sector is facing higher operating costs as the Bank of Canada warns the conflict centred in the Persian Gulf is increasing fuel prices, transportation costs and metals prices globally.
In its latest Monetary Policy Report, the Bank says inflation rose from 1.8% in February to 2.4% in March and is expected to reach about 3% in April, largely because of higher gasoline prices linked to rising oil prices.
While Canada is not involved in the conflict -- which is between the U.S., Israel and Iran -- it is having severe repercussions on its economy. Disruptions to shipping routes near the Strait of Hormuz — one of the world’s most important oil transit chokepoints — are affecting global energy markets and supply chains.
As a result of the conflict, brent crude prices -- which had been trading around US$60 at the beginning of the year, rose to US$100 per barrel in April.
“The war is pushing up oil prices and transportation costs,” the Bank wrote. “Higher prices for gasoline, diesel and jet fuel have led to the introduction of fuel surcharges for some goods and services.”
The report says disruptions involving oil shipments through the Strait of Hormuz and related production shutdowns sharply increased global oil prices and created volatility in energy markets.
The Bank also says prices for base metals increased about 15% in 2025, while aluminum prices rose about 10% because of supply disruptions tied to the conflict.
That is significant for the collision repair industry because aluminum is increasingly common in EVs, luxury vehicles and newer trucks.
The report says Canadian exports declined in early 2026 because of “the ongoing effects of US tariffs and a temporary drop in motor vehicle shipments linked to retooling.”
According to the Bank, sectors directly affected by U.S. tariffs account for about 1% of Canadian output and employment but roughly 15% of exports.
The average U.S. tariff rate on Canadian goods now sits at 5.1%, compared to 0.1% before 2025. Canada’s tariff rate on U.S. imports stands at 1.5%.
The report also highlights changes involving Chinese electric vehicles. Canada reduced tariffs on Chinese EV imports from 100% to 6.1% for the first 49,000 vehicles imported under a March 2026 agreement with China.
The Bank projects Canadian GDP growth of 1.2% in 2026. Unemployment has remained between about 6.5% and 7% over the past year, while wage growth measures are between 3% and 3.5%.
The report says higher oil prices and related cost pressures are expected to boost CPI inflation by about 0.3 percentage points during 2026.
Housing activity is also expected to remain subdued because of affordability pressures, slower population growth and weaker investor demand.
Bank of Canada governor Tiff Macklem said higher energy prices are affecting household budgets.
“Higher global energy prices are pushing inflation up,” Macklem said during the report release. “The surge in gasoline prices combined with still-elevated food price inflation is squeezing more Canadians.”
The Bank says risks remain elevated if oil supply disruptions persist or energy prices remain high for longer.
According to the Automotive Industries Association of Canada, the country’s auto care sector contributes $43.9 billion annually to the Canadian economy and supports roughly 26.6 million vehicles nationwide.
