Geopolitical tensions are now considered a bigger risk to Canada’s economic productivity than trade conflict with countries like the U.S, according to the Bank of Canada‘s latest survey data.
This comes as the Iran war continues to wage on after more than two months with no end in sight, and after U.S. President Donald Trump rejected Iran’s latest ceasefire proposal.
The central bank released the results of its Market Participants Survey for the first quarter of 2026 on Monday, which was conducted from March 25 to April 1, 2026. It featured about 27 participants considered to be financial and business leaders working in banking, insurance, pension funds, asset management and research firms.
Among the categories, participants were asked to select up to three downside risks to Canada’s economic growth outlook.
Eighty-two per cent of respondents selected increasing geopolitical tensions as a risk, which was the most common among all options provided.
Meanwhile, 79 per cent chose worsening trade tensions and 57 per cent said it was tightening global financial conditions.
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In addition to the uncertainty of the conflict’s long-term outlook, the Iran war is creating supply chain disruptions and strains on essentials like crude oil, natural gas, fertilizer and other materials that normally pass through the Strait of Hormuz. With the narrow shipping channel essentially closed to most container ship traffic, prices are rising worldwide for items such as food and gasoline as supplies run low.
On food prices, a UN agency warned last month that the Iran war could cause a food “catastrophe” later this year if it continues unabated.
The Bank of Canada warned in April that if oil prices continue to climb, it may be forced to raise borrowing costs in Canada in order to cool inflation.
Governor Tiff Macklem at the central bank spoke to reporters in Ottawa on April 29 shortly after leaving the benchmark interest rate unchanged in Canada at 2.25 per cent.
“If energy prices go higher, and particularly if they stay higher for longer, there could well be a need to increase the policy rate to get inflation back to two per cent,” said Macklem.
Iran has also targeted energy infrastructure in the United Arab Emirates and Kuwait amid broader strikes on neighbouring countries it views as aligned with U.S. interests.
In the same Market Participants survey for the final three months of 2025, increasing trade tensions took the top spot with 93 per cent of respondents making the selection, while geopolitical risks were not among the top three reported as selections by participants. This was followed by 43 per cent of participants selecting tighter financial conditions globally and 37 per cent chose weaker consumer spending as top risks.
— With a file from Global’s Uday Rana
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