“On net, we judge the macro impact of the Iran war on Canada to be broadly neutral… That said, oil prices remain the single most important source of uncertainty around the forecast.”
The forecast assumed tensions ease “around mid‑year, with oil prices remaining elevated through Q3 before gradually easing,” and warned that higher energy costs “clearly skew inflation risks to the upside – especially in the US.”
While the US Federal Reserve is expected to deliver just one cut this year and one in 2027, Scotiabank said the Bank of Canada “faces a familiar tradeoff” as weaker data collided with cost‑push pressures from oil.
On the domestic front, “Canada hits a soft patch in early 2026, but recovery remains intact,” the report said.
Weaker labour and trade numbers meant Scotiabank “now expects weaker growth in early 2026, with average GDP growth revised down to 1.3% for the year,” before a rebound to 2.0% in 2027 on the back of fading trade headwinds, past rate cuts and fiscal support.