Canada Inflation Surges to 2.8% as Iran War Drives Gasoline Prices Higher

Canada’s annual inflation rate jumped sharply in April, AOL.com reported Tuesday, accelerating to 2.8% from 2.4% in March. The primary driver was a dramatic surge in gasoline prices tied to the ongoing conflict in Iran.

Gasoline Prices Lead the Charge

Fuel costs climbed 28.6% in April alone. Since the Iran war began on February 28, gasoline prices have risen more than 38% in total. That pushed transportation costs up 7.6% for the month. That reading was the highest since November 2022. Food prices also rose, climbing 3.5% annually in April. Rents were up 3.6%, and passenger vehicle prices gained 2.8%.

Below Forecasts Despite the Jump

The April reading still came in under analyst expectations. Economists polled by Reuters had forecast annual inflation at 3.1% and a monthly gain of 0.7%. The monthly figure matched that 0.7% forecast exactly. Softer prices in travel, tours, some accommodation categories, and furniture helped offset the fuel-driven pressure. The result kept the headline number below the more alarming scenarios markets had priced in.

Background: Carbon Levy and the Iran Conflict

Canada’s consumer carbon levy was removed in April 2025. That removal had suppressed gasoline and natural gas costs in the monthly comparisons for a full year. With that base effect now rolling off the 12-month window, upward pressure on the all-items CPI basket intensified. The Iran conflict then compounded that dynamic, sending crude prices sharply higher and amplifying the inflationary impact on fuel-dependent categories across the economy.

Core Measures Cool Even as Headline Rises

The Bank of Canada’s preferred underlying gauges moved in the opposite direction of the headline. CPI-median, which tracks the centermost component of the price basket, eased to 2.1% from 2.3% in March. CPI-trim, which strips out the most extreme price swings, fell to 2.0% from 2.2%. Those softer core readings gave markets some pause. Money market pricing for a rate increase shifted modestly, with traders now placing a 25-basis-point hike in October as the most likely next policy move. Prime Minister Mark Carney announced a five-month gasoline excise duty relief of 10 Canadian cents per litre to cushion consumers. The Canadian dollar slipped 0.20% to C$1.3766 per US dollar following the data. Two-year government bond yields fell four basis points to 2.782%.

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