Scotiabank Warns of Rising Food and Shelter Costs in Canada Due to 'Diesel Shock'
A Scotiabank report warns that supply chain disruptions from the Iran war and the Russia-Ukraine conflict are driving a 'diesel shock' expected to push up Canadian grocery and shelter costs, with significant financial pressure on consumers likely beginning around March 2026.
Scotiabank released a report on Monday warning that diesel and crude oil price shocks are expected to be inflationary, leading to increased costs for food and shelter across Canada. 
According to the report, crude oil supplies have been strained by the Iran war choking off shipments through the Strait of Hormuz, while diesel shortages are linked to damage to Russian refineries from the war with Ukraine. Olivier Gervais, director of modelling and forecasting at Scotiabank, stated that diesel prices have risen beyond what crude oil movements would normally imply, adding broader inflation pressure.
The bank's analysis outlines a "lag" effect in which higher transportation costs are passed along to other areas over 12 to 18 months. The report explains that shelter prices typically peak roughly one year after such a shock, while food prices peak around 18 months later. Based on the start dates of the conflicts — the Iran war on Feb. 28, 2025, and the Russia-Ukraine war since 2022 — Scotiabank estimates consumers may feel significantly more financial pressure starting around March 2026.
Central banks, including the Bank of Canada, are monitoring these inflationary risks. If the price shock persists, there is a risk that central banks could raise interest rates more aggressively to combat inflation, potentially increasing the cost of loans and mortgage renewals. 
Bank of Canada Governor Tiff Macklem stated in August that there was little evidence yet of higher oil prices feeding through broadly, but noted it was early days. Higher oil and gas prices kept consumer inflation at three per cent in July and August, remaining within the Bank of Canada's target range of one to three per cent.