Canadian oil companies expected to ‘benefit disproportionately’ during the war in Iran

Darryl McCoubrey, analyst at Veritas, joins BNN Bloomberg to discuss Canadian energy stocks impacted by Iran war.

Canadian oil stocks are poised for a significant rally as the war in Iran continues to shake oil prices, according to an energy analyst.

Cenovus Energy, in particular, was upgraded to a “strong buy” on Wednesday by research analyst Darryl McCoubrey of Veritas Investment, with the company’s stock trading 3.4 per cent higher at $31.85 Wednesday midday, nearly reaching its yearly peak of $32.62.

In the event of a price spike, Canadian companies Cenovus and Canadian Natural Resources both “benefit disproportionately compared to the other oil sands majors,” because they are both sensitive to a West Texas Intermediate (WTI) price hike,” McCoubrey told BNN Bloomberg.

“So we increased both of those valuations by nearly 30 per cent,” he said.

Crude prices hovered around US$90 a barrel on Wednesday while Iran told the world to be ready for oil at US$200 a barrel, because the oil price depends on regional security, which the U.S. has “destabilized.”

McCoubrey said he shifted from a supply glut outlook to a high-risk scenario.

He said Canadian Natural Resources, which was trading 2.5 per cent higher Wednesday midday, performed relatively well compared to Cenovus Energy over the last month, but Cenovus stands out as being relatively levered to the current high-price environment.

“I expect it to be the name that kind of performs best amongst the best four (oil companies),” said McCoubrey.

If things were to go the other way, he said Suncor is the best alternative because of its upstream exposure.

McCoubrey explained that Canadian Natural Resources and Cenovus Energy are more vulnerable to volatile oil prices because of a lack of downstream refining operations.

“It’s something we saw actually occur during the 12-day war last year, where, just like now, WTI prices spiked, and so too did crack spreads.”

Crack spreads, or the margins refiners make by turning crude into products like gasoline and diesel, can help producers offset weakness when oil prices fall.

After the Israel-Iran war ended on June 24, 2025, oil prices came down quickly, but those with downstream operations were able to soften that downward spike and hold onto higher crack spread margins for a longer period, said McCoubrey.

How does the IEA releasing reserves affect Canada?

On Wednesday, the International Energy Agency, which includes Canada, agreed to release 400 million barrels of oil from its emergency reserves, to address disruptions in oil markets stemming from the war in the Middle East.

In the short term, the 400 million barrel release will buy Canada months of time, in which it would not experience a severe disruption in energy markets, says McCoubrey.

• Canada will ‘do its part’ to help IEA release of oil reserves: Hodgson

“I think the goal here is obviously to keep a lid on prices, so there isn’t a real urgency to end the conflict sooner,” says McCoubrey.

He said the relief is limited, as depleting strategic reserves by 50 per cent would create a severe supply crisis if the Iranian threat to the Strait of Hormuz continues.

He said that, in the short term, Canada also cannot do much with the infrastructure it has.

“The issue that Canada faces in its energy complex is that it’s captive. Getting these supplies out to these markets is challenged,” says McCoubrey.

On Wednesday, Natural Resources Minister Tim Hodgson said Canada will do its part to help lower the global cost of oil. While Canada is already producing at capacity, he said it could look into delaying facility maintenance or having refineries switch to domestic crude to free up supply.

With files from Deepak Bidwai, BNN Bloomberg.