In this week’s The Seven…

• Ceasefire - The Iran-U.S. MOU
• Warsh shock - New Fed chair sends hawks flying
• Great White North - G7 leaders point to Canada amid energy crisis
• Resilient consumers - Retail sales increase again…but risks loom
• Trade as relationship - Indigenous entrepreneurship in Alberta
• Interesting Fact - Economics of the World Cup
• Chart of the Week - Where did all the natural increase go?
  
  

“To everything (turn, turn, turn) 

There is a season (turn, turn, turn)”

Turn! Turn! Turn! (To Everything There Is a Season), the Byrds (1965)


Now what’s your forecast? 

That’s the question I was fielding this week, as news broke late last week that the U.S. and Iran had reached a deal (I mean MOU) to reopen the Strait of Hormuz. 

Our quarterly Alberta forecast was prepared shortly before the MOU, so it’s a natural question. 

My answer? Our outlook remains unchanged because we 1) already took a conservative approach to oil prices, 2) the economic data continues to reinforce our forecast (including population and retail this week), and 3) oil prices have less torque on the real economy than in the past and this cycle looks different as I discussed yesterday.  

That doesn’t mean we’re not watching what’s happening. A lot of things, beyond oil prices, will cause us to change our next quarterly forecast - everything from the CUSMA review to the status of the Alberta-Canada MOU. In the meantime, we publish low/high scenarios to deal with risk. 

But for now, we take a step back to see how things shake out before adjusting our view. The world will keep turning, but we’re not changing our outlook with every turn.

Starting point - More diplomatic work needed after MOU

Details have emerged on the Iran-U.S. Memorandum of Understanding (MOU). There are three main components 1) 60-day ceasefire to negotiate on nuclear stockpiles 2) reopening of the Strait, and 3) sanctions and asset relief.

A breakthrough yes, but it’s going to be a bumpy ride. Negotiations seem to have hit another snag as Israel launched another round of attacks in Lebanon, resulting in the postponement of talks scheduled today.

With the Strait reopening, oil prices ground lower this week and sit at $US76bbl at the time of writing. Our view is still that the massive supply disruptions of physical barrels and increased geopolitical risks means prices will remain higher than pre-war levels. Oil futures suggest approx. $80/bbl average WTI in 2026 and $70/bbl in 2027 - roughly in line with our June forecast and still well above the $60/bbl we had penciled in pre-war.

Seizing the moment - G7 leaders highlight Canada as a solution to energy crisis

News of the U.S.-Iran MOU broke during the G7 Summit in Évian, France.

G7 leaders announced a new wave of sanctions against Russia, committed to a joint Anglo-French naval mine-clearing mission in the Gulf, and formalized a pact to reduce reliance on Chinese rare-earth minerals to under 60% by 2030, with no single country supplying more than 60% of their imports of rare earths. 

But the main thing for Canada was a joint acknowledgement of Canada as a secure and stable jurisdiction for energy amid the latest crisis:

"We commit to accelerate the diversification of energy supply routes in order to reduce global vulnerability to the Strait of Hormuz and to increase our energy stocks. We welcome the potential for Canada to deliver significant additional capacity to global markets in the coming years."

New Fed Chair Warsh spooks markets on “hawkish” tone

"We've dropped forward guidance... As a general proposition, forward guidance isn't the business we should be in." Fed Chair Kevin Warsh, June 17. 

All eyes were on Kevin Warsh this week, the new chair of the U.S. Federal Reserve, as he delivered his first rate decision.

It’s not what he did, but what he said (or didn’t say). The decision to keep the benchmark rate at 3.5-3.75% was widely expected. 

The shock came from the ‘hawkish’ tone and lack of forward guidance. Unlike his predecessor Jerome Powell who signaled upcoming moves, Warsh kept markets guessing with his wait and see, data-driven approach. He also said that he’s focused on the “left of the decimal point” on inflation - suggesting an intolerance for inflation remaining above its 2% target (right now it’s 4.2%, while the core measure is 2.9%). Finally, he didn’t submit his “dot plot” forecast for rates, suggesting that he won’t stand in the way of a consensus view to hike. Right now that updated dot plot points to a rate hike by the end of the year.

U.S. stock markets slid on the news, while U.S. 2 and 10-year yields jumped, widening the spread against Canadian yields. 

Bottom line: President Trump had concerns about Powell’s reluctance to cut rates. The new chair, Warsh, appears to be standing firm, with rate hikes more likely than not to get inflation under control.

Answer to the previous trivia question: It’s true: U.S. President Nixon proposed a ban on selling gasoline on Sundays as part of an effort to address the energy crisis that followed the 1973 Arab oil embargo.

Today’s trivia question: As of May 2026, what percentage of national forestry, fishing, mining, quarrying, oil and gas sector employment was in Alberta?  

Answer to the previous trivia question: False. Alberta employment in professional, scientific and technical services now far exceeds employment in the oil and gas extraction sector. The two lines intersected in October 2014.

Today’s trivia question: Births are more seasonal than you may realize. In what quarter of the year are births the highest in Canada?