Oil prices surged for a second day running on Tuesday as global markets brace for a prolonged conflict in the Middle East. On Monday, Iran’s Islamic Revolutionary Guard Corps (IRGC) officially declared the Strait of Hormuz "closed," warning that any vessel attempting to pass will be attacked or "set ablaze". While the U.S. Central Command (CENTCOM) maintains the waterway is not formally closed, traffic has dropped by approximately 70-80%, with major global shippers, including Maersk, Hapag-Lloyd, and MSC, suspending all crossings.
Brent crude for April delivery gained nearly 5% on Tuesday, reaching $85 earlier in the day, marking the first time it has traded above the pivotal $80 per barrel mark since July 2024, while the corresponding WTI gained less than a percentage point on the geopolitical tailwinds.
Long-suffering oil and gas bulls are finally enjoying some reprieve, with U.S. energy stocks leading all 11 sectors of the U.S. market: the sector’s favorite benchmark, State Street Energy Select Sector SPDR ETF (NYSEARCA:XLE), is now up ~24% in the year-to-date, incomparable to the -1.0% return by the S&P 500.
However, some experts have argued that the Middle East debacle’s impact on energy markets is more favorable to Canada than it is to the United States. According to Eric Nuttall, senior portfolio manager at Toronto-based Ninepoint Partners, the Middle East conflict is a “massive opportunity” for Canada, which can position itself as a stable and secure supplier of oil.
Nuttall argues, as reported by Bloomberg, that Canada is uniquely positioned as a stable and secure energy supplier with decades of inventory in the oil sands and the Clearwater formation. The Clearwater Formation in Alberta, Canada, holds vast, high-viscosity heavy oil and bitumen reserves, with estimated in-place volumes exceeding 70 billion barrels in the Cold Lake area alone. Production is expected to grow, with estimates that it could hit nearly 400,000 bbl/d by 2031.
Nuttall has characterized the sudden loss of Iranian supply and the closure of the Strait as a"worst-case scenario" for investors and a historic event whereby the market’s tendency to immediately sell any spikes in oil prices may not apply.
And in the meantime, Nuttall says he has been actively adding Canadian energy stocks to his portfolio, noting that current equity prices do not yet reflect the increased importance of "security of supply." The asset manager has called on the Canadian Parliament to approve new export pipelines, including a one-million-barrel-per-day project, in a bid to address the global supply-demand mismatch.
Here are our top 3 Canadian Oil & Gas stocks for 2026.
#1. Peyto Exploration & Development Corp.
Market Cap: $3.9B
Forward Dividend Yield: 5.19%
52-Week Share Returns: 87.1%
Peyto Exploration & Development Corp. (OTCPK:PEYUF) focuses on the exploration, development, and production of unconventional natural gas, oil and natural gas liquids. Operating in Alberta’s Deep Basin, the company is known for a low-cost structure, utilizing integrated infrastructure to maximize profitability.
Peyto is considered a strong investment due to its position as one of Canada's lowest-cost natural gas producers, offering high-margin production, a sustainable dividend yield and significant growth potential driven by LNG expansion. With the expansion of LNG Canada and global demand for cleaner energy, Peyto is positioned to benefit from increased, higher-priced natural gas exports. The shares have been on a tear, thanks to strong bottom-line growth: In Q3 2025, Peyto reported a 29% increase in funds from operations, showcasing strong operational execution and hedging strategies.
#2. Cenovus Energy
Market Cap: $42.B
Forward Dividend Yield: 2.6%
52-Week Share Returns: 79.8%
Cenovus Energy (NYSE:CVE) is a Calgary-based, integrated oil and natural gas company that operates across the full energy value chain in Canada, the U.S., and the Asia Pacific region. Key activities include oil sands development, conventional oil and natural gas production, upgrading, refining, and marketing of crude oil and products.
CVE is a "Moderate Buy" going by technical indicators and moving averages. However, the company's fundamentals also qualify it as a Buy candidate driven by strong operational performance and debt reduction. The company reported record oil sands production in Q4 2025 and expects a 4% year-over-year production increase in 2026. The $8.6 billion acquisition of MEG Energy is expected to deliver $150 million in annual synergies in 2026, growing to over $400 million by 2028.
#3. Suncor Energy
Market Cap: $68.6B
Forward Dividend Yield: 3.0%
52-Week Share Returns: 61.1%
Suncor Energy (NYSE:SU) is a leading Canadian integrated energy company that specializes in
producing oil from oil sands, offshore and conventional exploration, petroleum refining, and marketing products under the Petro-Canada brand. Based in Calgary, Alberta, the company operates major oil sands mining and in-situ assets, including refineries across North America, and is expanding into lower-carbon power.
If you are seeking a reliable, income-generating energy stock with high cash flow and a solid track record of capital returns, Suncor remains a top contender in the Canadian energy sector. Suncor’s integrated business model (oil sands + refining + retail) provides a hedge against oil price volatility. The company is actively reducing share count through buybacks (up to 10% by March 2027) and has increased its dividend.
By Alex Kimani for Oilprice.com
