Good morning. The United States and Iran threatened yesterday to target critical infrastructure, a potential escalation in a war that already had some market watchers predicting oil prices could reach US$200 a barrel. That’s among the stories we’re following this week.

Defence: Canada is hosting the first round of in-person negotiations to establish a new multilateral defence bank institution.

Real estate: Developers are increasing perks for potential homebuyers as sales slump.

Philanthropy: The Labatt family is donating $40-million to make mental-health services more accessible to youth.

Oil at $200? Maybe not today. Maybe not tomorrow. But with access to the Strait of Hormuz frozen for the foreseeable future, it’s hard to see how oil prices stop climbing. Demand for crude is still strong, and supply is tight.

It’s not as though the world is running on empty – in fact, the International Energy Agency expects global oil supply to rise in 2026, despite the unprecedented nature of the energy crisis. (It would be nice to live in precedented times, wouldn’t it?)

The threat of attack on ships entering the Strait, a sliver of water that offers the only passageway from the Persian Gulf to the open ocean, is holding back about 20 per cent of the world’s supply from the market. Major oil fields across the Middle East are closing or slowing down production until they no longer face a glut or risk more attacks themselves.

As it stands, Iran is allowing mainly its own ships to pass through. (Although, there is at least one Greek shipping magnate still taking the risk.) And with oil prices jumping by as much as 60 per cent in less than a month since the U.S and Israel launched the war on Iran, the U.S. is letting them pass to avoid making matters worse.

That’s pretty strong leverage for Tehran, and a tough spot for the Trump administration. If the most likely outcome is a continuation of the current standoff, as John Rapley suggests, the supply-demand imbalance will soon intensify, and the price of oil will climb again.

How high? Many market watchers say prices would need to reach US$200 a barrel before “equilibrium” is met. That’s the point at which suppliers blink in the face of available demand, and prices start falling. For such a hopeful-sounding term, getting there would mean households and businesses have suffered massive economic damage.

Drilling down: How the global energy sector deals with the impact of the Middle East conflict will be in the spotlight today at CERAWeek, a high-profile U.S. energy industry conference.

U.S. Energy Secretary Chris Wright, CEOs of Saudi Aramco, Shell and Chevron are among the many high-profile executives set to speak at the Houston conference, which runs until Friday.

For the U.S. and other countries that cut their bets on renewable and nuclear energy, the Hormuz crisis has instantly exposed the risks of rolling back green and cleantech agendas, Eric Reguly writes.

Economists vs. markets: At least there’s a grim logic to the math behind rising oil prices. In Canada, where economic growth has stalled, the housing market is falling, the job market is softening and Trey Yesavage has a shoulder impingement (*not all factors equally weighted), traders are pricing in hikes to the Bank of Canada’s key lending rate.

On Friday, just a couple of days after Tiff Macklem maintained its 2.25 per cent policy rate and pointed out that Canadians aren’t exactly eager to spend, money markets were implying more than 75 basis points of Bank of Canada rate hikes this year.

Some economists argue that makes no sense. David Rosenberg, founder of Rosenberg Research, said it is “beyond preposterous” that the bank would raise its key lending rate this year, especially as an oil-price shock further weighs on spending.

The market bracing for the possibility of rate hikes “may go down as one of the most bizarre financial events to have ever happened in this country,” Rosenberg said in an e-mail.

“I classify this as the mother of all misplaced knee-jerk reactions.”

Douglas Porter, chief economist at Bank of Montreal, said those market moves were in spite of a “friendly” inflation report for February released last week showing the headline number cooling.

“Call us old-fashioned,” he wrote in a note to clients, “but where’s the case for rate hikes when core inflation is below target?”

Greater expectations: An enforcement hearing launching today against defunct fund manager Emerge Canada Inc. will test the responsibilities of independent review committees.

The Ontario Securities Commission has alleged the firm’s founder and chief executive officer improperly borrowed nearly $6-million of investor money from funds they managed to cover the company’s operating expenses.