06:58 AM EDT, 03/25/2026 (MT Newswires) -- Inflation expectations in Canada have jumped since the beginning of the Iran conflict, but it has so far been largely contained to the short run, said Bank of Montreal (BMO).

Five-year inflation expectations -- TIPS spread -- jumped as high as 2.7% in recent days, before Monday's slide in oil prices pulled them back down, noted the bank. That compares with around 2.2% coming into 2026.

Meantime, five-year expectations five years forward are still down on the year and have barely budged since the conflict broke out, pointed out BMO.

This suggests that, while maybe not clearing up as quickly as some initially thought, markets still view this as a short-term supply shock that won't root into longer-term inflation expectations, stated the bank.

That's an important distinction for monetary policymakers who will be eying weaker growth, but will be careful to ease into an environment where inflation expectations do risk becoming entrenched, according to BMO.