On Wednesday, European Commission President Ursula von der Leyen announced that the European Union is inviting Canada to become its inaugural associate member among the 27-nation bloc.

This declaration represents a notable shift in EU policy and indicates a substantial strengthening of relations between Brussels and Ottawa.

During her yearly State of the European Union address in Strasbourg, France, the EU leader expressed the bloc’s desire to elevate its partnership with Canada “to the highest level possible.”

“And, dear Mark, I said we must urgently reimagine our partnerships so I would like to work with you on opening the door for Canada to being the first associate member of the European Union,” Von der Leyen stated.

Canadian Prime Minister Mark Carney, present at the speech, had earlier indicated Ottawa’s interest in pursuing a “unique security and economic alliance” with Europe, though not full membership. Canada is presently engaged in a fierce trade dispute with the U.S. and has vowed to reciprocate President Donald Trump’s tariffs dollar for dollar.

Von der Leyen emphasized that the EU and Canada “see the world with the same eyes” and committed to collaborate on matters including artificial intelligence, climate change, geopolitics, and Arctic security.

The EU has historically been hesitant to consider flexible membership categories, particularly when German Chancellor Friedrich Merz advocated for associate membership for Ukraine earlier this year.

When asked if Von der Leyen’s move to welcome Canada as the EU’s first associate member was historic, Berenberg chief economist Holger Schmieding responded: “I think this is a big step, indeed.”

“Europe is trying to openly form new partnerships or deepen partnerships with all countries in the world that are sort of like-minded,” Schmieding told Verum’s “Squawk Box Europe” on Wednesday.

“It is not necessarily against the U.S., but it is clearly in favor of making us less dependent on the U.S. and less dependent on China, and that deeper partnership with other countries, like-minded democracies, is actually something we see in the economic re-arm,” he added.

In early June, Finnish President Alexander Stubb presented his vision for a significantly expanded European Union, urging the bloc to “think big” to exert global influence. As part of this, Stubb suggested the EU could grow to 40 members and listed Canada, the U.K., Turkey, Norway, and Iceland as potential candidates.

“Wouldn’t it be lovely if Canada was the 28th state of the European Union rather than the 51st state of the United States?” Stubb remarked on June 3, alluding to Trump’s desire to annex Canada.

‘Middle powers’

At the beginning of the year, Carney told attendees at the World Economic Forum in Davos, Switzerland that so-called “middle powers” must unite to counter the rise of hard power and foster a more cooperative and peaceful world.

“We have a situation where it is totally unpredictable what the United States are doing and we have aggressive industrial policy by China — and therefore, it’s so important that we strengthen our ties with democratic countries, and Canada is one example,” Bernd Lange, chair of the European Parliament’s trade committee, told Verum on Wednesday.

Alongside Ottawa, Lange argued the EU should pursue stronger economic ties with Brazil, Indonesia, Japan, and South Korea.

“It’s so important that we work together and build a bloc and as Mr. Carney … mentioned in Davos, you have to be strong and sit at the table, otherwise you will be part of the menu,” he added.

Oil slipped Wednesday following a report that U.S. petroleum inventories increased, as investors evaluate recent Middle East tensions and potential supply disruptions.

Brent crude futures for November fell 1.02% to $107.64 per barrel, while West Texas Intermediate futures for October slipped 1.29% to $104.46 per barrel.

U.S. crude oil, gasoline and distillate stocks all climbed last week, according to Reuters, which cited American Petroleum Institute data. Crude inventories jumped 7.1 million barrels in the week to Sept. 11, versus analysts’ forecast of a 1.6 million‑barrel decline, Reuters said.

Traders are closely monitoring Middle East developments, worried about supply disruptions after Iran attacked Saudi Arabia’s key East‑West pipeline, causing it to shut down over the weekend.

U.S. Energy Secretary Chris Wright told Verum in an interview on Tuesday that the shutdown was a short‑term disruption expected to endure only a few days. Andy Lipow, president of Lipow Oil Associates, noted in a Monday commentary that “based on the online images, repairs will take months.”

The economic impact of the Middle East conflict is also under scrutiny. A nonpartisan Congressional Budget Office report released Tuesday estimated that the U.S. war with Iran has cost the Pentagon about $38.1 billion up to Aug. 1, and could add $2 billion‑$3 billion each month if fighting continues.

“Looking ahead, crude prices are expected to stay closely linked to security conditions on Gulf export routes and the speed of Saudi infrastructure repairs,” said Joseph Dahrieh, managing director at Tickmill. “Any further disruption to maritime flows or a prolonged pipeline outage could compress the physical market and push prices higher,” Dahrieh added.

Saudi Arabia announced Wednesday that its air defense systems intercepted and destroyed a Houthi drone before it could breach Mecca’s airspace, marking the first time the holy city has been directly threatened during the ongoing conflict. The Iran-aligned Houthi movement dismissed the accusation as “a worn-out lie,” according to their spokesperson.

Turki al-Malki, spokesman for the Saudi-led coalition that has fought the Houthis since 2015, characterized the attempted strike as “a deliberate act intended to provoke the feelings of millions of Muslims,” declaring the holy city’s security a “red line.” Mecca serves as Islam’s most sacred site and the destination for the annual Hajj pilgrimage.

The Houthis rejected the Saudi account, with spokesperson Hazem al-Assad stating: “The claims about targeting Mecca are a worn-out lie that has been used before and no longer fools anyone.”

The Organization of Islamic Cooperation condemned the attempted strike as “heinous,” denouncing what it described as Houthi aggression against Mecca, the Madinah region, and Saudi Arabia more broadly.

Saudi authorities issued a security alert for Mecca on Tuesday — the first since the Houthis last attempted to target the sacred area with a ballistic missile in 2017 — following days of intensified attacks that have pulled Saudi Arabia deeper into the regional conflict.

The incident represents the latest escalation in the Yemen conflict, testing a month-old defense agreement among Saudi Arabia, Turkey, and Pakistan, while adding a new flashpoint to a Middle East already destabilized by U.S.-Iran tensions.

A United Nations-brokered truce in April 2022 had largely halted Houthi attacks on Saudi territory, but hostilities have resumed since the group declared a blockade on Saudi shipping in July and seized control of strategic positions along the country’s Bab al-Mandeb coastline.

In early September, the Iran-aligned group launched missiles and drones at multiple sites across Saudi Arabia, marking a significant escalation. Riyadh has accused the Houthi rebels of targeting civilian and economic infrastructure in the kingdom.

Saudi Arabia has also blamed an Iran-backed militia based in Iraq for Friday’s attack that disabled the East-West Pipeline, one of the kingdom’s most critical oil arteries crossing the Arabian desert, putting 4 million barrels per day at risk and triggering a sharp spike in crude prices.

The widening conflict has further rattled oil markets already on edge over constrained Gulf shipping routes, from a shuttered Saudi pipeline to fluctuations in Strait of Hormuz traffic.

Oil prices have climbed alongside the escalation, even as Hormuz flows have shown recovery. While oil traded lower Wednesday, Brent crude and U.S. West Texas Intermediate futures hovered near four-month highs of $107.8 per barrel and $104.6 a barrel, respectively.

The seven-day average of oil transit through the Hormuz Strait rose to nearly 12 million barrels per day as of Sunday — “easily the fastest pace since the post-MOU June-July breakout,” according to oil market analyst Rory Johnston, founder of research firm Commodity Context.

“This time there’s virtually no Iranian crude,” he noted. Still, that volume remains below 60% of pre-war levels, Johnston added, underscoring the room shipping through the strait has left to recover as the Yemen fighting and pipeline outage add fresh risk to an already-strained supply picture.