Trade war turmoil: Oil hits 3‑year low amid tariff tensions
Oil prices have dropped to their lowest level since 2022, and many other commodities, including industrial metals, have recorded losses as the trade war between the US and China escalates. Concerns about increasing global recession risks are deepening declines in the commodities markets, and announcements of higher tariffs add to the uncertainty, reports Reuters.
On Wednesday, oil prices hit their lowest level over three years, extending a five-day losing streak. This is the most significant downturn in three years. Reuters reports that the common denominator for the declines in the commodities market is the growing tension related to the trade war between the United States and China.
Higher tariffs that US President Donald Trump imposed on Chinese goods raise concerns about decreased commodity demand and fuel fears of a global economic recession. "Crude oil extended losses amid signs of escalation in the trade war," ANZ wrote in its note.
Energy markets reacted to the Trump administration's announcements of further tariff increases, which raised concerns about limiting oil demand. Increased forecasts for oil supply and the risk of a prolonged trade war between the US and China reduce the chances of a quick agreement between the world's two largest economies.
China’s aggressive retaliation diminishes the chances of a quick deal between the world’s two biggest economies, triggering mounting fears of economic recession across the globe, said Ye Lin, vice president of the oil market at Rystad Energy.
Changes in the metals market
The increase in trade tensions also affected the prices of industrial metals, especially copper, with contracts on the Shanghai Futures Exchange reaching an eight-month low.
Other metals, such as iron ore, also recorded losses, and gold prices fell as US bond yields began to rise. Meanwhile, agricultural commodity markets showed mixed trends – soybean futures rose, but palm oil and rubber recorded losses.
Reuters notes that the escalation of the trade war between the US and China offers no sign of a quick resolution. This will have serious consequences not only for the commodities market but also for the global economy. The reactions of financial markets and the decline in commodity demand confirm that the coming months may bring further economic challenges.
