Oil Drops 3% As Trump's Tariffs Predicted To Hinder Demand

Oil prices dropped more than 3 per cent on Thursday following U.S. President Donald Trump's declaration of extensive new tariffs, raising investor concerns that this will escalate a global trade war, hindering economic growth and reducing fuel demand. Brent futures dropped by $2.66, or 3.55 per cent, reaching $72.29 a barrel by 0918 GMT. U.S. West Texas Intermediate crude futures decreased by $2.69, equivalent to 3.75 per cent, settling at $69.02. On Wednesday, Trump announced a 10  per cent minimum tariff on the majority of goods brought into the U.S., which is the leading oil consumer globally, imposing significantly higher tariffs on items from numerous nations, which starts a global trade war that could lead to increased inflation and hinder economic growth in the U.S. and around the world.

"The announcement of U.S. tariffs evidently surprised the markets." "Speculation before the announcement indicated a stable 15-20 per cent tariff, but the ultimate choice was more aggressive," Yeap Jun Rong, market strategist at IG, stated in an email. "Regarding oil prices, attention now turns to the global growth forecast, which may be adjusted lower because of these unexpected higher tariffs," he mentioned. On Wednesday, the White House announced that oil, gas, and refined product imports were excluded from the new tariffs. On Wednesday, UBS analysts reduced their oil projections by $3 per barrel for 2025-26 to $72 per barrel, citing weaker fundamentals.

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Traders and analysts anticipate increased price volatility shortly as tariffs may fluctuate while nations seek to negotiate reduced rates or implement retaliatory taxes. "Immediate countermeasures are on the horizon, and based on the initial market response, recession and stagflation have emerged as alarming prospects," stated PVM analyst Tamas Varga. "Since tariffs are ultimately borne by local consumers and companies, their expense will inevitably rise, hindering the growth of economic prosperity." In other updates, data from the U.S. Energy Information Administration on Wednesday indicated that U.S. crude stockpiles unexpectedly increased by 6.2 million barrels last week, contrary to analysts' predictions of a drop by 2.1 million barrels.