Oil Prices Plunge as Trump Intensifies Trade War with China

The oil market is in turmoil as President Donald Trump's escalating trade war with China sends shockwaves through global economies. Oil prices have crashed to their lowest point since 2021, with Brent crude trading at $60.36 per barrel and West Texas Intermediate at $57.04 per barrel, both down by close to 4% from Tuesday’s close. The tariff announcements have sparked fears of a global recession, significantly reducing oil demand and putting pressure on OPEC+ to potentially reverse their recent production increase.

The recent tariff announcements have significant potential implications for the financial performance of major oil companies and their stock prices. The escalating US-China trade war has led to a crash in oil prices to their lowest point since 2021. Brent crude was trading at $60.36 per barrel, and West Texas Intermediate at $57.04 per barrel, both down by close to 4% from Tuesday’s close. This price slump puts pressure on OPEC+ to potentially reverse their recent production increase, which could affect the supply and demand dynamics in the oil market.



Analysts fear that the trade war will lead to a global recession, significantly reducing oil demand. For instance, Rystad Energy Vice President for oil markets, Ye Lin, stated, “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.” This reduction in demand could negatively impact the financial performance of major oil companies.

The tariff-sparked market sell-off has not spared oil, and analysts at Goldman Sachs see prices heading even lower if the global economy tips into a recession. This could lead to a decrease in the stock prices of major oil companies. For example, Goldman Sachs analysts lowered their forecast for Brent to an average of $62 per barrel in 2025 and $58 for WTI under the assumption that Trump's tariffs will be reduced, the US avoids a recession, and OPEC raises supply only modestly in the months following its May increase. However, if tariffs remain as high as initially announced and a recession follows, prices could head into the $50 range by year-end.

The drop in oil prices and borrowing costs could offer some near-term improvements for U.S. consumers, including lower gas prices. Patrick de Haan, the head of petroleum analysis at GasBuddy, told ABC News, “Motorists can expect gas prices to begin falling nearly coast-to-coast, with oil now at its lowest level since the early days of the pandemic in 2021.” However, this could also lead to a decrease in the stock prices of major oil companies as lower gas prices reduce their revenue.

The market impact of the tariff announcements could be significant, especially for large investors. For example, the recent decline in Treasury yields owes to hotter demand rather than a cooling off, experts said. The price of a bond moves in the opposite direction as its yield, or the amount of interest accrued by a bondholder. In other words, when bond yields go down, bond prices go up. The decline in yields over recent days has resulted from a surge in demand as investors flee stocks and seek out safe-haven assets. This could lead to a decrease in the stock prices of major oil companies as investors seek safer investments.

In conclusion, the recent tariff announcements have the potential to negatively impact the financial performance of major oil companies and their stock prices due to the reduction in oil demand, lower oil prices, and market sentiment. However, the actual impact will depend on various factors, including the duration and severity of the trade war, the response of OPEC+, and the overall economic conditions.