Trade war turmoil sinks oil and metals to new lows
Oil prices have fallen to their lowest level since 2022, and many other commodities, including industrial metals, have registered losses as the trade war between the US and China escalates. Concerns about rising global recession risks are deepening declines in the commodities markets, while announcements of higher tariffs increase uncertainty, reports Reuters.
On Wednesday, oil prices dropped to their lowest level over three years, continuing a five-day losing streak, the longest in three years. According to Reuters, the common factor for the declines in the commodities market is the increasing tension related to the trade war between the United States and China.
The higher tariffs imposed by US President Donald Trump on Chinese goods raise concerns about decreased demand for commodities and fuel fears of a global economic recession. "Crude oil extended losses amid signs of escalation in the trade war," wrote ANZ 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 swift 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, whose contracts on the Shanghai Futures Exchange reached 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 trade war escalation between the US and China still offers no hope for a quick crisis 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 difficulties.
