Oil markets faced a sharp downturn this week, with prices headed for their steepest weekly loss in several months. The slump follows rising investor anxiety triggered by former U.S. President Donald Trump’s proposed tariffs, which have added fresh uncertainty to the global economic outlook.
As the week draws to a close, Brent crude and U.S. West Texas Intermediate (WTI) are both on track to post losses exceeding 5%, marking their worst performance since early 2024. The decline came despite tight supply expectations and ongoing geopolitical tensions in the Middle East, which typically support higher prices.
The tipping point appears to be market reaction to Donald Trump’s renewed calls for a tariff-heavy trade policy, particularly a suggested 60% duty on Chinese goods if he is re-elected. This has reignited fears of a potential trade war—similar to what the world witnessed during his first term—which could hamper global demand, especially for oil.
Traders and analysts say the market is now weighing demand-side risks more heavily. With inflation still a concern and the global economy walking a tightrope, the uncertainty around future trade policies is undermining what has otherwise been a bullish trend supported by OPEC+ output cuts and limited U.S. crude inventories.
Adding to the pressure, recent U.S. economic data revealed a slight uptick in unemployment claims and a cooling labor market, leading to speculation about slower consumer activity in the coming months. These signs of a possible economic slowdown are fueling bearish sentiment in energy markets, despite solid fundamentals in supply.
While the oil price drop may seem alarming, it’s important to recognize that markets often react sharply to political developments—especially ones with long-term implications. The proposed tariffs are not yet policy and may evolve over time, depending on the political landscape. Until then, oil prices may continue to reflect the broader tug-of-war between supply-side tightness and demand-side fear. For now, cautious optimism and close monitoring remain key for both investors and policymakers.