Oil prices rose at the beginning of the week as threat of new tariffs on steel and aluminum and retaliatory tariffs by China sparked fears of escalating trade wars and increased inflationary pressures.
The international benchmark Brent crude rose by 0.7%, trading at $75.04 per barrel at 10 a.m. local time (0700 GMT), up from $74.53 at the close of the previous session.
The US benchmark West Texas Intermediate (WTI) increased by 0.7%, reaching $71.37 per barrel, compared to its prior session close of $70.86.
Oil prices increased on Monday after US President Donald Trump announced plans of new tariffs on steel and aluminum imports.
Trump announced on Sunday that he would impose a 25% tariff on steel and aluminum imports, including those from Canada and Mexico. He also mentioned that tariffs would be applied based on reciprocity, saying, ‘If they are charging us 130% and we’re charging them nothing, it’s not going to stay that way.’
The move raised concerns that it could dampen global economic growth and energy demand. Experts noted that Trump’s statements raised concerns about an escalating trade war, with fears that US’s protectionist trade policy could increase inflationary pressures in the country.
On the other hand, China’s retaliatory tariffs against the US came into effect today, amid failed negotiations between Beijing and Washington. Oil and natural gas traders are demanding exemptions from China for US imports of crude oil and liquefied natural gas.
Meanwhile, uncertainty over US Federal Reserve (Fed) policies and US sanctions on Iranian oil exports added further volatility to the energy markets.
Last week, the US administration announced sanctions against an international network for facilitating the shipment of Iranian crude oil to China. Trump signed a presidential decree reinstating the ‘maximum pressure on Iran’ policy. The US Treasury Department imposed new sanctions targeting a number of individuals and tankers transporting millions of barrels of oil from Iran to China.
The Fed’s Monetary Policy Report created uncertainty in the oil markets. The Fed’s commitment to reducing inflation to 2% and signals regarding its interest rate policies could influence oil prices.
Experts say the Fed’s policy decisions could lead to fluctuations in the markets. Possible interest rate hikes may strengthen the dollar and lower global oil demand, while the possibility of an interest rate cut could push prices up.
