Oil prices increased following President Donald Trump's threat of implementing secondary tariffs on buyers of Russian and Iranian oil. The intention behind the tariffs is to discourage countries like China and India from purchasing oil from Russia and Iran. Despite the tariff threats, analysts anticipate ongoing pressure on oil prices due to broader economic concerns.
Following Trump's statement on Saturday regarding the possibility of secondary tariffs, US benchmark West Texas Intermediate rose by 3.1% to $71.48 a barrel, while Brent crude oil futures increased by 1.5% to $74.74 a barrel on Monday. Both types of oil continued to rise on Tuesday. The escalation in prices was triggered by Trump expressing his dissatisfaction with Russian President Vladimir Putin's criticism of Ukrainian President Volodymyr Zelenskyy.
If secondary tariffs are imposed, any country engaging in trade with the US while also buying oil from Russia or Iran will face additional US tariffs. The potential impact of these tariffs could significantly influence the global oil market, as both Russia and Iran are major oil exporters. China and India, the primary purchasers of Russian oil, could be particularly affected by the secondary tariffs. The situation is complicated by the ongoing trade tensions between the US and China, as well as the delicate negotiations over Iran's nuclear program.
Despite the decision by OPEC+ to increase oil production from April onwards, concerns persist within the market regarding a potential global economic downturn caused by Trump's tariffs. As a result, most analysts anticipate a sustained period of relatively low oil prices. A Reuters poll of 49 economists and analysts conducted in March predicted continued downward pressure on oil prices throughout the year.
The overall impact of Trump's tariff strategy may extend beyond the oil market, potentially leading to inflation. Since energy prices play a critical role in various industries, implementing these tariffs could prove counterproductive for Trump's goal of reducing oil prices, which was one of his campaign promises.