Oil prices dropped by around 3% on Monday, hitting their lowest levels since 2021 due to concerns about the escalating trade tensions between the United States and China. This impacted various commodity markets, causing metals and coffee prices to decline. Gold, which had reached a record high recently, also saw a decrease in value during a broader market sell-off.

The market sentiment was further worsened by U.S. President Donald Trump's firm stance on imposing tariffs, leading to a significant drop in major stock indexes. This situation raised fears of a looming recession, as highlighted by Wall Street banks.

According to Ole Hansen, the head of commodity strategy at Saxo Bank, the uncertainty surrounding trade tensions and fears of impact on growth and demand have resulted in a reduction in commodity positions across the board.

China's retaliatory actions to Trump's tariffs, such as additional levies on U.S. goods, have heightened concerns about a full-fledged trade war and its potential impact on the global economy. This has led to a notable decline in Brent and U.S. West Texas Intermediate crude futures, both of which have experienced significant losses in the past week.

Various financial institutions, including Goldman Sachs, Citi, and Morgan Stanley, have revised their oil price forecasts downwards in response to these developments. Additionally, natural gas prices have also fallen, reflecting worries about a possible recession.

In the metal markets, copper prices saw a decline on the London Metal Exchange, with the metal used in power and construction down by 0.4%. The volatility in Monday trading was influenced by the reopening of financial markets in China after a public holiday. Meanwhile, gold prices also dipped slightly as some investors sold off bullion to offset losses from other trades, though expectations of continued central bank demand and anticipation of a U.S. Federal Reserve interest rate cut helped limit the decline.