Trade war drives oil prices to four-year low

Brent and WTI crude drop as escalating US-China tariffs fuel global recession fears.

An oil pumpjack operates in a field on April 8, 2025, in Nolan, Texas. Photo by Brandon Bell/Getty Images

By Anna Fadiah and Hayu Andini

The trade war drives oil prices to four-year low, sending shockwaves through global energy markets and stirring fears of a looming economic recession. Brent crude prices plummeted by 4.2%, nearing $60 per barrel, while West Texas Intermediate (WTI) crude experienced its fifth consecutive day of losses. Analysts and investors point to the escalating tariff standoff between the United States and China as the primary catalyst behind this dramatic slide in global benchmark oil prices.

In what many experts view as one of the most volatile weeks in the oil market in recent memory, prices have plunged nearly 20% since the beginning of the year. The underlying reason, according to analysts, is not only the direct impact of reduced trade flows but also the broader decline in investor confidence that often follows trade tensions. With U.S. President Donald Trump imposing higher tariffs on 60 countries — labeling many as trade offenders — the energy sector has become an unintended casualty of a larger geopolitical battle.

The trade war drives oil prices to four-year low as President Trump’s aggressive trade policy strategy sends ripples through both financial and commodity markets. The tariffs came into effect just after midnight in New York, slapping new levies on a wide range of imported goods. In turn, China retaliated with tariffs of its own, igniting fresh concerns over global economic slowdown and dragging down demand forecasts for crude oil.

Market strategist Warren Patterson of ING Groep NV in Singapore voiced concern over the trajectory of the crisis. “Tariff escalation continues to worsen the global growth outlook, leaving further downside risks to oil demand. Without signs of de-escalation, risks remain tilted to the downside,” he told Bloomberg. Patterson’s analysis reflects a growing consensus: unless trade tensions ease, oil demand will continue to suffer, and with it, global price stability.

To make matters worse for oil producers, OPEC and its allies — collectively known as OPEC+ — have decided to ease their production curbs earlier than planned. This move, while intended to maintain a balance between supply and demand, may inadvertently flood the market with excess oil. The result: growing fears that supply will soon outpace demand, deepening the downward pressure on prices.

Commodity analyst Robert Rennie of Westpac Banking Corp added his voice to the chorus of concern. “Assuming China doesn’t announce another round of retaliatory tariffs, Brent should be able to hold above $60 a barrel. However, if we see another round of retaliation, then a drop lower to $60 seems likely,” he said.

Rennie’s cautious optimism highlights the fragility of the current oil market. Each announcement — whether from Washington or Beijing — has the potential to move markets instantly. It’s not just oil that’s feeling the heat. Other asset classes, from equities to currencies, are also bearing the brunt of the uncertainty, with emerging markets being particularly vulnerable.

So why is oil so sensitive to trade tensions?

Crude oil is more than just a commodity; it is a barometer of global economic health. When countries trade less, produce less, and invest less, their need for energy diminishes. Shipping lanes grow quieter. Factories operate at lower capacity. Transportation slows. All of these factors reduce the demand for oil — and when demand weakens, prices follow.

The oil price drop from trade war also hits producing countries hard. Nations like Saudi Arabia, Russia, and even the United States, which has rapidly become one of the world’s top oil producers thanks to the shale revolution, depend on stable or rising oil prices to fund national budgets and infrastructure projects. A prolonged slump could strain public finances and dampen economic recovery efforts in multiple regions.

Meanwhile, consumers might see some short-term benefits. Lower oil prices usually translate to reduced costs at the gas pump and for transportation. However, these savings could be offset by rising prices on imported goods due to tariffs, as well as broader economic slowdowns that may lead to job losses and reduced income growth.

For now, the global oil market is holding its breath. Analysts are watching every move from Washington and Beijing, hoping for a breakthrough or at least a temporary truce that could stabilize prices. But with each new tariff or retaliatory measure, hopes dim and the path forward grows murkier.

Looking ahead, the crude oil falls on tariff tensions narrative is likely to dominate headlines until a resolution is found. The market remains highly reactive to geopolitical developments, and any sign of progress in trade negotiations could offer a temporary rebound in prices. But lasting recovery, experts agree, will require a comprehensive and sustained de-escalation in global trade conflicts.

Until then, the global oil slump from tariffs remains a potent symbol of how deeply interconnected the world’s economies have become. In this landscape, oil prices are not just numbers on a chart — they reflect the broader mood of uncertainty, tension, and transformation that defines our times.

As Brent and WTI crude both teeter at key psychological and technical thresholds, the energy world is watching — and waiting. Whether prices will stabilize or continue their downward spiral depends on diplomacy, policy choices, and the unpredictable tides of global trade.