Crude oil prices initially surged on Monday following U.S. President Donald Trump’s threats to impose hefty tariffs on Russian oil exports. However, economic concerns quickly took precedence, leading to a market retreat as investors weighed the impact of a slowing global economy on oil demand.
Oil futures opened higher in Asia as Trump warned of potential 25% to 50% tariffs on Russian crude. He also issued stark warnings regarding Iran, stating there would be “bombing” and “secondary tariff” measures if the country failed to negotiate a nuclear deal.
Both West Texas Intermediate (WTI) and Brent crude rose by 0.6% early in the session but later fell as risk-averse sentiment dominated. Fears of an economic downturn intensified ahead of Trump’s upcoming auto and reciprocal tariffs, set to take effect on Wednesday. Oil markets have seen a 5% increase since mid-March following U.S. strikes on Iran-backed Houthi militants in Yemen, who had previously targeted commercial shipping in the Red Sea amid escalating tensions between Israel and Hamas.
Trump has also targeted Venezuela’s oil trade, threatening 25% tariffs on countries purchasing its crude, effective from April 2. His latest remarks over the weekend added further volatility. “If Russia and I are unable to make a deal on stopping the bloodshed in Ukraine, and if I think it was Russia’s fault — which it might not be — but if I think it was Russia’s fault, I am going to put secondary tariffs on oil, on all oil coming out of Russia,” Trump said in an NBC News interview Sunday. “That would be that if you buy oil from Russia, you can’t do business in the United States… There will be a 25% tariff on all oil, a 25 to 50 point tariff on all oil.”
In a separate Saturday interview, Trump reinforced his hardline stance on Iran’s nuclear ambitions, stating: “There will be bombing. It will be bombing the likes of which they have never seen before.”
Meanwhile, the Organization of the Petroleum Exporting Countries (OPEC) and its allies plan to start rolling back voluntary oil production cuts of 2.2 million barrels per day in April. However, Trump’s threats against key OPEC+ members—Russia, Iran, and Venezuela—could limit supply, counteracting the planned production increases.
The OPEC+ coalition is set to meet on April 5 to discuss production strategy, with expectations of a 135,000-barrel-per-day output rise in May. However, some members must reduce supplies to offset previous overproduction, bringing total cuts to 4.2 million barrels per day. Analysts at BNP Paribas predict compliance with these reductions will be low, potentially affecting market balance.
Despite Trump’s aggressive stance on tariffs and geopolitical risks, economic uncertainty remains the dominant factor influencing crude oil markets, keeping investors on edge.
