Oil prices fell by as much as 3% on Thursday after U.S. President Donald Trump announced sweeping new tariffs that investors worry will spark a global trade war that will curtail economic growth and limit fuel demand.
Brent futures were down $1.60, or 2.13%, to $73.35 a barrel by 0331 GMT after dropping by as much as 3.2% earlier, its biggest daily percentage decline since March 5. U.S. West Texas Intermediate crude futures were down $1.62, or 2.26%, to $70.09 after slipping by as much as 3.4% earlier.
Trump on Wednesday unveiled a 10% minimum tariff on most goods imported to the United States, the world’s biggest oil consumer, with much higher duties on products from dozens of countries, kicking into high gear a global trade war that threatens to drive up inflation and stall U.S. and worldwide economic growth.
“The US tariff announcement clearly caught markets off guard. Pre-announcement speculation suggested a flat 15-20% tariff, but the final decision was more hawkish,” Yeap Jun Rong, market strategist at IG, said in an email.
“For oil prices, the focus now shifts to the global growth outlook, which is likely to be revised downward due to these higher-than-expected tariffs,” he added.
Imports of oil, gas and refined products were exempted from the new tariffs, the White House said on Wednesday.
The tariffs sent markets reeling on Thursday, with Japan’s Nikkei plunging to an
eight-month low, China’s yuan dropped to its lowest levels in seven weeks and stock markets slumped in early Asia trade.
“We know it will be negative for trade, economic growth and thus oil demand growth. But we don’t know how bad it will be as the effects come a little bit down the road,” said Bjarne Schieldrop, chief commodities analyst at SEB.
On Wednesday, UBS analysts cut their oil forecasts by $3 barrels over 2025-2026 to $72 per barrel, citing weaker fundamentals.
Traders and analysts now expect more price volatility in the near term, as the tariffs may change as countries try to negotiate lower rates or enact retaliatory levies.
Reinforcing the bearish sentiment, the Energy Information Administration data on Wednesday showed U.S. crude inventories rose by a surprisingly large 6.2 million barrels last week, against analysts’ forecasts for a decline of 2.1 million barrels.
Inventories gained amid a surge in imports from Canada, which had expected to be hit with tariffs on its crude shipments to the U.S.
The EIA data also showed gasoline demand was lower last week and refinery runs were lower at a time of year that plants should be producing more fuel ahead of the summer driving season.
(Reporting by Siyi Liu in Singapore and Nicole Jao in New York; Editing by Sonali Paul and Christian Schmollinger)