A pumpjack operates at the Vermilion Energy site in Trigueres, France, June 14, 2024. REUTERS/Benoit Tessier/File Photo
Oil Prices Plunge as Trade War Escalation Fuels Recession Fears
New York – Oil prices fell sharply on Friday, posting their largest single-day drop in over a year and settling at their lowest levels in more than three years. The decline followed China’s announcement of steep new tariffs on U.S. goods, further escalating a global trade war and heightening investor concerns about an impending economic recession.
Markets React to China’s Tariff Hike
China declared that it will impose additional tariffs of 34% on all U.S. imports effective April 10. The move comes in response to the U.S. administration’s decision to raise tariff barriers to their highest levels in more than a century, prompting widespread retaliation from trading partners.
As a result, global financial markets experienced broad declines. Commodities such as natural gas, soybeans, and gold also saw significant losses. Investment bank JPMorgan raised its estimate for the likelihood of a global recession by year-end to 60%, up from a previous forecast of 40%.
Crude Benchmarks Record Steep Losses
Brent crude futures dropped $4.56, or 6.5%, to close at $65.58 per barrel. U.S. West Texas Intermediate (WTI) crude futures fell $4.96, or 7.4%, ending the day at $61.99. Both benchmarks reached session lows of $64.03 and $60.45, respectively—levels not seen in four years.
Brent posted its largest weekly percentage loss in 18 months, while WTI marked its steepest weekly decline in two years.
“This is probably close to fair value in crude until we get a clearer indication of how much demand has actually been reduced,” said Scott Shelton, Energy Specialist at United ICAP. He added that WTI could potentially fall to the mid-to-high $50s in the near term, citing market volatility and weakening demand.
Fed Signals Economic Uncertainty
Federal Reserve Chair Jerome Powell stated on Friday that the new tariffs are “larger than expected” and could lead to both higher inflation and slower economic growth. His remarks underscored the challenges facing the U.S. central bank and contributed to the bearish sentiment in energy markets.
OPEC+ Output Plans and Additional Supply Pressures
Adding further pressure on oil prices, the Organization of the Petroleum Exporting Countries and its allies (OPEC+) announced plans to accelerate output increases. The group now intends to return 411,000 barrels per day (bpd) to the market in May, a significant revision from the previously scheduled 135,000 bpd.
Additionally, the Caspian Pipeline Consortium (CPC) confirmed that a Russian court had ruled against suspending operations at its Black Sea export terminal. This decision is expected to prevent a potential disruption in oil production and exports from Kazakhstan.
Broader Implications of U.S. Tariff Policy
Although imports of oil, gas, and refined petroleum products were exempted from the latest U.S. tariffs, analysts warned that the broader trade policies could contribute to inflation, restrain global economic growth, and intensify geopolitical tensions—factors that are likely to weigh on energy demand.
In response to the changing market outlook, Goldman Sachs revised its December 2025 price forecasts for both Brent and WTI downward by $5, to $66 and $62 per barrel, respectively.
“The risks to our reduced oil price forecast are to the downside, especially for 2026, given growing risks of recession and, to a lesser extent, increased OPEC+ supply,” said Daan Struyven, Head of Oil Research at Goldman Sachs.
Demand Outlook Adjusted
HSBC also lowered its 2025 global oil demand growth forecast from 1 million bpd to 0.9 million bpd, citing the dual impacts of escalating tariffs and OPEC+’s decision to increase supply.
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