Oil prices slide despite market rebound

Trump’s tariff pause cheers markets, but China’s retaliation and oil turmoil keep risks high

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Global markets have staged a dramatic rebound after U.S. President Donald Trump announced a 90-day pause on most newly enacted tariffs.

While markets soared on the unexpected move, fears of recession and geopolitical risk continue to cast a long shadow. Trump’s simultaneous decision to raise tariffs on Chinese imports to a staggering 125 per cent keeps trade tensions alive.

The pause delivered immediate relief to investors. The Nasdaq jumped 12 per cent, the S&P 500 climbed 9.5 per cent and the Dow Jones industrial average surged nearly 3,000 points, clawing back much of the week’s earlier losses.

Yet serious risks remain. Trump’s sweeping tariffs had already ignited fears of an escalating global trade war. His partial pause came after mounting economic concern and what he described as a “yippy” reaction from the public to the growing fallout. But the damage is far from contained.

Nowhere is the impact more visible than in the crude oil market.

Trump’s tariffs, the harshest in more than a century, initially slapped blanket duties on all U.S. trading partners. Intended to shield American industries from foreign competition and revive domestic manufacturing, they unleashed panic in global markets. Even though energy was technically exempt, oil traders were spooked. Panic set in the moment markets opened last week, just hours after Trump’s announcement.

By Friday, oil prices had cratered seven per cent, crashing to their lowest levels in more than three years. Brent crude futures closed down US$4.56, or 6.5 per cent, at US$65.58 a barrel, while U.S. West Texas Intermediate (WTI) crude tumbled US$4.96, or 7.4 per cent, to close at US$61.99. Intra-day lows were even worse: Brent fell to US$64.03 and WTI touched US$60.45, levels not seen in four years.

The S&P 500 energy index, which tracks U.S. oil and gas stocks, collapsed 16 per cent over just two days. Heavyweights like APA Corp., Diamondback Energy and Baker Hughes all plunged more than 20 per cent.

This is more than a rout. It is a freefall reshaping global energy markets and geopolitics alike.

Yet tariffs were only the opening shot.

Seemingly out of nowhere, OPEC and its allies, known as OPEC+, the alliance of oil-producing nations that controls roughly 40 per cent of global supply, blindsided markets with an aggressive production hike. Instead of 135,000 barrels per day, they are now releasing 411,000 barrels per day in May. With global demand already under pressure thanks to Trump’s tariff barrage, markets are struggling to absorb the flood of new supply.

Officially, Saudi Arabia claimed the hike was aimed at punishing quota cheats like Kazakhstan and Iraq. But many see another motive: Trump’s relentless pressure to open the taps. Determined to deliver cheaper gas ahead of the U.S. election, Trump leaned hard on OPEC+, and Saudi Arabia, wary of offending Washington, complied.

It is a risky play. OPEC+ members rely on high oil prices to fund their governments. Saudi Arabia, according to the International Monetary Fund, needs crude above US$90 a barrel. Lower revenues have already forced Riyadh to scale back some of Crown Prince Mohammed bin Salman’s flagship projects. Iraq faces the same crunch, with a break-even point above US$90. Kazakhstan’s threshold is even higher, at more than US$115.

Sustaining this price collapse is a dangerous game.

Adding to the turmoil, hopes of a resolution in the Russia-Ukraine war have raised expectations of more Russian oil flooding the market. If sanctions ease or are lifted, even more supply could hit global markets. Meanwhile, a Russian court ruling kept the Caspian Pipeline Consortium’s Black Sea terminal operating, preserving crucial exports from Kazakhstan and adding to the growing global glut.

The crash in prices is now undermining Trump’s own energy ambitions. His push to ramp up U.S. drilling has hit a brick wall. “I don’t think ‘drill, baby, drill’ was ever a near-term reality for U.S. producers,” said Leo Mariani, an analyst at Roth Capital Partners. “Now it’s not even a consideration.”

China has fired back hard. While Trump paused most tariffs, he also hiked tariffs on Chinese imports to 125 per cent, escalating tensions with Beijing. China, in turn, is imposing an additional 34 per cent tariff on U.S. goods starting April 10 and tightening export controls on seven rare earth minerals, materials critical to electronics, electric vehicle batteries and military hardware.

The combined assault of OPEC+’s output surge and China’s retaliation continues to pressure oil prices, despite the temporary market rebound. Some estimates suggest that US$10 per barrel has been carved off global oil prices in recent days.

The International Monetary Fund is sounding the alarm. It warns that escalating tariffs and retaliatory measures now pose a “significant risk” to the global economy and that its 3.3 per cent global GDP growth forecast for 2025–26 is likely to be revised downward.

Oil analysts are scrambling to catch up. Goldman Sachs has cut its year-end Brent forecast by US$5 to US$66 a barrel. Enverus slashed its demand growth projections by a third. UBS has halved its growth estimate for global oil demand in 2025.

“The moment that President Trump slapped tariffs on Canada two months ago, we downgraded our forecast,” said Al Salazar, head of macro oil and gas research at Enverus. “The timing of the OPEC announcement felt like them piling on.”

Much now hinges on how long this uneasy truce lasts. The pause in tariffs may have given markets breathing room, but underlying risks remain severe. Supply chains are in disarray, and trade tensions are far from resolved.

As Prime Minister Mark Carney put it, the world “will not be the same.” Even if the tariffs are eventually lifted, the scars they leave on global markets and energy geopolitics will linger for years.

Toronto-based Rashid Husain Syed is a highly regarded analyst specializing in energy and politics, particularly in the Middle East. In addition to his contributions to local and international newspapers, Rashid frequently lends his expertise as a speaker at global conferences. Organizations such as the Department of Energy in Washington and the International Energy Agency in Paris have sought his insights on global energy matters.