Global oil markets experienced sharp fluctuations on Tuesday, February 4, as prices came under pressure due to the escalating trade dispute between the United States and China. However, losses were later trimmed following an announcement by U.S. President Donald Trump regarding the reactivation of the “maximum pressure” policy on Iran, raising concerns about global oil supply.
Oil Initially Declines Due to the Trade War
At the start of the trading session, oil prices saw a significant decline as the U.S. implemented new 10% tariffs on Chinese imports, prompting Beijing to retaliate with tariffs on certain U.S. exports. This move fueled market uncertainty, causing oil prices to drop by over 3%, reaching their lowest levels since late December.
Renewed Pressure on Iran Pushes Prices Higher
Later in the day, market dynamics shifted when Trump signed a presidential memorandum reinstating the “maximum pressure” policy, aimed at curbing Iranian oil exports and preventing Tehran from advancing its nuclear program. This announcement reignited fears about supply disruptions, which helped oil prices rebound.
As a result, U.S. crude futures trimmed losses, closing 46 cents lower (-0.63%) at $72.70 per barrel, after having dropped more than 3% earlier in the session. Meanwhile, Brent crude managed to reverse losses into gains, settling 24 cents higher (+0.32%) at $76.20 per barrel, following an earlier decline of over 1%.
A Mix of Economic and Geopolitical Factors
According to analysts, the initial drop in oil prices was mainly due to China’s retaliation against U.S. tariffs, as concerns grew over potential global economic slowdown and its impact on oil demand. However, the announcement of stricter sanctions on Iran fueled supply concerns, helping prices recover from their earlier losses.
Iran and the Ongoing Challenges in the Oil Market
During Trump’s first term, U.S. sanctions significantly reduced Iranian oil exports to near-zero levels, severely impacting Iran’s economy. However, under former U.S. President Joe Biden, Iranian oil exports witnessed a significant rebound, as Tehran found ways to bypass U.S. sanctions, allowing it to gradually regain market share.
Oil Market Outlook
As these developments unfold, investors closely monitor the impact of U.S. policies on global oil markets. With the ongoing U.S.-China trade conflict and the effect of sanctions on Iranian supply, markets remain in a state of caution and anticipation. Traders continue to watch for any new political or economic moves that could shape the future trajectory of global oil prices.
