Oil prices experienced a significant drop, falling around 3% on Monday and reaching their lowest level since 2021. This decline occurred alongside a broader downturn in commodity markets, including metals, largely driven by fears of a recession linked to the escalating trade war between the United States and China. Gold, which had recently hit a record high, also fell amid a wider market sell-off.
Major stock indexes across Asia saw sharp declines as White House officials continued to stand firm on their substantial tariff proposals. Investors reacted by speculating that the increased risk of recession might prompt cuts to U.S. interest rates as early as May. ANZ commented that this situation poses the most significant threat to the global goods trading system since World War II, leading to a swift reduction in risk assets and heightened recession risks.
Even gold, traditionally seen as a safe haven asset, could not escape the pervasive market decline. In retaliation to U.S. tariffs imposed by President Donald Trump, China announced plans to impose 34% additional levies on American goods. This action heightened concerns that a full-blown global trade war could be emerging, further jeopardizing the world economy.
Both Brent and U.S. West Texas Intermediate crude futures dropped to their lowest since April 2021, with a reduction of over 10% in the past week. The primary cause behind this price decline is the fear that tariffs will adversely affect the global economy. Additionally, a planned increase in production by OPEC+ has added to selling pressures, with retaliatory tariffs from other countries being a crucial factor to monitor.
In China, base metal prices were also adversely affected, with copper on the Shanghai Futures Exchange falling by 6%, marking its lowest point in over three months. Market trends have triggered a sell-off of gold as investors sought to cover losses from the broader market downturn.