Oil prices fell on Tuesday after a brief rally, as global markets reacted to renewed trade tensions and another attack on shipping in the Red Sea. Brent crude hovered around $69 per barrel, giving back gains made Monday when prices rose nearly 2%.
The price drop comes after President Donald Trump released a series of letters threatening to raise tariffs on key trading partners, including Japan and South Korea. The letters, posted on social media, warned of 25% levies on imported goods unless trade talks progressed quickly. Trump set a deadline of August 1, though he indicated that the timeline and rates could still change.
The tariff threats added pressure to an already nervous oil market. Traders are weighing the potential effects on global economic growth, which could reduce fuel demand. “Traders are watching Trump’s new tariff threats and global growth risks, which could soften demand,” said Haris Khurshid, chief investment officer at Karobaar Capital LP. “Looking ahead, we should be paying attention to any new OPEC+ signals about extending or adjusting supply cuts.”
On Monday, oil prices had surged despite a surprise move from OPEC+ to speed up production increases starting in August. The group’s decision to ease supply restrictions more rapidly than expected was countered by Saudi Arabia’s move to raise crude prices for Asian buyers. The higher prices suggest that Riyadh remains confident in oil market strength and ongoing demand in the region.
Still, concerns about supply disruptions resurfaced after another ship was attacked in the Red Sea. The MV Eternity C, sailing near Al-Hodeidah, Yemen, suffered major damage and lost propulsion following an assault, according to UK Maritime Trade Operations. The ship is reportedly surrounded by small boats and under continuous threat.
This attack is part of a broader pattern of violence targeting vessels in the Bab el-Mandeb Strait, a critical waterway linking the Red Sea and the Gulf of Aden. Since late 2023, the number of tankers using the route has remained low due to repeated attacks by Houthi rebels. The ongoing danger in the area has added uncertainty to oil shipping logistics and raised broader concerns about regional stability.
While supply risks persist, fears of weaker demand are dominating market sentiment. Investors remain cautious as economic signals point to slowing growth. Central banks in major economies continue to battle inflation, and higher interest rates have dampened industrial output and consumer spending.
Market analysts are closely watching for updates from OPEC+ on potential changes to production plans. Any decision to extend or deepen supply cuts could provide price support, while a more aggressive output strategy might keep prices under pressure.
At the same time, political developments in Washington and global trade relations are now central to oil market forecasts. Trump’s aggressive trade stance could reshape commodity flows, manufacturing trends, and shipping demand in the months ahead.
As it stands, the oil market is caught between opposing forces—production adjustments on one side and slowing demand on the other. Ongoing geopolitical flare-ups, like those in the Red Sea, could deliver short-term price spikes, but the broader outlook remains fragile.
With August approaching and tariff deadlines looming, traders are expected to remain on edge. The next few weeks may bring more clarity on both supply policies and trade tensions, shaping the trajectory of oil prices through the rest of the summer.
