Oil Prices Decline Amid Lingering US-China Trade War Concerns: Commodity and Currency Market Analysis

By: Aditi

Published on: Apr 29, 2025

The global commodities market faced renewed turbulence on Tuesday, 29 April 2025, as oil prices extended losses amid persistent fears that escalating US-China trade tensions could suppress global fuel demand. Meanwhile, gold prices dipped slightly, and the British pound wavered against a strengthening US dollar. Investors remain on edge as geopolitical uncertainties and mixed signals from policymakers dominate market sentiment.

Oil Prices Slide as Trade War Fears Loom

Brent crude futures fell 1.5% to $63.84 p er ba rre l, w hi l e U S W es tT e x a s I n t er m e d ia t e (W T I) cr u d e d ro pp e d 1.4$ 61.18 per barrel during early trading. The declines reflect growing anxiety over how prolonged trade disputes between the US and China could stifle economic growth and energy consumption.

US Treasury Secretary Scott Bessent struck a cautiously optimistic note on Monday, stating that several trading partners had presented “very good proposals” to resolve tariff disputes. However, he emphasized that China must take steps to de-escalate tensions. Analysts interpreted this as a sign that Washington remains firm in its stance, leaving markets uncertain about near-term resolutions.

Susannah Streeter, Head of Money and Markets at Hargreaves Lansdown, noted: “The lack of clarity in US-China negotiations is weighing heavily on oil markets. Both sides appear locked in a stalemate, and projections for energy demand are being revised downward as global growth concerns persist.”

The White House’s recent announcement of plans to ease auto tariffs provided little relief. While the move aims to support domestic carmakers by reducing levies on steel and aluminum imports, it failed to quell broader fears about the trade war’s ripple effects.

Gold Prices Dip Amid Shifting Risk Sentiment

Gold futures (GC=F) slipped 0.5% to $3, 330.20 p ero u n ce, w i t h s p o tp r i ces d ec l inin g 0.8$ 3,317.02. The retreat comes despite gold’s traditional role as a safe-haven asset during periods of uncertainty.

The dip reflects tentative optimism following the White House’s tariff relief announcement for automakers. US Commerce Secretary Howard Lutnick hailed the policy as a “major victory” for domestic manufacturing, signaling potential compromises in trade negotiations. However, analysts caution that gold’s pullback may be temporary.

“Investors are reacting to short-term optimism, but gold remains near all-time highs,” said a commodities strategist. “Any resurgence in trade tensions or equity market volatility could reignite demand for safe-haven assets.”

Pound Struggles Against a Resurgent Dollar

The British pound (GBP/USD=X) dipped 0.2% to $1.341 as the US dollar index (DXY) climbed 0.2% to 99.22, nearing a three-year high. The greenback’s strength reflects its status as a refuge currency amid geopolitical uncertainty, though analysts warn its rally may be fragile.

Francesco Pesole, FX Strategist at ING, commented: “The dollar’s rebound is driven by tariff-related developments and late equity market support. However, weak US economic data could reverse gains, leaving the currency vulnerable.”

Against the euro (GBP/EUR=X), the pound edged up 0.1% to €1.1773, supported by cautious optimism over UK-EU trade relations. Meanwhile, the FTSE 100 remained flat at 8,420 points, reflecting broader market hesitancy.

Market Outlook: Navigating Uncertainty

1. Oil Markets:
Oil prices are likely to remain volatile as traders weigh supply-demand dynamics against geopolitical risks. OPEC+ production cuts and US shale output trends will play critical roles in stabilizing prices. However, prolonged trade disputes could derail demand recovery, particularly in energy-intensive industries.

2. Gold’s Resilience:
Despite Tuesday’s dip, gold’s long-term outlook remains bullish. Central banks’ dovish monetary policies, inflation concerns, and geopolitical risks are expected to sustain demand. A break above $3,400 per ounce could signal renewed upward momentum.

3. Currency Fluctuations:
The pound faces headwinds from Brexit-related uncertainties and shifting BoE rate hike expectations. Meanwhile, the dollar’s trajectory hinges on Federal Reserve policy and trade war developments. Investors should monitor key economic indicators, including US GDP data and Eurozone inflation reports, for directional cues.

Key Takeaways for Investors

Trade War Risks: Escalating tariffs between the US and China remain the primary threat to global growth. Investors should diversify portfolios to hedge against commodity and equity market volatility.

Dollar Dynamics: A stronger dollar pressures emerging markets and export-driven economies. Consider exposure to currencies like the euro or yen as potential hedges.

Commodity Strategies: Energy stocks may face headwinds if oil prices remain subdued. Conversely, gold miners and renewable energy sectors could benefit from shifting market sentiment.