Oil prices rise as Trump threatens buyers of Russian Crude

Global risk assets are being hit hard in anticipation of a global breakdown in trade should Donald Trump enact a worldwide tariff rather than the targeted approach most had expected on Wednesday. The ongoing trade surplus enjoyed by the EU always meant there would come a time where Trump would turn his attentions to evening out the playing field, and the anticipation of that announcement was always likely to take over from the recent fiscal boost felt for European stocks of late. However, we are seeing widespread weakness in anticipation of a sharp jolt to growth prospects worldwide, sending gold to a fresh record high in early trade today.

Looking at the sectors being hit today, it is interestingly the mining stocks that are feeling the pinch as much as the manufacturers, in a nod to the potential implications to global growth if Trump implements globally tariffs. The declines seen in the face of better-than-expected PMI surveys released in China overnight do highlight the perception that those gains may be shortlived once tariffs hurt both the US-China relationship and global spending habits. This week brings plenty of fresh insights into the US economy, with the ISM manufacturing PMI and Friday’s jobs report providing updates over the direction of travel in the face of growing fears around the economy under Trump.

Oil prices are on the rise in anticipation of a breakdown in relations between the US and Russia, with Trump said to be furious with Putin over his apparent lack of interest in bringing the Ukraine conflict to a resolution. The US has shown itself to be a less than a forthcoming partner the war under Trump, with the President keen to save money by ending the conflict as swiftly as possible. However, the military gains seen by Russia since Trump took charge clearly highlights the potential benefit from stringing along negotiations while pushing hard to gain ground in Ukraine. Trump’s threat to hit any buyers of Russian oil could have much larger implications than the similar plan outlined for Venezuela, with China and India currently the two biggest buyers. Worryingly this has the potential to drive up energy prices, raising inflation risks and driving home the rising potential for stagflation.