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Oil prices fell sharply on Friday after US threatened to impose sweeping new tariffs on China, reigniting trade tensions and amplifying fears of weakening global demand in an already oversupplied market.

Brent crude settled $2.49 lower, or 3.8%, at $62.73 a barrel, the weakest since 7 May.

WTI dropped $2.61, or 4.2%, to $58.90 a barrel, the lowest since early May.

The sharp decline followed remarks from Washington hinting at a “massive increase” in tariffs on Chinese goods and a possible cancellation of an upcoming bilateral meeting. The move came after Beijing expanded export controls on rare earth elements — key to global technology manufacturing — deepening fears of renewed trade hostilities that could curb energy consumption.

Easing geopolitical risks also pressured prices. The ceasefire agreement between Israel and Hamas marked a turning point in the Gaza conflict, reducing the geopolitical premium that had underpinned crude values in recent months. 

At the same time, market focus has shifted back to fundamentals, with supply growth from OPEC members and producers in the Americas reinforcing expectations of an impending surplus. A smaller-than-expected output increase agreed by OPEC+ for November provided only limited support.

Broader macroeconomic uncertainty further weighed on sentiment, with investors wary that a prolonged US government shutdown could dampen domestic consumption and slow overall energy demand.

Written: Aiman Haikal