Oil & Metals Under Pressure: How Trade Wars, Recession Fears & OPEC+ Output Are Shaping 2025

The primary trigger for the sell-off in oil and related commodities in early April 2025 is the sharp escalation in trade tensions between the U.S. and China. China’s announcement of 34% tariffs on U.S. goods in retaliation to U.S. tariffs confirmed fears of a full-blown trade war, prompting investors to price in slower global economic growth and reduced demand for raw materials [1][3].

On the supply side, OPEC+ played a crucial role. Plans to increase output, including the phasing out of previous production cuts, added downward pressure on oil prices just when demand outlooks were weakening due to trade war risks. Market participants viewed the combined effect—escalating supply and falling demand—as highly bearish [1][2].

On the demand side, metals like copper (used in power and construction), coffee, and agricultural commodities were hit hardest. Copper touched a 17-month low, corn fell on expectations that Chinese tariffs will curtail U.S. agricultural exports, and coffee dropped sharply following tariffs on producing countries [1]. Gold, usually a safe haven, also fell—investors liquidated to cover losses elsewhere, though some support was preserved by central bank purchases and expectations of rate cuts [1].

Financial markets compounded the pressure: equities plunged, margin calls forced portfolio stress, and there was a general deleveraging across commodities. Natural gas, too, saw steep declines, with key benchmarks hitting their lowest since late 2024, reinforcing the narrative of widespread weakness in raw material demand [1].

Strategically, there are multiple implications: 1) persistence of U.S.–China tariff escalation raises risks for global trade and commodity-dependent economies; 2) OPEC+’s willingness to raise output signals a tolerance for lower prices or a strategic encroachment on market share; 3) buying opportunities may emerge in oversold metals such as silver and industrial inputs if expectations for demand improve; 4) inflation trends may shift as commodity price declines offset cost pressures elsewhere, complicating central bank policy decisions.

However, open questions remain: How severe will the recession risks become, especially in China and the U.S.? Will OPEC+ reverse course or tighten supply amid falling prices? Will central banks respond to inflation pressures coming from tariffs versus disinflation from declining commodity prices? And are market participants mispricing underlying demand resilience in sectors like energy transition, infrastructure, or agriculture?