LONDON, April 7 (Reuters) – Oil prices dropped by about 3% on Monday, reaching their lowest point since 2021, as a deepening trade war between the United States and China raised concerns over demand for raw materials. Most commodity markets, including metals and coffee, also saw declines.
Gold, which hit a record high last week, also fell as part of a broader market selloff. Major stock indexes plunged after U.S. President Donald Trump showed no signs of backing down from his proposed tariffs. Wall Street banks warned of a high risk of recession.
“Commodities are suffering due to concerns about growth and demand, triggered by these tariff-related issues,” said Ole Hansen, head of commodity strategy at Saxo Bank. “As volatility rises, we are seeing a major phase of deleveraging, with investors reducing their positions across commodities.”
In response to Trump’s tariffs, China announced on Friday that it would impose additional levies of 34% on U.S. goods, raising fears that a full-scale trade war was underway and could push the global economy toward a recession. On Monday, Brent crude and U.S. West Texas Intermediate oil prices fell to their lowest levels since April 2021. Both benchmarks have lost more than 10% in the past week.
“Oil prices have fallen more sharply than equities since Trump detailed his tariffs last week. The decline has been worsened by OPEC+’s plans to increase output,” said Satoru Yoshida, a commodity analyst at Rakuten Securities.
Goldman Sachs, Citi, and Morgan Stanley all lowered their oil price forecasts on Monday.
Natural gas prices also dropped amid recession fears, with the Dutch front-month contract falling by 1.45 euros to 35 euros per megawatt-hour ($11.26 per million British thermal units). It had earlier reached a low of 33.65 euros/MWh, its lowest point since September 2024.
Metals tied to economic growth also declined on the London Metal Exchange. Copper, used in power and construction, was down 0.4% at $8,745 after a sharp 6.3% drop on Friday—the biggest daily drop since the 2020 COVID pandemic.
Monday’s early trading saw high volatility as financial markets in China, the world’s top metals consumer, reopened after a holiday. Copper briefly touched $8,105, a 17-month low, before recovering some losses.
Among precious metals, spot gold dropped 0.4% to $3,025 as some investors sold gold to cover losses in other trades. However, expectations of continued central bank demand and bets on an early U.S. Federal Reserve rate cut helped limit the decline.
“The new U.S. trade barriers sent stock markets sharply lower in the second half of the week. Some market observers believe this triggered margin calls on equity market positions, forcing traders to liquidate gold positions to cover them,” said Frank Watson, a market analyst at Kinesis Money.
Silver gained 2.2% to $30.20 per ounce after a sharp drop in the previous two sessions. “Traders are starting to search for relative value in assets that have fallen too much. There’s already some bottom fishing in silver,” said Hansen from Saxo Bank.
In the grain markets, Chicago Board of Trade’s most-active corn dropped 0.4% to $4.58-1/4 per bushel. “Corn is being pulled down by the general market meltdown as tariff tensions continue,” said one European trader. “An economic slowdown would hurt demand, and the Chinese tariffs are expected to curb U.S. sales to China.”
Cocoa and coffee markets also faced pressure. Top cocoa producer Ivory Coast is facing a 21% tariff on U.S. exports, while Vietnam, the second-largest coffee producer, is facing a 46% levy. Coffee prices were hit hardest, with robusta down 3% at $4,972 per metric ton, reaching a 2.5-month low of $4,907. Arabica fell 0.6% to $3.6335 per lb, also hitting a two-month low of $3.5550.
London cocoa futures dropped 3.1% to 6,171 pounds per metric ton, marking a two-week low of 6,104, while raw sugar fell 1.1% to 18.63 cents per lb, reaching a one-month low of 18.62.
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