Global oil markets surged on Monday, with prices jumping more than 3 percent after the United States and China took a substantial step in resolving their trade conflict. The agreement between the two largest economies offers a 90-day reprieve from further tariff increases following days of talks in Geneva.
Brent crude futures were up by $2.03, or 3.18%, at $65.94 a barrel by 0942 GMT. Meanwhile, U.S. WTI crude futures rose $2.06, or 3.38%, to $63.08. The significant increase illustrates returning optimism in potential upticks in global trade flows and crude demand.
The breakthrough comes as world markets are still recovering from a rocky month featuring geopolitical uncertainty and economic malaise. U.S. President Donald Trump, who had just returned to his post, rekindled trade tensions by imposing new tariffs on several trading countries, including China, early last month. These steps reverberated through the markets, prompting a steep decline in oil prices and halting investment decisions.
However, this weekend's face-to-face meetings in Geneva between senior Chinese and American officials marked the first direct discussions since the escalation of reciprocal tariffs. The talks yielded agreements to cut tariffs to a common 10% baseline — a reduction of more than 100 percentage points in some sectors.
"Global equity markets and procyclical commodities have responded very positively," said Ole Hansen, head of commodity strategy at Saxo Bank. "The pause in tariffs suggests a possible end to the trade war, which in turn suggests stability in trade," which historically means increased demand for oil.
The latest developments in Geneva are part of a larger pattern of diminishing trade hostilities. A separate U.S.-U.K. trade agreement was reached, helping stem a tide of investor pessimism, boosting both Brent and WTI against-the-wire gains of over 4% by week's end. Market observers note that these negotiations represent a timely shift towards economic cooperation, particularly in energy-dependent industries.
Beyond that, U.S.-Iran diplomatic efforts continued to make progress, supporting oil prices, and also entered a new stage. Diplomats said that in Oman, negotiations to restrict Iran's nuclear program ended on Sunday, with follow-up talks planned. Iran is still insisting on access to its uranium-enrichment program, but the exchange has stoked optimism that sanctions could soon ease, possibly adding more oil supply to the global tally.
Both developments are being watched closely by analysts, who say a deal between the United States and Iran could send prices lower by adding supply. But in the short term, the market is being propelled by a return of optimism over demand on the back of U.S.-China cooperation.
In another development, Danish energy giant Orsted said it would pull out of a major offshore wind project in the U.K., blaming approximately doubled projected costs and delays in permits. The development, unrelated to crude, also represents wider energy industry volatility in the face of regulatory changes and investment challenges.
