Oil’s tariff playbook

Daily update

The policy pattern of the trade war is echoed in the policy pattern of the ongoing Gulf war. In 2025, US threats over tariffs provoked market reactions, leading to a policy retreat in the face of those reactions. Escalating Gulf violence pushed oil prices over USD100/barrel, leading to a policy shift by the US. The risk with this process is that as investors anticipate a policy retreat, the market reaction becomes more muted over time and applies less pressure for policy change.
There are two key differences for investors. The trade war was largely unilateral, but the Gulf war needs Iran to act too. The oil price drop required Iran to cease strikes on US targets. The trade war directly affected the US economy, not the global economy (global trade is at a record high). Erratic oil prices have a more global direct impact.
China’s June industrial profits data is not normally market moving. However, the persistence of profits growth weakens the argument that China is generally “dumping” exports (selling at a loss because of overcapacity)—although specific sectors may be open to accusations.
The German ifo business sentiment poll, and the US Dallas Federal Reserve manufacturing sentiment poll are due. US durable goods data offers some insight into investment trends.