Trump: A Threat or a Boon for the Commodities Market?

The hot topic in the coming days — and probably beyond — will be Trump, his reforms, and their possible impact on the global economy and markets, particularly the S&P 500, Dow Jones Index and Nasdaq. So far, the stock market has not experienced major turbulence, even with the imminent threat of new tariffs.      

There is probably still some hope that extreme measures such as a 25% tariff on imports from Mexico and Canada or 100% tariffs on BRICS countries will not be implemented — at least not in the baseline scenario, but rather as negotiating tactics. As always, only time will tell how all this evolves. 

However, commodity markets, particularly oil, have already reacted. Following the cancellation of the memorandum banning drilling in the Arctic and Trump's plans to increase oil production everywhere, crude oil prices have started to fall, with Brent trading below $80.     

It's unclear why the reaction is happening now, as Trump had mentioned similar plans during his campaign. The ceasefire between Israel and Hamas may have played a role. The more important question is what oil companies will do. An oversupply could lower prices and affect future profits.      

Not for nothing, reports indicate that oil executives show no interest in spending the substantial sums needed to increase production. Instead, they remain focused on satisfying investor demands by returning surplus profits through large dividends and generous share buybacks.     

The bulls' hope seems to be that energy demand will continue to rise, driven by AI growth, domestic production, and the new president's plans to refill strategic reserves ‘to the top’ after they reached their lowest levels since the 1980s under President Joe Biden.     

The Strategic Petroleum Reserve, with a maximum capacity of about 700 million barrels, currently stands at 394.4 million. Following the sale of 180 million barrels to stabilize oil prices, which soared after the outbreak of war in Ukraine, the reserve now stands at 394.4 million barrels.    

Another factor that could support oil prices is sanctions on Iran. OPEC’s reports show Iran's oil production in 2024 reached an average of 3.259 million barrels per day, an increase of 400,000 barrels compared to 2023. Removing this volume from the market could push prices beyond $90 per barrel. 

But such a dramatic scenario is unlikely. After Trump's election, analysts at Commodity Insights lowered their forecast for Iranian production in 2025 by only 150,000 barrels per day. This aligns with Goldman Sachs' $75 per barrel forecast this year, falling to $71 in 2026.