Oil Markets Keep Tariffs, Recession Fears & Energy Volatility Front of Mind

Oil Prices Tumble as Tariffs, Recession Fears Rattle Markets

Key Takeaways:

• Energy market sentiment is weighed down by tariff uncertainty, with fears of a broader economic slowdown impacting demand
• Despite price drops, Iran and Russia continue to bypass sanctions, keeping barrels on the market
• A surprising divergence in oil and natural gas markets highlights the growing importance of U.S. LNG exports

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Tariff Fears, OPEC Strategy & Market Volatility

For weeks, oil had been holding steady above $70 per barrel—until February hit and a wave of uncertainty knocked prices into the mid-$60s. A fresh round of uncertainty—centered on tariffs, recession fears, and shifting supply dynamics—sent crude tumbling into the mid-$60s. Traders now find themselves at a crossroads, asking: Is this just a bump in the road, or the start of something much bigger?

Alex Hodes, Director of Energy Market Strategy at StoneX, and Trevor McClanahan, Energy Risk Manager, see a market that isn't acting the way fundamentals suggest it should. "By the numbers, oil should be stronger," Hodes noted. "But right now, sentiment is running the show." "[I]t’s all about the macro picture. The market is running with fear."

Ongoing tariff anxieties continue to cast a shadow over energy markets the two suggest, particularly the proposed increases on North American metals. "When you start talking about steel and aluminum tariffs, you’re talking about increasing costs for the entire oil and gas supply chain," McClanahan noted. "That doesn’t just impact drilling—it influences refining, pipeline infrastructure, even transportation. The longer this drags out, the more it seeps into market sentiment."

Sanctions, The ‘Dark Fleet,’ and OPEC’s Hand

Sanctions enforcement has been a hot topic for months, and it’s not going away anytime soon. "Iranian barrels are expected to come off the market, but we’ve been here before," Hodes explained. "Russia has mastered the art of rerouting its oil despite sanctions, and Iran is doing its best to follow suit. The real question now is whether the U.S. will step up enforcement—or let these flows continue under the radar."

The “dark fleet” web of vessels engaged in ship-to-ship transfers, mentioned in episode 4 , continues to play a role in masking the origins of sanctioned crude. McClanahan, noting that as long as the sanctions threat remains “just on paper,” the barrels will still flow. Though, he also cautions that if enforcement tightens, “that’s where we’ll see real impact."

Meanwhile, OPEC remains in control of its own levers. The group recently announced it would bring 130,000 barrels per day back into the market in April—a relatively small figure in the context of global supply. "That’s a rounding error in a 100-million-barrel-a-day market," Hodes pointed out. "It’s not enough to cause a major shift, but it’s a signal that they’re watching price action closely."

Natural Gas Defies the Trend

While oil has been under pressure, natural gas is telling a different story. European gas markets have strengthened, and the U.S. continues expanding its LNG export capacity, driving renewed interest in the sector.

"We’ve seen this before—when oil weakens, natural gas sometimes carves out its own path," McClanahan said. "The difference this time is the global shift toward LNG. European demand is holding firm, and the U.S. is ramping up exports. That’s creating a bit of a decoupling between the two markets."

Some in the industry see LNG as a bellwether for broader energy demand. "If LNG stays strong, it suggests underlying energy demand isn’t as weak as the oil market is making it seem right now," Hodes said. "That could mean oil finds its footing sooner than people expect."

Finding the Floor

Crude has been drifting in the mid-$60s, and traders are keeping a close eye on key price levels "There’s solid support around $65," McClanahan noted. "If we break below that, we could see a short-term washout, but I’d be surprised if we stayed there for long."

Hodes pointed to shale breakevens as another key factor. "For existing wells, producers can stay profitable at much lower prices. But for new development, that breakeven sits around $62 a barrel. If prices stay too low for too long, production growth slows down, which naturally puts a floor under the market."

Both analysts agree: while the macro environment is keeping oil prices under pressure, the fundamentals don’t support a prolonged downturn. "It’s a classic case of fear overruling facts," McClanahan said. "If recession fears ease and demand firms up, crude could be back in the $70s before we know it."

 

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---Written by: Andrew Catsimanes, Copywriter

---Experts: Alex Hodes, Director of Energy Market Strategy and Trevor McClanahan, Energy Risk Manager