The markets witnessed a decline in commodity prices, including oil, gas, metals, and grains, on Wednesday, as the U.S. dollar strengthened following Donald Trump’s victory in the presidential election, raising investor concerns about the potential impact of tariffs on the economy and global growth.
Oil prices dropped by over 1% due to pressure from the rising dollar, which marked its largest gains since March 2023 against other currencies.
Traders expect Trump’s policies to bolster the dollar’s strength, as interest rates may need to remain high to counter potential inflation resulting from new tariffs. A stronger dollar negatively affects dollar-denominated commodities like oil, making them more expensive for investors using other currencies.
The decline wasn’t limited to oil; precious metals also fell. Gold dropped to its lowest level in three weeks, while copper slid by more than 2%, making it the weakest performer among base metals.
On the other hand, a UBS analyst noted that renewed sanctions on Iran and Venezuela could reduce global oil supply, potentially supporting oil prices in the future. For example, Iran exports around 1.3 million barrels per day.
European gas prices also declined by about 3% as concerns rose over gas supply security in light of Trump’s policies regarding conflicts in the Middle East and the Russia-Ukraine war.
As for China’s metals and steel industries, they may face significant challenges, as Trump pledged to impose high tariffs on Chinese imports to support American manufacturing.
The market also expects a decrease in copper demand, with the potential rollback of support for electric vehicles possibly reducing U.S. copper consumption.
It is noteworthy that the dollar’s strength makes U.S. grains more expensive internationally, while Trump’s proposed tariffs could disrupt agricultural trade, especially for soybeans, which heavily rely on the Chinese export market.
There are growing fears that China might resort to retaliatory measures, which could reduce U.S. crop exports, adding downward pressure on prices.
European clean energy companies also faced stock losses, as Trump vowed to halt offshore wind projects through executive orders on his first day in office.
