Trump weighing up fresh tariff framework

Another downbeat start to the day in Europe, as traders weigh up the consequences of a fresh surge in energy prices as WTI pushes back up through the $90 handle.

In European markets, the main driver of strength is defence stocks, with BAE Systems, Rheinmetall, and Thales providing a key area of strength as the conflict in Iran rolls on.

Notably, we are seeing gains almost entirely across the board for commodities, with softs, metals, and energy all moving higher together.

Nonetheless, the fear of stagflation remains prevalent right now, with banks being hit hard by dimming economic growth forecasts.

Oil prices remain front and centre for traders, with yesterday’s 400-million-barrel release from the IEA doing little to stifle the bullish sentiment that pushed WTI back up to $94.

While Trump’s claim that we could soon see a resolution to the conflict does provide hesitancy for the bulls, the reality of the situation will undoubtedly call for higher prices as the days roll on.

The news that Indian-flagged tankers may be allowed passage through the Straits does provide some relief, with negotiations ongoing to secure the transit of over 20 vessels.

Nonetheless, with Iran seemingly ramping up attacks on both land and waterborne energy targets, the fallout for global energy supplies does appear to be worsening by the day.

With the Iran conflict already grabbing the headlines, Trump has turned his attention back to global trade, with his administration launching two trade investigations into excess capacity for 16 trade partners.

Coming hot off the heels of a Supreme Court decision that struck down his prior country-specific tariffs, this appears to be a fresh bid to reinstate levies under the ‘section 301’ investigation of unfair trade practices.

Given that the current Section 122 tariffs were implemented under a temporary 150-day framework (unless extended by Congress), it looks like Trump will instead target specific countries under his new framework. Those countries include China, the EU, India, Japan, South Korea and Mexico.