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Highlights
- Oil prices recover after recent drop
- Market volatility linked to US monetary policy tensions
- Investors monitor Fed leadership uncertainty
Oil prices showed signs of recovery after a steep decline triggered by growing tensions between US President Donald Trump and Federal Reserve Chairman Jerome Powell. The market movement reflected broader concerns about economic stability and the future of US interest rate policy.
After falling by over 2.5% on Monday—its sharpest drop in over a week—Brent crude edged back up, hovering near $67 a barrel. West Texas Intermediate (WTI), another major oil benchmark, remained below the $64 mark, still pressured by ongoing volatility. The earlier slide was fueled by Trump’s public criticism of Powell and speculation around potential changes at the helm of the Federal Reserve.
Trump’s remarks suggested that the US economy could face a slowdown if the Fed fails to adjust interest rates lower. Such a statement from the White House reignited investor fears of political interference in monetary policy, creating turbulence across multiple asset classes. Equities, US Treasury yields, and the dollar all declined sharply in response.
This economic backdrop has intensified the downward pressure on oil, which has already faced headwinds due to rising trade tensions. The strained relationship between the US and its key trading partners—including China and the European Union—continues to contribute to demand-side uncertainty. These developments have weighed on global growth expectations and, by extension, energy demand forecasts.
Adding to the market’s caution is the rumor that President Trump had considered the possibility of removing Powell from his position—a move that would be unprecedented in modern times. While such an action remains speculative, even the suggestion of instability at the Fed’s leadership level is enough to send shockwaves through financial markets.
Despite these challenges, crude oil prices have found temporary support amid broader discussions around interest rate cuts, which tend to benefit commodities priced in US dollars. Lower interest rates can weaken the dollar and make oil more attractive to global buyers, offering a cushion against other bearish pressures.
Energy-focused companies such as Woodside Energy Group Ltd (ASX:WDS) and Santos Ltd (ASX:STO) are likely to stay in focus as the oil market continues to react to these macroeconomic signals. Investors and analysts alike will be watching closely for any further developments from the Federal Reserve or the White House that could steer oil’s next big move.
