Oil prices plunged more than 2% on Thursday (July 10th), as investors weighed the potential impact of US President Donald Trump's tariffs on global economic growth.

Brent crude futures closed at $68.64 per barrel, down $1.55, or 2.21%. US West Texas Intermediate crude futures closed at $66.57 per barrel, down $1.81, or 2.65%.

On Wednesday, Trump threatened Brazil, Latin America's largest economy, with punitive 50% tariffs on exports to the US, pressuring his Brazilian counterpart, Luiz Inácio Lula da Silva, over the trial of former President Jair Bolsonaro in Brazil on charges of plotting a coup to prevent Lula from taking office in 2023.

On Thursday, Lula held a meeting with ministers, a day after hinting at reciprocal measures in a social media post. Trump has also announced plans for tariffs on copper, semiconductors, and pharmaceuticals. His administration has sent tariff letters to the Philippines, Iraq, and other countries, adding to more than a dozen this week, including to major U.S. suppliers South Korea and Japan.

Trump's history of frequently delaying tariffs has caused the market to be less reactive to such announcements, said Harry Tchilinguirian, head of group research at Onyx Capital Group.

"People are largely in a wait-and-see mode, given the erratic nature of policy and the flexibility the administration has shown regarding tariffs," Tchilinguirian said.

Policymakers remain concerned about inflationary pressures from Trump's tariffs, with only "a few" officials at the June 17-18 Federal Reserve meeting saying they felt interest rates could be lowered as soon as this month, according to meeting minutes released Wednesday.

Higher interest rates make borrowing more expensive and could slow oil demand. OPEC+ oil producers are set to agree to another major production increase for September, as eight members complete a voluntary production cut and the United Arab Emirates moves to increase its quota.

However, OPEC+ has indicated it will likely pause production increases in October due to the potential peak in oil demand, said Phil Flynn, senior analyst at Price Futures Group.

"Previous fears of 'peak oil' have not materialized, and rising prices are encouraging the discovery of new oil resources, both domestically and abroad," Flynn wrote in a note on Thursday.

Elsewhere, US Secretary of State Marco Rubio held "candid" talks with Russian Foreign Minister Sergei Lavrov, where he expressed Washington's frustration over the lack of progress in ending the war in Ukraine. Trump recently said he was considering a bill that would impose tougher sanctions on Russia. (alg)

Source: Reuters