Oil Prices Surge as US Threatens Secondary Tariffs on Russian and Iranian Oil
Oil prices experienced a significant jump yesterday in response to mounting threats to oil supplies. The ICE settled nearly 2.8% higher following President Trump’s warning of potential secondary tariffs on Russia and Iran. This move comes on the heels of a recent executive order targeting Venezuela. While currently just a threat, the imposition of tariffs on Russia and Iran could introduce substantial upside risk to the market due to the significant oil export volumes associated with both countries.
Russia exports approximately 7.4 million barrels per day of crude oil and refined products, while Iran exports around 1.4 million barrels per day of crude oil. The utilization of secondary tariffs could prove highly effective in dissuading buyers from engaging with the targeted oil, potentially causing detrimental effects on the buying country’s economy that outweigh the benefits of discounted crude oil. China and India are major buyers of Russian crude oil, with the US being their primary export markets. Taking action against Russia, in particular, could complicate Trump’s efforts to lower oil prices, leading to an increase in prices instead.
Agriculture Sector – USDA Predicts Decline in Soybean Acreage
The latest Prospective Plantings report from the US Department of Agriculture (USDA) forecasts a significant drop in soybean plantings this year, alongside an increase in corn acreage. The USDA projects that soybean acreage in the US for 2025 could plummet to 83.5 million acres, compared to 87.1 million acres in 2024. Market expectations were around 83.8 million acres. In contrast, corn plantings are anticipated to reach 95.3 million acres for 2025, surpassing the 90.6 million acres planted in 2024 and exceeding expectations of 94.4 million acres. Retaliatory tariffs imposed by China on US soybeans could drive US farmers to prioritize corn plantings over soybean areas. Wheat planting estimates have been revised downward to 45.4 million acres, lower than last year’s 46.1 million acres.
The USDA’s quarterly stocks report, as of 1 March, revealed corn inventories at 8.15 billion bushels, marking a 2.4% decline year on year but aligning closely with market forecasts. Soybean inventories were reported at 1.91 billion bushels, a 3.5% increase year on year and slightly above market expectations of approximately 1.9 billion bushels. Similarly, wheat inventories stood at 1.24 billion bushels, reflecting a 13.6% increase year on year and surpassing the market’s anticipated 1.2 billion bushels.
Recent data from the Indian Sugar & Bio-energy Manufacturers Association (ISMA) indicates that sugar production in India for 2024/25 reached 24.8 million tons, post-ethanol diversion as of 31 March. The ISMA also reported that 90 mills were actively crushing cane during the second quarter of the ongoing 2024/25 season.
Analysis: The surge in oil prices due to potential secondary tariffs on Russian and Iranian oil could lead to increased costs for consumers globally. Additionally, the agricultural sector may experience shifts in planting patterns, with soybean acreage expected to decline while corn acreage rises. These developments could impact food prices and supply chains, potentially affecting everyday consumers and investors in various markets.