The US will not impose tariffs on Chinese goods connected to Russian oil unless Europe takes similar steps. Scott Bessent from the US Treasury encourages European countries to help reduce Russia’s energy income. He criticizes both the direct import of Russian crude and the purchase of refined products from India. Currently, the US has a 25% tariff on Indian goods. President Trump is pushing Europe to apply 50-100% tariffs on China and India. Bessent believes that coordinated tariffs could end the war in just “60 or 90 days” by cutting off Russia’s main source of income.

Tougher Sanctions on Russian Oil Majors

The US is also looking into stricter sanctions on Russian oil companies. This may involve using frozen Russian assets, moving part of the $300 billion held abroad into a special vehicle to help fund loans for Ukraine. Despite Bessent’s comments on differing strategies, Washington is still urging Europe to impose tougher tariffs on China and India. While this position avoids immediate trade escalation, there are concerns that potential tariffs and stricter sanctions could affect energy and commodity markets. Today’s news raises questions about market stability. The US is tying its actions regarding China to whether Europe imposes tariffs, creating a conditional threat. This may lead to increased volatility across various asset classes. For instance, when the conflict began in 2022, the VIX index spiked above 30 due to geopolitical news, and we might see a similar reaction if Europe indicates it could take action.

Impact on Energy and Commodity Markets

For oil traders, the focus is on the potential rise in crude prices, as coordinated action would directly target Russia’s main income. Buying call options on Brent or WTI futures for the coming months could be a smart strategy to take advantage of possible price increases. Last year, India and China became the largest buyers of Russian seaborne crude, taking more than 80% of its exports. Any tariffs would greatly disrupt global energy flows. This uncertainty may affect specific stock markets, especially in Europe, which is facing tough economic choices. We recommend purchasing put options on major European indices like the DAX or Euro Stoxx 50 to hedge against a potential downturn. The trade disputes from the late 2010s created lasting pressure on global indices, and this situation feels similar. In the currency markets, this geopolitical tension strengthens the U.S. dollar as a safe-haven asset. The euro is especially vulnerable due to Europe’s central role in this diplomatic situation. A strategy to go long on the U.S. Dollar Index (DXY) via futures or options looks wise, similar to the dollar’s rise in 2022 when global risk aversion was heightened. Create your live VT Markets account and start trading now.

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