The United States plans to introduce new measures during a meeting of the finance ministers from the Group of Seven (G7) economies on Friday. These measures aim to impose high tariffs on China and India for buying Russian oil. This initiative targets the energy transactions of China and India with Russia. It highlights the US’s goal of creating stricter economic consequences due to ongoing global tensions.

Objectives Of The Tariffs

The purpose of the tariffs is to deter China and India from buying as much Russian oil. This strategy is part of a larger approach to manage important economic and political issues related to global trade and energy reliance. Overall, this action is part of a coordinated effort to exert financial pressure. The G7 finance ministers will discuss how to assess and possibly implement these proposed tariffs. With the G7 meeting on Friday, we expect increased volatility in energy markets. The US proposal to target China and India for their Russian oil purchases raises considerable geopolitical risks. We’re monitoring Brent and WTI futures contracts closely for any major movements as the weekend approaches.

Market Reaction And Considerations

The immediate strategy is to prepare for sharp price fluctuations, not just a specific direction. With the VIX sitting near its yearly low of 14, options are relatively inexpensive. Buying call options on oil ETFs like USO or even on the VIX itself could be a smart way to profit from the uncertainty created by this G7 news. We also need to keep an eye on currency markets, particularly the Chinese yuan and the Indian rupee. Serious tariff discussions will likely weaken these currencies against the US dollar. We remember the significant market reactions during the trade disputes of 2018-2019, and we might see similar patterns emerging now. The stakes are high, as Russia now exports over 75% of its seaborne crude—about 3 million barrels per day—to China and India. This constant supply has been a key reason Brent crude prices have remained stable at around $85 per barrel over the past month. Any disruption to this trade could cause an immediate and significant supply shock. However, we must also consider the chance that the proposal might not receive full G7 support. We saw divisions during the 2023 energy crisis, as European nations are sensitive to anything that could provoke inflation again. If Friday’s statement ends up being weak, oil prices could drop sharply, impacting those who are heavily invested on the long side. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now