What impact will the continuous fluctuations in the global oil market have?

Recently, the 9th International Conference of the Organization of the Petroleum Exporting Countries (OPEC) was held in Vienna, the capital of Austria. During the conference, the flagship report "World Oil Outlook 2025" was released. In the first half of this year, the international crude oil price was in continuous fluctuations, priced in US dollars. Compared with the relatively short-term impact of geopolitical risks factors on international oil prices, the adjustments of the US tariff policy and the crude oil production policies of "OPEC+" will have an impact on the performance of the international crude oil market for a longer period of time. In the first half of this year, the Trump administration continuously threatened major trading partners with tariffs. Although the Trump administration has extended the so-called "equivalent tariffs" suspension period until August 1st, at the same time, the Trump administration still continued to pressure major trading partners and threatened to impose more tariffs, which kept the market nerves on edge.

The continuous fluctuations in the global oil market have a wide and profound impact on the financial industry, involving many fields and multiple levels. First, it affects the stability of the financial market. Fluctuations in oil prices directly affect the profitability of energy-related industries, which in turn affects the stock market. When oil prices rise, the revenue and profit expectations of energy companies increase, attracting investors' attention and driving the prices of related stocks to rise; conversely, when oil prices fall, it may lead to a decline in the stock prices of energy-related companies, triggering market instability. Moreover, fluctuations in oil prices may affect the trading behavior of market participants, thereby affecting market liquidity. During periods of intense oil price fluctuations, investors may need to be more cautious and reduce trading activities, resulting in a decline in market liquidity. Fluctuations in oil prices provide opportunities for speculators, who may earn profits by buying and selling crude oil futures contracts in large quantities, thereby exacerbating market volatility.

Second, it affects the prices of financial assets. The increase in oil prices has a positive impact on the profits of oil extraction and production enterprises, driving the stock prices of related enterprises to rise. However, for enterprises that consume oil heavily, such as aviation and transportation, an increase in oil prices will increase operating costs and compress profit margins, leading to a decline in stock prices. In the long term, oil price fluctuations accelerate the process of energy transformation. In a high oil price environment, the investment attractiveness of renewable energy (such as solar and wind power) and the electric vehicle industry increases, and related stocks may achieve excess returns. Fluctuations in oil prices will affect inflation expectations. When oil prices rise significantly, it may trigger imported inflation, leading to an increase in market interest rates and a decline in bond prices. Because investors will demand higher yields to compensate for the losses caused by inflation. Fluctuations in oil prices will affect the exchange rates of currencies of oil-exporting and oil-importing countries. When oil prices rise, the export income of oil-exporting countries increases, and their foreign exchange reserves increase, causing their currencies to appreciate. While oil-importing countries will experience an increase in import costs, a deterioration in international balance of payments, and a depreciation of their currencies.

Third, it affects monetary policies and the global economic outlook. Fluctuations in oil prices may influence the monetary policy decisions of central banks. For example, when rising oil prices lead to an increase in inflationary pressure, central banks may adopt tightening monetary policies such as raising interest rates to curb inflation. This will lead to an increase in market interest rates and a decline in bond prices, having a negative impact on the investment portfolios of financial institutions. Fluctuations in oil prices may affect the global economic growth outlook. High oil prices may increase production costs for enterprises and purchase costs for consumers, suppressing economic growth momentum. This will lead to a slowdown in the growth of credit business and an increase in non-performing loan rates of financial institutions.

In conclusion, with the evolution of energy transformation and the geopolitical landscape, the coupling relationship between oil and the financial market will continue to evolve. Only by strengthening cross-market collaborative supervision and improving the risk hedging toolkit can a more resilient global financial system be constructed to cope with uncertainty shocks.