Fundamental Analysis: Weekly Update – April 3, 2025

Wednesday’s highly anticipated tariff announcement comes at a precarious time for both the economy and financial markets, with equities already experiencing weeks of turbulence due to shifting trade policy expectations. Investor uncertainty remains elevated, as there are few signs that this latest move will bring clarity or stability to global markets. Retaliation from key U.S. trading partners has been swift, with China, Japan, and South Korea reportedly coordinating a joint response to Trump’s aggressive tariff strategy. The prospect of a unified countermeasure from major Asian economies heightens fears of a prolonged trade conflict, which could disrupt global supply chains and weigh on economic growth. As markets digest the implications of the administration’s two-step tariff approach, traders will be watching for further policy details and potential exemptions. Meanwhile, with Federal Reserve officials already navigating a complex economic landscape, any inflationary impact from rising import costs could add another layer of uncertainty to the central bank’s interest rate trajectory.

The United States has intensified its military presence in the Middle East, with Defense Secretary Pete Hegseth deploying additional warplanes as part of an ongoing bombing campaign in Yemen. The move comes amid rising tensions with Iran, as President Donald Trump continues to pressure Tehran into nuclear negotiations. On Sunday, Trump warned Iran of potential military strikes and additional secondary tariffs if it failed to reach an agreement with Washington over its nuclear program. In response, Tehran sent a diplomatic message through Oman, rejecting direct talks while U.S. sanctions and military threats remain in place. Iran’s foreign minister has reiterated that Tehran would not negotiate under pressure, underscoring the deep impasse between the two nations. With Iran defying Trump’s latest warning, the risk of further escalation remains high. Analysts suggest that unless diplomatic backchannels yield progress, the U.S. could move forward with both economic and military measures, heightening volatility in global markets and the energy sector.

The OPEC scaled back its crude oil production in March, tightening supply ahead of a scheduled output increase in May, according to the latest Bloomberg survey. OPEC’s March production averaged 27.43 million barrels per day (bpd), marking a reduction of 110,000 bpd from February as the group pushed for stricter adherence to output quotas among its members. This adjustment reflects OPEC’s ongoing strategy to balance the market and support prices amid fluctuating global demand. Meanwhile, the broader OPEC+ alliance is expected to proceed with a planned production hike of 138,000 bpd in May, following a similar increase in April. Market participants will be closely watching the group’s discussions, as its output policy remains a key driver of oil price stability in the face of geopolitical uncertainties and shifting demand dynamics.