Trump Claims Oil Price Drop Could Lead to Ukraine Peace; Kremlin Rejects Link

Commodity

Russia-Ukraine Conflict

Summary:

U.S. President Donald Trump asserted that the recent decline in global oil prices may encourage Russia toward peace in Ukraine, but the Kremlin swiftly dismissed the notion...

Trump Links Oil Prices to Peace Prospects

Speaking to reporters at the Oval Office on May 5, President Trump stated that falling oil prices have placed Russia in a weaker position economically, increasing its willingness to negotiate an end to the war in Ukraine. “I think Russia, with oil prices where they are now, wants a resolution. Ukraine wants a resolution. We’re in a good position to get something done,” Trump said.

Since the start of 2025, oil prices have dropped by around $15 per barrel, cutting into one of Russia’s key revenue streams. Trump suggested that this decline may have softened Moscow’s posture, referencing President Vladimir Putin’s recent proposal for a temporary ceasefire to mark the 80th anniversary of the Allied victory in World War II as a “positive step.”

“This three-day ceasefire may not seem like much, but it means a lot when you consider how far we've come,” Trump noted. “This war should never have happened.”

Kremlin Pushes Back

In Moscow, Kremlin spokesman Dmitry Peskov pushed back firmly against Trump’s comments, rejecting the idea that oil prices have any bearing on Russia’s military strategy in Ukraine. “The conflict has nothing to do with oil revenues,” Peskov said. “It is driven by threats to our national security and the West’s consistent refusal to address Russia’s legitimate concerns.”

The Kremlin’s response reinforces its longstanding position that NATO expansion and Western military support for Ukraine are the root causes of the war, not economic calculations.

Nord Stream Attack Question Reignites Controversy

During the same press conference, Trump was asked whether he would reopen an investigation into the 2022 Nord Stream pipeline explosions — a sabotage event that remains unresolved. His answer, delivered with skepticism, hinted at doubts over widely circulated claims that Russia was behind the attack.

“They say Russia did it,” Trump remarked with a smirk, adding, “I think a lot of people know who actually did it.” This veiled suggestion aligns with Trump’s pattern of resisting direct blame on Moscow and leaving room for alternative narratives.

The Nord Stream pipelines, which transported Russian gas to Germany through the Baltic Sea, were severely damaged by underwater explosions in September 2022. While Western sources, including major U.S. media, have pointed to pro-Ukrainian actors as possible culprits—based on intelligence leaks—Russia has accused the U.S. and U.K. of orchestrating the sabotage, though it has presented no conclusive evidence.

Energy and War Intersect in Broader Strategy

Trump’s argument underscores a broader belief that economic pressure through energy markets can shape geopolitical outcomes. However, analysts note that the effectiveness of such leverage is mixed. While falling oil revenues may constrain Russia’s budget, the country has shown resilience through alternative markets and by tightening control over domestic economic policies.

Furthermore, the Kremlin’s rejection of the oil-peace link signals that any diplomatic breakthrough will require more than commodity price shifts—it will depend on deeper security assurances and political compromise.

As diplomatic speculation swirls, Trump’s comments once again spotlight his unconventional approach to international affairs—combining economic logic, public overtures to adversaries, and a healthy dose of ambiguity. Meanwhile, Russia’s firm rejection of any oil-related pressure suggests that a negotiated end to the Ukraine conflict remains elusive, regardless of market fluctuations.

Source: Reuters

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[Quick Facts]

1. China agrees to talk to the U.S., He Lifeng will meet with Bessent.

2. PBOC cuts reserve ratio and rates.

3. U.S. 2-year treasury yield drops as trade deficit renews economic concerns.

4. Kazakhstan is considering its options for complying with its OPEC+ obligations to cut production.

5. U.S. exports plummet, with the agricultural sector hit hardest.

6. UK and India finalize free trade agreement.

7. U.S. and Yemen reach an agreement to halt ship attacks.

8. UK and the U.S. near trade deal to cut auto and steel tariffs.

9. Plunging oil prices have prompted Russia to consider tighter budget rules.

[News Details]

China agrees to talk to the U.S., He Lifeng will meet with Bessent

China's Foreign Ministry announced on May 7 that Vice Premier He Lifeng, China's economic dialogue lead, will meet with U.S. Treasury Secretary Bessent during his visit to Switzerland (May 9th-12th). The decision follows global expectations, China's interests, and appeals from U.S. industries and consumers.

PBOC cuts reserve ratio and rates

The PBOC cut the reserve requirement ratio (RRR) by 50 basis points and policy rates by 10 basis points on May 7, releasing approximately ¥1 trillion in long-term liquidity.

Governor Pan Gongsheng stated at a State Council Information Office press conference that, from a financial market perspective, China's domestic financial markets performed well in the first quarter. Since April, despite facing significant external shocks, the domestic financial system has remained stable, and the financial markets have demonstrated strong resilience. The PBOC will diligently implement the decisions and plans of the Central Committee, promote high-quality economic development, steadfastly advance high-standard opening-up, actively participate in international financial governance and cooperation, and safeguard the rules-based international monetary and financial order. Simultaneously, the PBOC will balance financial opening-up with security, explore ways to enhance the macroprudential and financial stability functions, and resolutely ensure the stable operation of China's financial markets, including the foreign exchange, bond, and stock markets.

U.S. 2-year treasury yield drops as trade deficit renews economic concerns

The yield on the U.S. 2-year Treasury note fell, with a record trade deficit and a wave of pessimistic corporate outlooks refocusing markets on potential economic pressures from global trade tensions. The more Fed-sensitive 2-year yield declined nearly 4 basis points. Traders now anticipate three 25-basis-point rate cuts from the central bank this year, with the first reduction expected in September. "Investors fear that even with bad economic news, Trump won’t adjust policies and the Fed won’t ease monetary conditions," said Bob Savage, Head of Macro Strategy at BNY Mellon Markets. "The current positive news isn't enough to offset worries about growth and inflation. Markets remain uncertain, and risk appetite is broadly cooling."

Kazakhstan is considering its options for complying with its OPEC+ obligations to cut production

Kazakhstan is exploring ways to meet its OPEC+ oil production quotas after Saudi Arabia urged compliance. The nation's energy ministry stated it remains “committed to the OPEC+ agreement” and is "evaluating all options.” Oil prices have tumbled since OPEC+'s surprise output hike on May 3, with Goldman Sachs revising down price forecasts. Saudi Arabia, OPEC's de facto leader, warned at the meeting that the group's overproducing members must take action or face further output hikes.

U.S. exports plummet, with the agricultural sector hit hardest

Latest supply-chain data reveals that the trade slump triggered by Trump-era tariffs has expanded from an initial plunge in import orders to a near-nationwide export collapse, with major agricultural products such as soybeans, corn, and beef suffering the most severe blows. According to an analysis by trade-tracking firm Vizion of export container bookings five weeks before and after the U.S. imposed so-called "reciprocal tariffs," the export decline to Asia and globally since January has now spread to the vast majority of U.S. ports. The U.S. agricultural sector continues to sound "crisis" alarms, with port data further confirming a sharp drop in outbound agricultural shipping capacity. Ben Tracy, Vice President of Strategic Business Development at Vizion, stated: "There is no doubt that nearly all of U.S. exports have taken a hit.”

UK and India finalize free trade agreement

India and the United Kingdom have struck a bilateral Free Trade Agreement (FTA) aimed at strengthening economic ties between the world's fifth- and sixth-largest economies. In a statement on Tuesday, the Indian government said: "A balanced, equitable, ambitious and mutually beneficial trade agreement covering trade in goods and services is expected to significantly boost bilateral trade, create new jobs, raise living standards, and enhance the overall well-being of citizens in both countries. It will also unlock new potential for jointly developing products and services tailored to global markets." For UK Prime Minister Keir Starmer and Indian Prime Minister Narendra Modi, the agreement is critical as nations worldwide race to insulate themselves from the impact of Trump's tariff wars. For India, the pact elevates its reputation as an emerging investment destination, attracting investors seeking diversification.

The U.S. and Yemen reach an agreement to halt ship attacks

On May 6th, a spokesperson for the Omani Foreign Ministry stated that discussions between the United States, Yemeni authorities, and relevant parties had culminated in an agreement. In the future, neither side will target the other, including American vessels, in the Red Sea and Bab al-Mandab Strait, ensuring freedom of navigation and the smooth flow of international commercial shipping.

UK and the U.S. near trade deal to cut auto and steel tariffs

According to the Financial Times, British and U.S. officials have announced that the UK and the United States are close to finalizing a trade agreement that would grant British steel and automotive exports access to lower tariff quotas. The deal, set to be signed this week, would partially shield some UK exports from the full impact of the 25% additional tariffs imposed by former President Trump on steel and auto imports in February and March. A senior British official described the negotiations as "proceeding rapidly" but cautioned that disagreements over pharmaceuticals remain unresolved. The UK's proposal includes concessions to Washington on digital services taxes, reduced tariffs on U.S. auto exports, and lower duties on American agricultural products.

Plunging oil prices have prompted Russia to consider tighter budget rules

Russia is weighing adjustments to its key budgetary mechanism in response to declining oil revenues, signaling that the Kremlin anticipates crude prices will remain low for an extended period even as the Russia-Ukraine conflict continues to strain state coffers.

According to reliable sources, if oil prices persist at current depressed levels, the Russian government may lower its budget rule threshold—currently set at 60 U.S. dollars per barrel—to around 50 U.S. dollars starting next year. Discussions are in preliminary stages, with officials facing a critical challenge: implementing spending cuts while the war drains fiscal resources.

[Today's Focus]

UTC+8 17:00 Eurozone March Retail Sales MoM

UTC+8 02:00 Fed Interest Rate Decision in May

UTC+8 02:30 Fed Chair Powell's Press Conference

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Gerik

China–U.S. Trade War

Economic

Early Stage Negotiations Set in Neutral Ground

According to coordinated announcements from the U.S. Treasury Department and the Office of the United States Trade Representative (USTR), Treasury Secretary Scott Bessent and USTR Jamieson Greer will represent the U.S. government during two days of negotiations scheduled for May 10 and 11 in Switzerland. The talks will serve as an initial confidence-building measure, rather than a forum for finalizing any substantive deal.

Secretary Bessent made it clear in a televised interview on Fox News that the aim is to “reduce tensions first before any forward movement can be made.” He acknowledged that current conditions do not favor swift outcomes, especially as both countries are still in the early stages of re-engagement following months of tariff escalations.

China’s Vice Premier He Lifeng to Lead Delegation

On the Chinese side, the Ministry of Foreign Affairs confirmed that Vice Premier He Lifeng will lead the delegation to Switzerland. He Lifeng, who is responsible for managing China’s international economic and trade policy, will meet Secretary Bessent during his official visit to Switzerland from May 9 to 12, following an invitation from the Swiss government. State-run media Xinhua emphasized that the purpose of the meetings is to “restore dialogue” and “stabilize expectations,” rather than immediately settle tariff-related disputes.

The meeting will be the first face-to-face encounter between senior trade officials from both countries since the Trump administration sharply escalated tariffs, including a recent announcement of a 100% tariff on foreign-produced films, with promises of more duties — such as those targeting pharmaceuticals — expected in the coming weeks.

Trade Tensions Cast Shadow Over Global Growth

This latest round of diplomatic engagement occurs amid growing warnings that the intensifying tariff battle between the world’s two largest economies could significantly drag on global economic growth. Financial markets have responded with volatility, and multinational corporations — especially in sectors such as electronics, pharmaceuticals, and consumer goods — are bracing for disruption to supply chains and price stability.

Earlier this month, Bessent informed members of Congress that the U.S. is concurrently negotiating with 17 other major trading partners to resolve tariff disputes and may announce new bilateral trade deals as early as this week. China was notably not included in that group, suggesting that the U.S.–China dialogue is still operating in a separate diplomatic track fraught with deeper structural disagreements.

Swiss Setting Symbolizes Diplomatic Reset

The choice of Switzerland — a neutral and stable diplomatic venue — reflects a shared desire to reset communication in a less confrontational environment. While both sides maintain tough public rhetoric, the decision to engage in direct dialogue signals an acknowledgment that prolonged deadlock could be economically and politically costly.

For the U.S., the meetings come at a time when tariff policies are beginning to impact domestic inflation expectations and investor sentiment. For China, the rapid appreciation of the yuan and signs of capital market instability have heightened the urgency for resolving external trade risks.

A Step Forward, With Modest Expectations

The upcoming discussions are unlikely to yield an immediate breakthrough. However, they offer a path forward for the world’s two largest economies to begin resetting the tone of their relationship. In the short term, a successful de-escalation of trade tensions could help calm global markets, while in the long run, the dialogue may evolve into a broader negotiation on trade fairness, technology transfers, and geopolitical influence.

Observers will be closely monitoring not only the outcomes of these talks but also how both sides frame the meeting publicly — as this could determine whether a thaw in relations is truly underway or simply a temporary pause in a broader economic rivalry.

Source: Yahoo Finance

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Grace Montgomery

Central Bank

Economic

China reduced its policy rate and lowered the amount of cash lenders must keep in reserve, as Beijing ramps up efforts to help an economy caught in a second trade war with the US.

The People’s Bank of China cut the seven-day reverse repurchase rate to 1.4% from 1.5%, according to governor Pan Gongsheng. The central bank will also trim the reserve requirement ratio by half a percentage point, Pan said at a briefing on Wednesday, without specifying when that would be effective.

The steps aim to guide borrowing costs lower and are among the 10 measures outlined by Pan, which also include rate reductions on a slew of relending tools and loans for policy banks. The RRR cut will release about RMB1 trillion (RM586.94 billion) in long-term liquidity, Pan said.

The offshore yuan trimmed its advance to trade little changed at 7.2 per dollar, while the 10-year government bond yield edged lower.

The central bank last reduced its policy rate and the reserve requirement ratio in September after Pan unveiled an array of aggressive measures to put a floor under China’s growth slowdown.

Pan also announced:

- The central bank will set up a RMB500 billion relending tool for consumption and elderly care.

- It will also increase its technology relending fund by RMB300 billion.

- Plans to increase its agriculture, small and medium enterprises relending fund

The decisions demonstrate officials are acting with urgency to support the world’s second-largest economy in the face of the US-China trade war. Expectations that Beijing would unleash more stimulus have risen after US President Donald Trump imposed up to 145% tariffs on Chinese imports, a level economists say would decimate bilateral trade.

“Today’s announcement reflects an orchestrated effort to not only support liquidity but to stimulate the broader market and economy,” said Frances Cheung, managing director and rates strategist at Oversea-Chinese Banking Corp Ltd. “Having a more resilient economy would also be a card to play in the face of tariffs.”

Source: Theedgemarkets

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Michelle Reid

Economic

China–U.S. Trade War

Key Points:

● Talks address tariffs, economic strategies, and potential impacts on markets.

● First official dialogue between US and China since tariff increases.

● Global trade markets await outcomes impacting international policies.

China and US Engage in Economic Talks Amid Trade Tensions

He Lifeng leads the Chinese delegation to Switzerland for economic dialogue with US Treasury Secretary Scott Bessent, scheduled from May 9-12. China-US economic talks aim to address escalating trade tensions affecting global markets.

He Lifeng, a key Chinese official, is leading China's delegation to Switzerland, marking the first official engagement since recent tensions. The talks, held from May 9-12, involve US Treasury Secretary Scott Bessent and aim to address the ongoing trade conflict that has resulted in significant tariffs.

China's stance is clear: while the doors remain open for dialogue, any discussions must be based on mutual respect and equality. Both nations have endured economic impacts, with tariffs affecting trade flows and market activities. The meeting could potentially ease tensions and result in adjustments to existing tariff policies.

Market observers and financial analysts are closely watching these developments. Statements from both parties have emphasized the importance of achieving a fair basis for trade negotiations, highlighting the need for balanced economic measures. As He Lifeng stated, "Vice Premier He, as the Chinese lead person for China-U.S. economic and trade affairs, will have a meeting with the U.S. lead person Treasury Secretary Scott Bessent."

Historical Trade Dialogues and Economic Analysis

Did you know? In 2018, China responded to US tariffs on steel with its own levies, impacting 128 American product categories.

Historically, US-China dialogues have experienced shifts, notably the end of the Joint Commission on Commerce and Trade in 2016. The renewal of talks reflects attempts to stabilize bilateral trade and address broader economic issues. Expert analysts suggest that a positive outcome could reignite investment interests and adjust trade practices.

Economic analysts point to the need for strategic adjustments in trade policies to prevent further market disruptions. Historical trends suggest that prolonged tariff impositions have negatively impacted both economies. Financial markets are assessing potential outcomes, with attention to changes in taxation and economic alliances.

Source: CryptoSlate

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Manuel

Economic

China–U.S. Trade War

The U.S. and Britain have made good progress in negotiating a trade deal that would likely include lower tariff quotas on steel and autos, a UK official said on Tuesday, but the timing of a deal remains in doubt amid conflicting signals from U.S. Treasury Secretary Scott Bessent and President Donald Trump.

Bessent told lawmakers earlier on Tuesday the Trump administration could announce trade agreements with some of the largest U.S. trading partners as early as this week. But later Trump told reporters before a meeting with Canadian Prime Minister Mark Carney that he and top administration officials will review potential trade deals over the next two weeks to decide which ones to accept.

Since Trump announced a 90-day hiatus from stiff "reciprocal" tariffs he had aimed at dozens of trading partners, he and his top officials have engaged in a flurry of meetings with trading partners to secure deals before the pause ends in early July.

U.S. and British officials engaged in "good discussions" remotely over the weekend and in person this week on a range of issues, but it was too soon to say when a deal could be finalized, a UK official said.

"There's a landing zone," the official said. "We've had good discussions this week."

The talks, led on the U.S. side by officials from the U.S. Trade Representative's office and the Commerce Department, were expected to result in lower-tariff quotas for steel and autos, with talks still continuing about the UK digital services tax.

A second source familiar with the talks said the situation was encouraging, but still fluid.

Britain was not expected to change its phytosanitary standards which have precluded the import of some U.S. meat products, but U.S. officials understood there was little demand for those products in Britain at this point. A second source familiar with the talks said the situation was still fluid.

A UK government spokesperson said talks on an economic deal between the U.S. and the UK were ongoing, but declined to set any timelines for agreement. "We will continue to take a calm and steady approach to talks and aim to find a resolution to help ease the pressure on UK businesses and consumers," they said.

Source: Reuters

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Patricia Franklin

Political

India early on Wednesday said its armed forces had conducted strikes against Pakistan and what it calls Pakistan-occupied Jammu and Kashmir, targeting "terrorist infrastructure."

"Our actions have been focused, measured and non-escalatory in nature. No Pakistani military facilities have been targeted," the country's Ministry of Defence said.

The operation follows a militant attack in Pahalgam, Jammu and Kashmir, in which 26 people were killed last month.

"We are living up to the commitment that those responsible for this attack will be held accountable," the statement said, while adding that India had shown "considerable restraint in selection of targets and method of execution."

The Defence Ministry said it will hold a detailed briefing on the strikes, labeled "Operation Sindoor," later in the day.

"Pakistan has every right to give a robust response to this act of war imposed by India, and a strong response is indeed being given," Pakistan's Prime Minister Shehbaz Sharif said, according to AP.