Oil prices rebounded from a three-year low on Thursday as investors resorted to lower level buying after Brent fell sharply in the previous session. 

Market sentiment in the oil sector has taken a pessimistic turn, evidenced by the significant drop in Intercontinental Exchange’s Brent crude oil prices. 

Wednesday’s trading saw a decline of nearly 2.5%, with prices settling below the critical $70 per barrel mark. 

This downward trajectory even led to a brief period where prices reached their lowest point in three years, signaling a concerning trend for oil market participants.

Analysts at ING Group, said in a note:

Rising OPEC supply and prospects for further increases, combined with ever-present tariff uncertainty, pushed the market lower.

At the time of writing, the Brent crude oil contract was at $69.43 per barrel, up 0.2% from the previous close.

The West Texas Intermediate crude oil price on the New York Mercantile Exchange was also up 0.3% at $66.54 per barrel. 

WTI and Brent crude oil prices have fallen to their lowest levels since May 2023 and December 2021, respectively, following a four-session decline. 

Brent crude fell 6.5% to its lowest point since December 2021 on Wednesday, while WTI crude fell 5.8% to its lowest point since May 2023.

According to Geojit Financial Services, the weak outlook in the oil market is likely to continue for the rest of Thursday. 

Tariff threats ease pressure on prices

The initial decline in the market was mitigated as the United States announced its decision to exempt automakers from the previously imposed 25% tariffs. 

This move instilled optimism that the potential adverse effects of the ongoing trade dispute could be lessened.

Furthermore, an insider source privy to the discussions revealed to Reuters that President Donald Trump is contemplating the removal of the 10% tariff currently levied on Canadian energy imports, including crude oil and gasoline, that adhere to the existing trade agreements. 

This potential decision further contributes to the easing of trade tensions and the prospect of a less severe impact on the overall market.

Weak oil prices weigh on producers

The recent decline in oil prices is creating significant challenges for US oil producers, making it economically unfeasible for them to continue with aggressive drilling and production activities. 

This is evident in the current price of WTI crude oil, which is trading below $67 per barrel. 

Furthermore, the forward prices for WTI are even lower, indicating that the market expects oil prices to remain depressed in the future. 

This creates a challenging environment for US oil producers, as they are faced with the prospect of lower revenues and profits.

As a result, many producers may be forced to scale back their drilling and production activities, which could lead to a decline in US oil production.

“Recent price weakness makes it difficult for US producers to “drill, baby, drill,” ING Group analysts said. 

The current trading price of around $63 per barrel for the 2026 calendar reduces the motivation for producers to ramp up drilling operations, according to ING. 

ING analysts added:

If anything, we’re likely to see a bigger pullback in activity. Producers need, on average, a $64/bbl price level to drill a new well profitably, according to the Dallas Federal Reserve Energy Survey. 

US crude stockpiles

US crude oil inventories increased more than anticipated last week due to seasonal refinery maintenance, according to the Energy Information Administration. 

Meanwhile, gasoline and distillate stockpiles decreased because of a rise in exports.

The EIA reported that crude inventories increased by 3.6 million barrels to 433.8 million barrels in the week. This increase significantly surpassed the analysts’ expectations of a 341,000-barrel rise in a Reuters poll.

Additionally, the WTI delivery hub’s stock levels reached their highest point since November due to a 1.12 million barrel increase in crude oil stocks at Cushing.

“Lower refinery rates contributed to the build, with utilisation rates falling by 0.6pp, and crude inputs dropping by 346k b/d week on week,” ING Group said. 

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For years, India’s stock market has been a prime destination for retail investors seeking better returns than traditional savings.

However, after reaching record highs, the market has entered a prolonged slump, erasing $900 billion in investor wealth since its peak in September.

The benchmark Nifty 50 index has been on its longest losing streak in nearly three decades, with foreign investors pulling out funds and earnings failing to support lofty valuations.

Millions of middle-class investors, many of whom entered the market during the post-pandemic boom, are now facing significant losses.

With rising inflation, stagnating wages, and increasing financial pressures, their confidence is being severely tested. The shift in global capital, growing interest in China, and geopolitical uncertainties have only added to the market’s volatility.

Households shift savings to stocks

Six years ago, only one in 14 Indian households invested in stocks.

Today, that number has surged to one in five.

This shift has been driven by government policies promoting financial inclusion, easy access to online trading platforms, and the influence of social media ‘finfluencers’ encouraging market participation.

Systematic Investment Plans (SIPs) have become a popular route for investors, with the number of SIP accounts soaring past 100 million—nearly three times the figure five years ago.

As the market downturn continues, many retail investors are seeing their portfolios shrink. For those who moved substantial savings from bank deposits to equities, the downturn has been particularly harsh, forcing difficult financial decisions.

With fixed deposits offering lower returns, many investors saw equities as the best option for growing their wealth. The market correction has exposed the risks of over-reliance on stocks, particularly among inexperienced investors.

Many are now considering shifting funds back to safer assets, but the losses they have already incurred make it a challenging decision.

Indian traders face big losses

The impact of the market downturn has been most severe for retail traders who took on excessive risks. Many were drawn in by social media influencers promoting high-risk strategies, including trading in derivatives and penny stocks.

This speculative trading has led to widespread losses, with some investors losing their entire capital.

Indian regulators recently stepped in to tighten oversight on futures and options trading after it was revealed that 11 million investors collectively lost $20 billion.

The regulatory intervention came after a surge in retail participation in speculative markets, encouraged by platforms offering easy access to leverage. The crackdown aims to prevent further financial distress, but for many, the damage has already been done.

Some traders who borrowed funds to invest during the pandemic are now facing mounting debt and pressure from creditors. Many have been forced to liquidate their portfolios at a loss, exacerbating their financial troubles.

The current downturn serves as a stark reminder that stock market investments require careful risk assessment and long-term planning rather than speculative bets.

What can we expect in the coming months?

Despite the ongoing slump, market experts believe that the correction is part of a normal cycle.

Foreign investor selling has eased since February, indicating that the worst may be over.

Valuations for many stock indices have now fallen below their 10-year average, which could attract institutional buyers.

The Indian government’s latest budget, which includes a $12 billion income tax relief, is expected to support consumer spending and corporate earnings in the coming months.

Furthermore, the Reserve Bank of India’s stance on maintaining stable interest rates could provide some stability to the markets.

However, global risks remain a concern. Geopolitical tensions in the Middle East and Ukraine, coupled with the uncertainty surrounding US trade policies, continue to weigh on investor sentiment.

While some analysts believe that India’s economic fundamentals remain strong, the immediate future of the stock market remains uncertain.

Financial advisers are urging investors to take a long-term view and avoid panic selling. Many believe that the market downturn is a necessary correction after years of rapid growth.

For investors who entered the market expecting quick gains, this period serves as an important lesson in managing expectations and understanding the risks associated with equities.

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The European Central Bank on Thursday lowered interest rates by 25 basis points, bringing the deposit facility rate to 2.5%.

The widely expected move marks the central bank’s sixth rate cut in nine months, as policymakers seek to support an economy grappling with sluggish growth and the looming threat of US tariffs on EU imports.

In its statement, the ECB noted that monetary policy is now “meaningfully less restrictive,” with rate cuts making borrowing cheaper for businesses and households, leading to a pickup in loan growth.

Following the ECB’s decision, the euro rose 0.2% against the dollar to $1.081.

Inflation has declined from a peak of 10.6% in October 2022 to 2.4% in February, while the deposit rate has reached its lowest level since February 2023.

The ECB also lowered its 2025 economic growth forecast for the fourth consecutive time on Thursday, projecting expansion at just 0.9%, slightly above last year’s 0.7% pace.

Inflation trends and economic growth

Despite the ECB’s policy shift, inflation remains a concern. Headline inflation in the euro zone is still below 3% but has shown some volatility in recent months.

February’s inflation rate eased to 2.4%, slightly higher than expectations but down from January’s reading.

Core inflation, which excludes volatile items like food and energy, also declined, suggesting some relief from persistent price pressures.

Growth in the euro area remains weak, with GDP rising by just 0.1% in the fourth quarter, according to Eurostat.

The modest expansion highlights the fragile state of the region’s economy, reinforcing the ECB’s decision to ease monetary policy.

Uncertainty over Trump tariffs and defense spending

The ECB’s rate decision comes amid heightened geopolitical and trade uncertainties.

US President Donald Trump has repeatedly threatened tariffs on European goods, though no specific measures have been announced.

The potential for new duties remains a key risk for the euro zone, with European leaders weighing their options for negotiation.

At the same time, European governments are ramping up defense spending in response to shifting geopolitical dynamics, particularly as US-Ukraine relations deteriorate.

Increased military expenditures could influence inflation and economic growth, adding another layer of complexity to the ECB’s policy outlook.

With economic headwinds still in play, the central bank’s easing measures signal an effort to balance inflation control with the need to stimulate growth in an uncertain global environment.

Markets are now pricing in nearly two additional rate cuts this year following the ECB’s decision on Thursday.

This is slightly fewer than before Tuesday’s German budget announcement but remains within the range of expectations seen in recent weeks.

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President Donald Trump announced that Mexico will be exempt from his newly imposed 25% tariffs on goods and services covered under the USMCA trade agreement, providing temporary relief for a key US trading partner.

“This exemption will remain in place until April 2,” Trump stated in a social media post on Thursday following a conversation with Mexican President Claudia Sheinbaum.

“I made this decision as a gesture of goodwill and out of respect for President Sheinbaum.”

The announcement followed Commerce Secretary Howard Lutnick’s statement that Trump was considering a temporary exemption from his newly imposed 25% tariffs on goods and services from Canada and Mexico covered under the United States-Mexico-Canada Agreement (USMCA).

However, it remained unclear whether he will extend the full USMCA pause to Canada, although he has said he would exempt Canadian autos and auto parts that are imported under the trade deal.

Reprieve for tariffs under USMCA dubbed “promising” by Trudeau

Lutnick has framed the exemption as a benefit to companies operating under the agreement’s rules, while warning that businesses straying outside USMCA’s framework would be exposed to the full impact of the tariffs.

“If you lived under Donald Trump’s US, Mexico and Canada agreement, you will get a reprieve from the tariffs now. And if you do choose to go outside of that, you did so at your own risk, and today is when that reckoning comes,” Lutnick said.

The exemption is expected to last until April 2, at which point Trump is preparing to impose a new round of tariffs.

These would include “reciprocal” duties on various countries and sector-specific measures targeting key industries such as automotive, pharmaceuticals, and semiconductors.

Canadian Prime Minister Justin Trudeau called Lutnick’s comments “promising” in remarks to reporters in Canada.

“That aligns with some of the conversations that we have been having with administration officials, but I’m going to wait for an official agreement to talk about Canadian response and look at the details of it,” Trudeau said.

“But it is a promising sign. But I will highlight that it means that the tariffs remain in place, and therefore our response will remain in place.”

Uncertainty regarding tariffs keeps markets on edge

The news of a possible exemption came as financial markets reeled from Trump’s escalating trade measures.

Stocks opened lower on Thursday, continuing a week-long slide as investors attempted to assess the broader implications of the administration’s tariff strategy.

The Dow Jones Industrial Average was down 115 points, or 0.3%, after an early session plunge of more than 600 points.

The S&P 500 declined 0.9%, while the Nasdaq Composite dropped 1.1%.

Stock markets have been volatile all week following the implementation of tariffs on Canadian, Mexican, and Chinese imports.

Canada and China responded swiftly with retaliatory measures, while Mexico has signalled plans to unveil countermeasures over the weekend.

“You’re just having confusion,” said Keith Lerner, chief market strategist at Truist. “That confusion is permeating into the day-to-day swings of the market.”

However, investors found some relief on Wednesday when the White House confirmed a one-month deferral of tariffs on automakers whose cars comply with USMCA rules.

What is the USMCA

The USMCA, replaced the North American Free Trade Agreement (NAFTA) in 2020, and was designed to create a more balanced trade relationship between the US, Canada, and Mexico.

The agreement includes measures aimed at strengthening intellectual property rights, supporting small and medium-sized businesses, and modernizing trade rules for the digital economy.

Trump’s latest tariff policies have put the agreement under strain, with Canada and Mexico pushing for clarity on whether compliance with USMCA will be enough to shield them from future trade penalties.

Beyond economic considerations, Lutnick suggested that the US is leveraging trade talks to secure cooperation from Mexico on fentanyl trafficking, an issue Trump has repeatedly highlighted.

“Both Mexico and Canada offered us an enormous amount of work on fentanyl,” he said.

Trump has linked his tariff strategy to national security concerns, arguing that trade restrictions on China and Mexico could help curb illicit drug flows and migration into the US.

At the same time, Trump has signaled that his broader trade agenda remains unchanged.

In a social media post, he reiterated his determination to reduce the US trade deficit, stating his intent to “change” the country’s “massive trade deficit with the world.”

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Investors have been cautious about high-growth technology stocks in 2024, with broader market uncertainty and concerns over President Donald Trump’s tariff policies putting pressure on valuations.

The Nasdaq Composite has declined 6% so far this year as investors rotate out of last year’s best-performing stocks and software companies have not been immune to this downturn.

The iShares Expanded Tech Sector exchange-traded fund, which includes major software firms, has fallen 4.5% this year and is down 10% from its all-time closing high of $108.46 in February, according to Dow Jones Market Data.

However, analysts at Evercore ISI believe the recent sell-off presents a buying opportunity.

Kirk Materne, an analyst at the firm, wrote in a research note this week that investors should consider “leaning in” to software stocks, given their attractive valuations and potential for AI-driven growth.

AI monetization strengthens long-term outlook

Materne highlighted five software companies as his top picks: Salesforce, Microsoft, Intuit, Snowflake, and Workday.

He noted that all five are trading below their five-year average forward price-to-earnings ratios, making them more attractive after recent declines.

For instance, Microsoft is trading at 27.9 times forward earnings, compared to its five-year average of 29.5 times, while Salesforce is valued at 25.9 times, down from its five-year average of 40.4 times.

Beyond valuation, Materne pointed to artificial intelligence as a key growth driver for these firms.

Companies like Salesforce are already integrating AI into their platforms, offering tools such as Agentforce, an AI-powered customer engagement tool.

Since its launch in October, Salesforce has closed 5,000 deals for Agentforce, and Materne estimates the product could contribute $1 billion in incremental revenue by 2026.

“While it is super early days — the monetization of Gen AI has begun and will build momentum over the remainder of the year,” he wrote.

“We believe the big are going to get bigger in a Gen AI world and we believe the AI narrative in software will only get stronger as the year progresses.”

Dim financial forecasts, economic challenges pose risks

Despite the positive outlook, some risks remain.

Recent earnings reports from Salesforce, Microsoft, and Intuit included financial forecasts that fell short of analyst expectations, raising concerns about near-term revenue growth.

Additionally, broader economic challenges, including potential business spending slowdowns due to rising tariffs, could pose headwinds for the sector.

Trump’s new tariffs could impact business spending, forcing some companies to scale back technology investments.

However, Materne believes software firms are relatively insulated from these effects.

Many software contracts operate on long-term subscription models, limiting immediate financial risks.

Moreover, software solutions focused on efficiency and automation are likely to remain in high demand, even in a tighter economic environment.

“We believe the setup for software remains favorable when taking a 3-6 month view,” Materne wrote.

While risks persist, Evercore’s analysis suggests that investors willing to weather short-term volatility may find compelling opportunities in software stocks as AI adoption accelerates and valuations remain attractive.

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