U.S. crude oil futures plunged to nearly four-year lows on Friday in a second day of heavy selling after China retaliated against President Trump's tariffs with its own duties on U.S. goods, escalating a trade war that has rattled global markets and led investors to price in a higher probability of recession.

Imports of oil, gas and refined products were exempted from Trump’s tariff plan, but traders fear the vast array of other levies could spark inflation and slow economic growth, hurting demand for crude.

J.P. Morgan said it now sees a 60% chance of a global economic recession by year-end, up from 40% previously, and Ritterbusch analysts noted a weaker Chinese economy due to the tariffs is “a major negative” for global demand growth and likely will lead to cuts in expectations.

This week's selloff also was fueled by the unexpected decision by OPEC+ to increase oil supply by 3x the planned amount next month.

"This pullback reflects market uncertainty and could weigh on global crude prices in the near term, particularly if trade tensions hinder economic growth in key oil-consuming regions," Joseph Dahrieh of Tickmill wrote. "Volatility is likely to increase as markets digest the full implications of the tariffs."

Goldman Sachs cut year-end 2025 price targets for Brent and WTI by $5/bbl each to $66 and $62, respectively, and HSBC trimmed its 2025 global oil demand growth forecast to 900K bbl/day from 1M bbl/day previously.

Still, wider supply risks remain, as the Trump administration has threatened a maximum-pressure policy on Iran and Venezuela, and any retreat in prices offers a greater opportunity to restrict production in those countries without suffering an inflationary price spike.

Rystad Energy analysts expect oil's recent downturn will prove short-lived due to anticipated summer demand and persistent geopolitical risks.

"With potential supply disruptions stemming from sanctions and tariffs - on both sellers and buyers - oil prices are unlikely to stay below $70 for long," according to Mukesh Sahdev, Rystad's global head of commodity markets.

Meanwhile, Sahdev sees the timing of OPEC+'s decision to accelerate supply increases is seen as strategic, given that non-OPEC+ production is not expected to grow next month, saying "OPEC+ has made an opportunistic move by boosting supply in May, capitalizing on the expected stagnation in non-OPEC production."

Front-month Nymex crude (CL1:COM) for May delivery finished -7.4% on Friday to $61.99/bbl, its lowest settlement value since April 26, 2021, and front-month Brent crude (CO1:COM) for June delivery closed -6.5% on Friday to $65.58/bbl, its worst settlement since August 20, 2021; for the week, WTI and Brent ended down 10.6% and 9.9%, respectively, in the largest one-week percentage declines since March 17, 2023, and October 6, 2023.

U.S. natural gas futures previously had benefited from buyers looking to diversify in an uncertain macro environment, but "the market is now pricing in the possibility that U.S. LNG exports may be affected by retaliatory measures of countries that have been hit with President Trump's latest round of tariffs," Gelber & Associates said; front-month Nymex gas (NG1:COM) for May delivery closed -7.3% on Friday and lost 5.6% for the week to $3.837/MMBtu. 

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Energy stocks, as represented by the Energy Select Sector SPDR Fund (NYSEARCA:XLE), finished -14.8% for the week.

Shares of U.S. refiners plunged this week, as the tariffs are seen resulting in weaker global GDP growth and thus slower fuel demand growth and weaker refining margins.

The refining sector (CRAK) already was over-supplied, so its margin recovery is heavily dependent upon the trajectory for demand growth, Wood Mackenzie's Alan Gelder said.

Shares of top refiners Marathon Petroleum (MPC), Valero Energy (VLO) and Phillips 66 (PSX) all plunged to their lowest since summer 2023, finishing Friday -5.8%, -8.4% and -7.8%, respectively.

"We are now expecting much lower demand growth in 2025 and in 2026, so not only do the tariffs stall the recovery in refining margins we previously forecast in 2026, but they also drive refining margins lower, perhaps back to 2021 levels," Gelder wrote.

Oilfield service stocks (OIH) also were hit hard, as the tariffs risk throwing supply chains into disarray while plunging oil prices could set the stage for a drop in drilling activity.

Analysts at Morningstar lowered their fair value estimates for the sector's big three oilfield service firms, SLB (SLB), Halliburton (HAL) and Baker Hughes (BKR), which finished Friday -11.3%, -10.7% and -13.3%, respectively.

The three companies could see a 2%-3% dip in oilfield revenue in FY 2025, and for each dollar lost in revenue, they could suffer $1.25-$1.35/share in lost operating profit, Morningstar said.

"Pipes, valve fittings, sucker rods are going to be impacted by tariffs, which will be felt by the big three in particular where they have multi-national sourcing strategies," Rystad Energy's Ryan Hassler wrote.