Oil prices were trading down again Monday despite tensions in the Middle East. The latest market mover is not the tensions surrounding Iran, and it’s not outages in Libya and Venezuela. It’s not even oil production or inventory moves in the United States—it’s China.

Specifically, it’s the most recent move by China to allow its currency to devalue that has the markets in an uproar. The move follows a last-week announcement by President Donald Trump that the US plans to slap tariffs on the remaining $300 billion of goods that come in from China.

At 1:54pm EST, WTI was trading down $0.64 (-1.15%) at $55.04 per barrel. Brent was trading down $1.77 (-2.86%) at $60.12.

And it’s not just oil prices that are feeling skittish. Stock markets around the world are in full-blown panic mode, with gold and government bonds taking full advantage. Gold prices jumped more than 1%.

Global stocks fell as China retaliated on Monday by letting its currency devalue below its typical 7-to-1 ratio with the US dollar for the first in a decade. China’s move shook the global markets as fear set in that it might be only the beginning of a currency war with the United States.

The devaluation caught the attention President Donald Trump.

“China dropped the price of their currency to an almost a historic low. It’s called ‘currency manipulation.’ Are you listening Federal Reserve? This is a major violation which will greatly weaken China over time!” President Donald Trump tweeted on Monday in response.

The Dow was trading down almost 3% on Monday afternoon. The FTSE 100 was down 2.47%, while Asian markets were down 1.6%.

While oil prices took a beating Monday, it is largely expected that China will not target US oil even if it retaliates with additional tariffs. China has scaled back its purchases of US crude, and is therefore unlikely to be directly affected by further tariff actions.

By Julianne Geiger for Oilprice.com

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