HOUSTON – Oil prices fell more than 2% on Thursday, as investors weighed the potential impact of President Donald Trump’s tariffs on global economic growth.

Brent crude futures settled at $68.64 a barrel, down $1.55, or 2.21%. U.S. West Texas Intermediate crude finished at $66.57 a barrel, down by $1.81, or 2.65%.

On Wednesday, Trump threatened Brazil, Latin America’s largest economy, with a punitive 50% tariff on exports to the U.S., pressuring his Brazilian counterpart Luiz Inacio Lula da Silva over Brazil’s trial of former President Jair Bolsonaro over charges of plotting a coup to stop Lula from taking office in 2023.

On Thursday, Lula called a meeting with ministers, a day after hinting at reciprocal measures in a post on social media.

Trump has also announced plans for tariffs on copper, semiconductors and pharmaceuticals. His administration sent tariff letters to the Philippines, Iraq and others, adding to over a dozen letters this week including to powerhouse U.S. suppliers South Korea and Japan.

Trump’s history of back-pedalling on tariffs has caused the market to become less reactive to such announcements, said Harry Tchilinguirian, group head of research at Onyx Capital Group.

“People are largely in wait-and-see mode, given the erratic nature of policymaking and the flexibility the administration is showing around tariffs,” Tchilinguirian said.

Policymakers remain worried about inflationary pressures from Trump’s tariffs, with only “a couple” of officials at the Federal Reserve’s June 17-18 meeting saying they felt interest rates could be reduced as soon as this month, minutes of the meeting released on Wednesday showed.

Higher Interest Rates Makes Borrowing Expensive

Higher interest rates make borrowing more expensive and can slow demand for oil.

OPEC+ oil producers are set to approve another big output boost for September, as they complete unwinding voluntary production cuts by eight members and the United Arab Emirates’ move to a larger quota.

However, OPEC+ indicated it may pause output hikes in October because of a possible peak in oil demand, said Phil Flynn, senior analyst with Price Futures Group.

“Earlier fears of reaching ‘peak oil’ have not materialized, and rising prices incentivize the discovery of new oil sources, both domestically and offshore,” Flynn wrote in a note on Thursday.

Elsewhere, U.S. Secretary of State Marco Rubio held “frank” talks with Russian Foreign Minister Sergei Lavrov in which he expressed Washington’s frustration around a lack of progress in ending the war in Ukraine.

Trump said recently he was considering a bill that would impose tougher sanctions on Russia.

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(Reporting by Erwin Seba in Houston, Anna Hirtenstein and Robert Harvey in London. Additional reporting by Katya Golubkova in Tokyo and Emily Chow in Singapore; Editing by Rachna Uppal, Joe Bavier, Jane Merriman, Louise Heavens, Tomasz Janowski and David Gregorio)