It is not jumping the gun to conclude that looking back at the major events of the first half of 2025 will provide a broadly reliable picture of the impending second half of the year. The January–June period was shaped almost exclusively by the policies of the Trump apparatus. It was volatile, unpredictable, and incoherent at times. No significant change is anticipated for the next six months. Probably the most salient takeaway of the past half a year is the realisation that the U.S. President can only think in terms of deals, victories, profits (financial, that is), and absolute dominance. For him, the sine qua non of the administration is governing by executive power, preferably via social media channels, without any checks or constraints, be they judicial or congressional, and forcing his will on allies and foes alike, often in a confrontational and hostile manner.

The modus operandi of the Trump administration has had a major impact on the social fabric of the U.S., geopolitics, the domestic and global economy, and, inevitably, the oil balance. Below, we attempt a brief look at each of these elements and try to foresee what the second half of the year might have in store for us.

It is axiomatic that the U.S. has never been more divided. The best example of this division was the Los Angeles riots at the beginning of last month, when protesters and law enforcement clashed during raids on illegal immigrants. The President was quick to federalise the California National Guard, sidelining the LAPD. The job of the police is to maintain order and protect citizens, while the National Guard is tasked with responding to natural disasters and can be deployed against foreign adversaries. When it replaces the police, people become the enemy. This leads to further social unrest, something that will likely be the zeitgeist of the second half of the year.

On the geopolitical front, the U.S. Administration's success rate has been mixed. The President typically responds to the right questions (immigration, ineffective federal bureaucracy, protecting the domestic economy, and foreign aid) with the wrong answers. However, demanding an increased defence budget from NATO members will likely prove beneficial in the war against Russia. Nonetheless, he spectacularly failed to fulfil his campaign pledge of ending the Ukrainian war. A few thousand miles south, he has taken full advantage of a weakened Iranian regime, striking its nuclear facilities. Success? Not quite. Claims that Iran’s capabilities have been obliterated seem exaggerated. Meanwhile, and despite last night’s claims that Israel has agreed to the ‘necessary conditions’ of a 60-day ceasefire with Hamas, the ongoing and ghastly atrocities in Gaza and the West Bank suggest that protracted peace is anything but imminent. Immediate crisis, however, has been averted, with positive consequences for the economy and oil supply.

The incumbent administration is a staunch advocate of supply-side economics – tax cuts and deregulation. The Big Beautiful Bill, the U.S. budget, was narrowly passed in the Senate yesterday, and if ultimately signed into law, it will add a few trillion dollars to the already mountainous U.S. debt pile, something that is vehemently refuted by the Republicans. Lowering tax rates and cutting spending simply cannot foster economic prosperity. It will redistribute wealth from the bottom to the top with no trickling back down. Additionally, servicing the growing debt burden will be an onerous exercise. The brazen pressure the US President puts on the Fed chair to lower rates is no coincidence.

Not even import tariffs would make up for the shortfall, and their fate remains uncertain. After the surreal performance on April 2, what seems certain is that trading partners will be coerced into making concessions. However, the actual level of reciprocal tariffs is still unclear. Current U.S. excise duties, including the 10% baseline on most imported goods and 25% on steel, aluminium, and auto parts, are around 16%, compared to around 2% under Joe Biden. If tariffs reduce the trade deficit, they will likely lead to renewed inflationary pressure. If they are hypothetically cut back to pre-Trump levels, financing unfunded tax cuts will prove impossible. Cast your mind back to Liz Truss’s disastrous mini-budget in 2022.

These are ominous signs, but equity investors appear undeterred for now. U.S. stock indices returned anywhere between 4.3% and 6.5% in the first half of 2025. It was a spirited performance, which suggests that our pessimistic view of economic prospects may prove unjustified, and we could end up with eggs on our faces. Retreating bond yields also hint at unbroken buoyancy, as conviction grows about U.S. rate cuts, which in turn would provide invaluable economic support. The dollar, however, is viewed as the counter-narrative to the prevailing confidence. It lost 10% of its value over the last six months, mainly due to the conspicuous lack of trust in U.S. economic policies. As a result, European stock indices, while underperforming their U.S. peers in dollar terms, have had the upper hand in domestic currencies. The U.S. budget and the planned reciprocal trade sanctions, expected to come into effect on July 9, cast dark clouds over the performance of the U.S. and global economies. See the latest data on US manufacturing. The sector contracted for the fourth successive month in June because of, yes, you guessed it, rising input prices due to tariffs.

The downbeat economic view is mirrored in oil demand estimates. Despite differing prognoses on absolute levels of consumption, the three main agencies have all downgraded their 2025 projections between December and June. Non-OPEC+ supply is widely expected to grow at a healthy clip this year, and the OPEC+ decision to focus on regaining its fair share of the market is loosening the oil balance further. Notwithstanding the supply excess, U.S. and OECD stocks have not yet started swelling as reflected in last night’s API data, recording small builds in crude and gasoline stocks but a significant plunge in distillate inventories. The structures of the two major crude oil benchmarks remain in healthy backwardation. The expected forthcoming stock builds will begin narrowing the front-end premium, which should be coupled with declining prices in the coming months. The latest oil price survey by Reuters echoes the absence of tangible bullish impetus. Although participating analysts revised the 2025 predictions slightly up to $67.86/bbl for this year due to elevated geopolitical risk, it is notable that the forecast is $14/bbl lower than a year ago and $7/bbl below the January level, marking the beginning of Donald Trump’s second term.

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