Oil is still trading more than $35 above where it sat before the conflict
Producer price inflation surged 1.4% monthly in April, the largest jump since March 2022, exceeding market expectations and signaling persistent inflationary pressures. Oil prices fell 2% to $105.57/barrel as diplomatic efforts between US and Iran stalled, though crude remains well above pre-conflict levels due to Middle East supply disruptions.
- Producer Price Index rose 1.4% monthly in April, largest jump since March 2022
- Brent crude fell 2% to $105.57/barrel but remains $35+ above pre-conflict levels
- Strait of Hormuz effectively closed; roughly 20% of global oil passes through it
- Trump visited China with technology executives to meet Xi Jinping
- Federal Reserve expected to hold rates steady; market now pricing in possible increases by year-end
Wall Street reached new highs driven by technology stocks while oil prices remained elevated due to stalled US-Iran diplomatic negotiations and Middle East supply concerns.
Donald Trump arrived in China this week carrying something more valuable than a briefcase: a delegation of technology executives. The visit, scheduled to include talks with Xi Jinping, had markets watching closely, but the real story unfolding wasn't in Beijing. It was in the numbers coming home.
Diplomatic efforts to broker peace between Washington and Tehran have collapsed into silence. Earlier in the week, Trump dismissed Iran's response to an American peace proposal as "unacceptable" and "garbage." There were whispers about whether the White House might resume military strikes. Tehran offered nothing in return—no concessions, no signals of willingness to move. The result is a negotiation that has simply stopped moving.
This stalemate has real consequences. The Strait of Hormuz, the waterway off Iran's southern coast through which roughly one-fifth of the world's oil passes, remains effectively closed. It has been for weeks. Brent crude futures dropped 2 percent to $105.57 a barrel on Wednesday, but that decline masks a deeper reality: oil is still trading more than $35 above where it sat before the United States and Israel launched their joint offensive against Iran in late February. The International Energy Agency warned that global oil supply will fall short of demand this year because the conflict is ravaging Middle Eastern production. Investors, according to analysts at Deutsche Bank, are growing anxious. Last week's headlines suggested a deal was imminent. This week made clear it was not.
Back home, inflation data arrived with teeth. The Producer Price Index for April surged 1.4 percent month-over-month—the largest monthly jump since March 2022. Year-over-year, it climbed 6 percent, the biggest annual increase since December 2022. Both figures blew past what markets had expected. Core producer prices, excluding food, energy, and trade, rose 0.6 percent monthly and 4.4 percent annually, again outpacing forecasts. The culprit is clear: the oil crisis born from the Iran conflict is pushing inflation higher across the American economy. Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics, noted that while the headline number grabbed attention, some underlying components—management fees, airfares, health insurance—showed more restraint. Still, the overall picture is one of persistent price pressure.
The Federal Reserve is unlikely to cut rates anytime soon. Market traders have begun pricing in the possibility of rate increases before year's end if inflation doesn't cool. That prospect has reshaped how investors are thinking about the months ahead.
On Wall Street, the mood was mixed. Alibaba shares climbed 7.3 percent despite the Chinese e-commerce giant reporting lower adjusted quarterly earnings. Wix.com collapsed 26 percent after missing profit expectations. GMR Solutions, a medical emergency services provider, opened at $13.50 on its first day of trading—10 percent below its $15 initial offering price, valuing the company at $3 billion. PayPal dipped slightly after announcing a partnership with Anthropic to provide artificial intelligence training for small businesses. Fervo Energy, a Houston-based geothermal developer, opened at $36, a 33 percent jump above its $27 offering price.
The week's story, then, is one of competing pressures. Technology stocks are drawing money. Inflation is rising. Oil remains elevated. Diplomacy has stalled. The Fed is watching. And in Beijing, Trump is meeting with Xi while the markets wait to see what, if anything, changes.
Citações Notáveis
Trump dismissed Iran's response to a peace proposal as 'unacceptable' and 'garbage'— Donald Trump
Investors are growing anxious that a U.S.-Iran deal appears more distant than recent optimistic reports suggested— Deutsche Bank analysts
A Conversa do Hearth Outra perspectiva sobre a história
Why does a stalled negotiation between the U.S. and Iran matter so much to Wall Street?
Because it controls the oil spigot. When diplomacy breaks down, the Strait of Hormuz stays closed. When the strait closes, a fifth of the world's oil can't move. When oil can't move, prices stay high. And when oil prices stay high, everything else gets more expensive.
But oil fell 2 percent this week. Doesn't that suggest things are improving?
It fell from a very high place. We're still $35 above where we were before the conflict started. The fall was actually a sign of disappointment—investors had hoped for a deal. When the deal didn't materialize, they sold a little. But the underlying problem hasn't changed.
What does the producer price data tell us that consumer prices don't?
Consumer prices lag behind. Producers feel the squeeze first. When a factory's input costs spike—oil, raw materials, labor—that's the canary in the coal mine. A 1.4 percent monthly jump is the kind of number that keeps central bankers awake.
So the Fed won't cut rates.
Won't cut, and might raise. That's the real shift. A month ago, traders were betting on cuts. Now they're hedging for increases. That changes everything about how expensive borrowing becomes.
Why did Alibaba rise when it reported weaker earnings?
Because the market is looking past the quarterly number to the bigger picture. China is where Trump is right now. Tech stocks are in favor. Sometimes the narrative matters more than the quarter.
What's the through-line here?
Uncertainty. Oil is uncertain. Diplomacy is uncertain. Inflation is uncertain. The Fed's next move is uncertain. Markets hate uncertainty, but they're learning to live with it.