Oil prices pulled back as traders viewed the much-anticipated talks between US President Donald Trump and Chinese leader Xi Jinping as a potential route to a resolution in the US-Iran war.
“The market is waiting to see whether President Trump will be able to convince President Xi to put pressure on Iran to reopen the Strait of Hormuz…to have the restart of oil supplies to the rest of the world,” said Andy Lipow of Lipow Oil Associates.
While the Dow edged lower, both the S&P 500 and Nasdaq powered to fresh records.
The Nasdaq led major US indices, piling on 1.2% behind big gains in most tech giants, including Google parent Alphabet and Nvidia.
The strong session on Wall Street came on the heels of a benign day in Europe and Asia, where leading bourses also advanced.
That came despite a US wholesale inflation report that greatly exceeded expectations, following Tuesday’s rise in the consumer price index.
Wholesale prices rose 6% for the 12 months ending in April, according to US department of labor data.
Month-on-month increases greatly exceeded expectations and were at their highest level since March 2022.
The average price of a gallon of diesel in the United States is up around 50% since the start of the war, according to the AAA motor club.
“There are also signs that higher energy costs are beginning to bleed through to other goods and services, like transportation costs, which will keep producer price inflation lifted in the coming months,” said Grace Zwemmer, US economist at Oxford Economics, in a note.
Also on Wednesday, the International Energy Agency warned that countries were tapping into oil inventories and strategic reserves at a “record pace”, meaning further price volatility was likely.
“Rapidly shrinking buffers amid continued disruptions may herald future price spikes ahead,” the IEA warned in its monthly report.
Despite these concerns, equity markets advanced for the most part, a sign of hope ahead about the talks in China.
Trump landed in Beijing, accompanied by leading CEOs, including Tesla boss Elon Musk and Nvidia chief Jensen Huang.
Trump and Xi are set to discuss extending a one-year tariff truce, which the two leaders reached during their last meeting in South Korea in October, although a deal is far from certain.
China’s controls on rare earth and agriculture exports are also expected to be on the menu.