By Anna Szymanski
Nov 6 (Reuters) – Markets had long been pricing in a “blue wave” in the United States midterm elections, but what they got was a deluge as Democrats regained control of the House and Senate in decisive fashion. That set the stage for a volatile few days in markets as oil prices plummeted on Wednesday and a tech-driven equity rout took hold by Thursday.
Brent crude plunged to below $100 a barrel on Wednesday and was headed for its biggest weekly fall since 2020 on Friday. Investors appeared to believe that Tuesday’s drubbing of President Trump’s Republican Party significantly reduced the chances for a renewed round of fighting in Iran.
But even that massive mood shift was overshadowed by a market meltdown on Thursday. Fears that emboldened Democrats may slow data center building hammered tech stocks, wiping away roughly $3 trillion in market cap from the S&P 500.
Markets could be in for a bumpy November.
The Democrats advanced in all parts of the country, including in Republican strongholds like Texas and Kansas, gaining at least 40 seats in the House of Representatives and at least seven in the Senate – both above expectations. Cost-of-living concerns appeared to be the biggest sore point, on top of the Iran war itself, a reminder of just how politically toxic elevated inflation can be.
Brent crude, which had fallen in the days before the election on hopes for a diplomatic resolution between Washington and Tehran, tumbled 9% on Wednesday to around $94 a barrel.
However, prices spiked nearly 4% on Thursday following fresh tanker attacks in the Gulf, suggesting investors may have been too quick to rule out a return to active combat.
Still, it’s understandable why markets are pricing in de-escalation. Vice President JD Vance blamed the Republicans’ losses squarely on the Middle East conflict in a strongly worded social media post on Wednesday. Trump later acknowledged that this was probably correct, though he also said the war was still worth it to stop Iran from obtaining a nuclear weapon.
The president also said on Tuesday that the US would end its $4 billion in annual military aid to Israel at the end of this year – earlier than previously anticipated – indicating that he may have been seeking to distance the US from its partner in the war. However, he may also have simply wanted to eliminate a talking point used by several Democrats in their campaigns.
Regardless, even if the White House wants to extricate itself quickly from the Gulf, its current options for doing so all have serious downsides that may have only worsened after the election, so a resumption of active fighting cannot be ruled out.
Falling energy prices helped lift Treasuries, reflecting expectations of more modest inflation moving forward and a less hawkish Federal Reserve interest rate trajectory. The yield on the benchmark 10-year note dropped as low as 4.82% on Thursday, its lowest since September.
But weak oil prices weren’t the only reason bonds got a bid. Investors were also seeking a safe haven as they unloaded tech stocks in droves on Thursday. The Nasdaq recorded its biggest one-day drop since Trump’s April 2025 “Liberation Day” tariff announcement, entering correction territory. Asian equities were also hit hard, with South Korea’s KOSPI shedding more than a tenth of its value this week and Taiwan’s index recording its biggest weekly decline since 1991.
The acute cause was fear that Democrats would slow the AI capex boom, as many made moratoriums on data center construction a key part of their winning campaigns.
But was yesterday’s move simply an overreaction to Tuesday’s “blue tsunami”? Maybe, as futures indicate that US equities could get some relief on Friday.
Moreover, there’s little sign on the ground that the AI investment boom is stuttering. Marvell Technology announced on Monday that it is acquiring optical components maker Lumentum in a $115 billion all-stock deal, including debt, one of the biggest deals of 2026. Meta also said on Tuesday that it would raise another $15 billion through a five-part dollar bond offering to fund its AI expansion.
On the other hand, it’s good to remember that the AI trade has been jittery for weeks – and the massive fundraising we’re continuing to see could be firms trying to get in before the door closes. If that’s the case, then leaders in the US and elsewhere should be worried. AI has helped prop up US and global growth in the past two years despite all the macro headwinds, so a further tech selloff could have ripple effects far beyond equity markets.
So what else happened this week away from the midterms drama? The world’s most valuable company, Apple, reported earnings on Monday. While the iPhone maker beat revenue expectations, its share price fell on concerns that its margins were being squeezed by rising chip costs.
Meanwhile, the Bank of England hiked interest rates by 25 basis points, the central bank’s first rate rise in three years, though several policymakers indicated that markets may be pricing in too much additional tightening.
Finally, the unnerving wave of cyberattacks continues. There was last week’s Binance heist, the biggest cyber theft in history, as well as the hacking of Ukraine’s air defense alert systems and the shutdown of supermarket freezers across Europe this week. These all highlight the new economic vulnerabilities that are emerging in the AI era – a risk that no one knows how to price.
So what’s on the data diary? October US nonfarm payrolls data will come out later today, with jobs expected to have risen by 65,000, and more US inflation data will be released next week. But what happened last month will likely carry a lot less weight with markets than what happened on Tuesday and what that means for the next two years.
Before you head off, take a look at some questions ROI columnists have recently been exploring:
• How could shifting 2028 US presidential bets impact markets?
• Why is Big Oil remaining cautious despite its big profits?
• Why might a US-Canada aluminium pact be bad news for Europe?
• Could healthcare be the next big AI winner?
• Might European energy consumers catch a break this winter?
• How much did Asian crude imports bounce back last month?
• Why is Qatar buying US LNG?
• Could Trump’s foreign policy blow up his AI ambitions?
• What are Asian countries hoping the US midterm sweep will change?
• What is causing significant confusion in the copper market?
• Why aren’t Indian equities keeping up with the country’s booming growth?
Want to receive the Morning Bid in your inbox every weekday morning? Sign up for the newsletter here. You can find ROI on the Reuters website, and you can follow us on LinkedIn and X.
Opinions expressed are those of the authors. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.
Comments