- Democrats took the lead in both the House and the Senate.
- Trump said on Tuesday that he has no immediate plans to attack Iran.
- Market participants are looking forward to the US monthly employment report.
Oil prices collapsed on Wednesday after Trump lost the midterm elections, increasing the odds of ending the Iran war. JD Vance blamed the war for their loss. Moreover, experts believe Democrats will now pressure the president to end the expensive war. Elsewhere, market participants are looking forward to the US non-farm payrolls report.
Brent futures (Source: Bloomberg)
After weeks of waiting, the US midterm elections finally came, and Democrats took the lead in both the House and the Senate. The outcome means that Trump’s power to implement policies has weakened. Analysts were particularly keen on the Iran war, which many believe was the cause of Trump’s election loss. His unyielding stance and the support of the two houses have prolonged the war, which has cost the US economy.
“The elections are leading the market to conclude that Trump might now be inclined to make a deal,” said Andy Lipow, president of Lipow Oil Associates.
“The Democrats may try to restrict funding for the war,” Lipow said. “Trump’s announcement earlier this week that the US will cut some funding to Israel could force Jerusalem to accept Washington’s decisions,” he said.
Notably, Trump said on Tuesday that he has no immediate plans to attack Iran. For weeks, markets have been worried about an escalation in the war after the elections. Trump had said the US and Israel were planning to attack Iran. He went as far as to warn Gulf nations to prepare for an intense military campaign in the region. Oil prices rose in response to these remarks.
However, the trend shifted last week amid hopes for a resumption of talks between the two countries. The first move that rekindled these hopes was JD Vance’s letter to Iran. The aim of the letter was a resumption of negotiations.
Afterward, US Secretary of State Marco Rubio said that Trump was looking to end the war using diplomacy. If this is the case, oil prices will drop further. However, experts still point to the risk of an escalation despite the election outcome and recent developments.
Elsewhere, market participants are looking forward to the US monthly employment report. The data will show the state of the labor market and shape the outlook for Fed rate hikes.
