Daily · US Midterms and Global Market Shock · November 5, 2026

Key points

US Midterms: Democratic Sweep and Market Volatility

Democrats won control of both the House and Senate in the November 3, 2026 midterm elections, flipping key Republican seats in Texas, Ohio, and South Carolina. This shift creates a divided government with President Trump, who signaled willingness to work with Democrats but posted an image of a hat reading 'VETO' on social media. The new Congress will convene in January 2027, with Hakeem Jeffries expected to become the first Black Speaker of the House.

The election results triggered immediate market turbulence. On Wednesday, the Dow Jones Industrial Average jumped over 1,500 points (3%) as investors priced in a potential end to the Iran war and reduced political gridlock. However, this rally reversed sharply on Thursday. The Nasdaq Composite fell 4.41% to 24,602.77, and the S&P 500 dropped 3.29% to 7,435.99. Tech stocks led the rout, with Micron falling 12.81%, Nvidia down 7.20%, and Tesla declining 10.79%. The VIX volatility index rose 44.91% to 24.07, reflecting heightened uncertainty.

The selloff was driven by fears of tighter regulation on AI data centers. Voters opposed data centers in 40 of 41 ballot measures across the US. According to Bloomberg, half of planned AI data centers in the US are now under review following Democratic wins in key states like Texas and Georgia. Incoming Governor-elect Gina Hinojosa of Texas proposed a moratorium on new data center construction. Altimeter Capital CEO Brad Gerstner warned that 10 to 15 gigawatts of expected AI capacity might not come online in 2027 due to these regulatory headwinds.

This suggests a structural shift in the US tech landscape where political risk now directly impacts capital expenditure. The mechanism linking the election to markets is the threat of increased scrutiny on AI infrastructure and potential restrictions on executive power, which may slow the pace of the data center boom that has driven recent GDP growth.

Energy Markets: Oil Crash and Hormuz Disruptions

Brent crude prices fell 8.7% to settle at $94.62 per barrel on Wednesday following the election results, before trading at $93.81 on Thursday. This decline represents a near-17% weekly drop, the largest since April 2020, as markets priced in a faster end to the Iran war. However, physical supply risks remain acute. On November 5, Iran's Revolutionary Guards reported that five oil tankers and a tugboat caught fire after striking naval mines in the Strait of Hormuz. UKMTO also reported a tanker struck by two unidentified projectiles off the coast of Qatar.

Despite the price drop, European gas prices remain elevated. The front-month TTF price fell 2.2% to $96.87 per megawatt-hour but remains near four-year highs. QatarEnergy extended force majeure on LNG deliveries until at least the end of December 2026. The IEA warned that global LNG supply will decline by 3% this year, with production expected to remain tight into 2027. European gas storage levels are at their lowest seasonal fill since 2022, at around 74% of capacity.

The divergence between falling oil prices and persistent supply disruptions highlights the complexity of the current energy environment. While political de-escalation hopes reduce the risk premium in crude, physical bottlenecks in the Strait of Hormuz and reduced LNG flows keep European gas costs high. This affects industrial operating margins and inflation trajectories across the EU and Gulf regions.

Bank of England Raises Rates to 4%

The Bank of England raised its base rate from 3.75% to 4.0% on November 6, marking the first increase in over three years. The Monetary Policy Committee voted 8-1 for the hike, with one member favoring a larger increase to 4.25%. The decision was driven by CPI inflation rising to 3.5% in September, well above the 2% target, largely due to energy costs. Bank staff project headline inflation to reach around 5% by the second quarter of 2027.

The hike impacts approximately 510,000 tracker mortgage-holders and 470,000 variable-rate borrowers in the UK. For a typical tracker loan, monthly repayments will increase by about £31. The Bank indicated that more rises are likely, with three members referring to 'rises' plural. Sterling reached its highest level since the Brexit referendum against a basket of currencies, reflecting confidence in the Bank's inflation-fighting stance and relative political stability.

This move signals a prioritization of inflation control over growth support. For businesses, this means higher borrowing costs and potential pressure on consumer spending. The mechanism is direct: higher policy rates increase funding costs for banks and corporates, potentially slowing investment and consumption in an economy already facing energy cost pressures.

Ukraine Peace Talks and Security Architecture

Trilateral talks between the US, Russia, and Ukraine are scheduled for November 10-11 in Abu Dhabi. Jared Kushner and Steve Witkoff will represent the US, while Vladimir Medinsky leads the Russian delegation. The talks aim to discuss ending the war and establishing a post-war security architecture for Europe. President Zelenskyy expressed hope that the new Democratic Congress would bring more support for Ukraine, though German Chancellor Friedrich Merz remained skeptical, noting Trump's tendency to bypass Congress.

In related developments, US First Lady Melania Trump hosted Russian and Ukrainian officials in Washington to recognize a partial ceasefire she helped broker in Oleshky. Zelenskyy awarded her the Order of Princess Olga, First Class. Meanwhile, Russia intercepted 496 Ukrainian drones overnight on November 5, indicating continued high-intensity conflict despite diplomatic efforts.

The Abu Dhabi talks represent a critical test for US foreign policy under a divided government. The interests of the actors are distinct: the US seeks to reduce military engagement and secure a deal; Ukraine demands security guarantees and continued aid; Russia aims to legitimize its territorial gains and weaken Western unity. The outcome will shape sanctions regimes, energy flows, and defense spending across EU and Gulf markets.

Geopolitical and Regulatory Developments

Switzerland adopted measures from the EU's 21st sanctions package against Russia and Belarus, adding 254 individuals and entities to its lists and banning operations with 33 Russian banks. This aligns Swiss compliance frameworks more closely with EU standards, affecting cross-border financial transactions.

In Asia, South Korea deployed maritime patrol aircraft and an explosive ordnance disposal team near the Strait of Hormuz to help keep the waterway open. The deployment is strictly noncombat and under South Korean command. Additionally, Japan is considering nearly doubling its five-year defense spending to 80 trillion yen ($508 billion), focusing on drones and AI battlefield management.

In the tech sector, Nvidia ordered data center partners to sell at least 51% of their services to non-Chinese companies, tightening access to advanced AI chips for Chinese firms. This move, implemented over the summer, aims to reduce criticism from US lawmakers regarding China's use of overseas leases for AI tasks.

Our read

The Democratic sweep of Congress introduces a new layer of regulatory risk for the US tech sector, particularly in AI infrastructure, which may slow the pace of data center construction and affect global supply chains. For European and Gulf-based firms, the combination of rising energy costs, driven by the Bank of England's rate hike and persistent LNG shortages, will pressure operating margins and inflation expectations. The scheduled Abu Dhabi talks on Ukraine offer a potential path to de-escalation, but the continued intensity of drone attacks and the complex interests of all parties suggest that any peace deal will be fragile. Decision-makers should monitor the outcome of the November 10-11 talks and the implementation of US data center regulations, as these factors will directly impact energy prices, tech investment, and geopolitical stability in the coming months.

This analysis was produced automatically by a large-language-model system from the public sources listed below. It is AI-generated content: it reflects the sources and the model's processing, not an editorial opinion, and may contain inaccuracies. It is not investment, financial or legal advice and contains no call to action; base decisions on the original sources and on advice from qualified professionals.

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