Oil, chip stocks and the dollar were under pressure in Asia on Thursday and just about everything else was up after US voters swept the Democrats to a series of stunning midterm election wins, a result that raised hopes for an end to the US-Iran war.
Brent crude futures dived nearly 9% overnight, falling below $100 a barrel. Brent has dropped by about 20% so far this week. If sustained through to Friday's close, it would make for the largest weekly drop in oil prices since April 2020 when US crude briefly fell into negative territory.
Tumbling energy prices encouraged a rally in bonds, which lowered yields, pulled the dollar to a one-month low of $1.1273 per euro, and helped stocks. The yield on the benchmark 10-year note fell to a two-month low and was last at 4.85%.
"The blue wave means the federal government is sure to be divided on most issues," said Deborah Cunningham, CIO for global liquidity markets at Federated Hermes.
"That typically creates a blockade against new legislation, an environment which broad financial markets traditionally view favourably as variables decrease."
Broad stock indexes climbed on the clear outcome, with the S&P 500 closing 1.6% higher and European shares notching a two-month high, although tech stocks struggled as investors fear greater scrutiny over AI infrastructure build-out.
European stock futures were 0.2% higher, while Nasdaq futures slid 1% indicating investor angst over chip and data centre stocks.
Democratic data-centre opponents who campaigned, in part, on moratoriums on data centre construction won stunning victories in Texas and Georgia in a sign public opinion is shifting on AI.
Asian chipmakers sink
South Korea's chipmaker-heavy KOSPI sank nearly 6% and remained within a whisker of a new seven-month low. Taiwan's benchmark index fell over 3%, poised for an 8% weekly decline, its worst weekly performance since April 2025.
Tech equipment suppliers dragged on the Nikkei, which fell 2%, although the broader Topix was 0.8% higher, underscoring the divergent market reaction to the decisive election results.
"AI is where the impact becomes more nuanced," said Masahiko Loo, chief fixed income strategist at State Street Investment Management.
Loo said Democratic control raises the prospect of tougher scrutiny around data centres, power demand and consumer costs, but does not mean a free hand as President Donald Trump retains veto power.
"The blue wave therefore raises the political risk premium around US AI without necessarily derailing the broader AI capex cycle," he said.
For now, investors sought refuge in markets that have struggled this year, with the benchmark indexes in India, Hong Kong and Australia rising sharply.
Solar supply chain stocks also jumped the most, in anticipation of Democrats boosting support for renewables, while shares in data centre companies and their equipment suppliers across Asia fell on expectations of tougher regulation.
Oil slides on hopes of end to Iran war
At $94.21, Brent crude was testing overnight lows as traders chose to bet that Trump, facing a Democratic Congress and hurt by high energy prices caused by the Mideast conflict, would be less likely to escalate the war with Iran.
Trump acknowledged on Wednesday that the war played a role in Republicans' defeat and his vice president, JD Vance, was even more blunt on X: "The reason we lost is the war."
A resolution could push oil prices lower still, alleviating inflation pressure and reducing the likelihood of future interest rate hikes.
The 2-year US yields, which track short-term rate expectations, fell about 2 bps to 4.56%.
In currencies, the dollar was broadly weaker, with investor focus on the Bank of England's policy announcement later on Thursday.
The central bank is expected to raise rates to contend with inflation pressure from soaring energy costs, although it may push back against investor bets that several more increases will follow next year.
(Reporting by Tom Westbrook; Editing by Sonali Paul and Sam Holmes)
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