US Midterms Shake Markets: What it means for stocks, dollar, oil and gold

The US midterm election outcome is drawing attention from financial markets. Investors are assessing what the new-look Congress could mean for US economic policy, government spending, trade and technology stocks. In simple words, when a president's party loses control of Congress, it gets harder to pass big new laws. Markets try to price in that change fast.

The outcome has triggered a sharp reaction across global financial markets.

How did Wall Street react?

Wall Street rallied as investors welcomed greater political clarity and bet that a Democratic-controlled Congress could limit abrupt policy changes. The Dow Jones Industrial Average gained 1,569 points, jumping 3.03%. The S&P 500 gained 1.58% and the Nasdaq Composite advanced 1.44%. Markets do not like surprises. If Congress can slow sudden policy shifts, investors feel they can plan better.

The impact is already visible across markets. The US dollar, Treasury bond yields, crude oil prices and gold all started reacting at the same time, reflecting changing investor expectations after the results.

Let us see how and why the various sectors and assets are reacting to the election outcome.

Market prices and movements

Source: Trading Economics; MCX India

Why did oil prices plunge after the results?

The biggest boost to the financial markets came as oil prices plunged after the results. Why does this matter? Cheaper oil lowers fuel and transport costs, which can cool inflation. Lower oil prices could ease inflationary pressures.

The jump of nearly 1,600 points in the Dow Jones Industrial Average is a case in point. The Dow tracks 30 large US companies, so it is seen as a barometer of homegrown American business. Falling oil prices can help bring costs down for these firms. Cheaper fuel means lower transport and production costs, which can protect profits for US businesses.

Brent crude fell toward $94 per barrel on Thursday. This extends a decline of nearly 9% in the previous session and pushes prices to a two-month low.

The drop came as a Democratic sweep in the US midterm elections fueled expectations that the Trump administration could face growing pressure to bring the war with Iran to an end. A Democratic-controlled Congress could limit military funding for operations in the Middle East. Senate Minority Leader Chuck Schumer has vowed to push for an end to the conflict. If the war ends sooner, worries about oil supply fade. Prices usually follow.

Crude exports from the Persian Gulf have begun recovering, and supply now exceeds near-term demand. When there is more oil than buyers need, prices tend to fall. Overall, the international oil benchmark has fallen about 17% so far this week, according to Trading Economics.

Why are some tech stocks cheering while others slide?

AI heavyweights like Microsoft, Amazon, and Apple are getting support from the election results. Why? Most of these technology stocks that surged are hyperscalers, or the largest cloud providers.

Hyperscalers are giant companies that rent out huge computing power. They combine massive capex spending with strong free cash flow and have the most experience and capability to build AI data centers. Capex is money spent on building things like data centres. Free cash flow is the cash left after those costs.

The midterm results are likely signalling restrictions on new data center developments in some states. That could make the capacity hyperscalers have already built even more important. If building new data centres gets harder, the ones already running become more valuable. And, so their stocks are in demand in the stock market.

The same midterm results, along with market sentiment, are turning the heat on data centre and some chip stocks. These stocks came under pressure amid concerns that the pace of AI development could slow. The worry is that scrutiny of AI infrastructure spending could get tighter. Chip makers and data centre builders depend on heavy AI spending. If that spending faces more checks, chip makers' growth could slow.

The US dollar was the big casualty

One significant casualty of the midterm election results was the US dollar index. It sharply declined and was on track for its largest daily percentage drop in three weeks. The results eliminated uncertainty in the market as investors assessed potential regulatory changes.

The dollar index, which measures the greenback against a basket of currencies, fell 0.34% to 101.22. It is on track for its biggest drop since October 15. The index shows how strong the dollar is against other major currencies. A falling index means the dollar is losing strength.

Bond yields slip to a near two-month low

The yield on the US 10-year Treasury note fell to approximately 4.85% on Thursday, its lowest in nearly two months, after the US midterm election results. The yield on the US 30-year bond eased to 5.24% on November 5, 2026, a 0.04 percentage point decrease from the previous session. Over the past month, the yield has fallen by 0.42 points. It remains 0.56 points higher than a year ago.

Until the election results, yields were moving up as investors were dumping bonds. When investors sell bonds, bond prices fall and yields rise. The tables have turned now, and yields are on the way down. Buyers are coming back to bonds, which pushes prices up and yields down.

Will the Fed still raise rates in December?

Despite political changes, expectations for the Federal Reserve's interest rate trajectory remain stable. Markets are currently pricing an over 82% probability of at least a 25 basis points rate increase at the December meeting, an increase from 77.4% previously. A basis point is one hundredth of a percentage point, so 25 basis points is 0.25%. Put simply, traders think a rate hike in December is very likely.

Gold gets a shine from the weaker dollar

Gold climbed toward $4,150 an ounce on Thursday. This extends the previous session's gains and takes the metal to two-week highs. The precious metal also found support from a weaker US dollar and declining Treasury yields. Both make gold more appealing to investors, as the yellow-metal is a non-yielding asset. A non-yielding asset pays no dividend or interest to the investors.

Gold Price in India jumped over 3% on Wednesday but is up by 1.5% on Thursday, in line with the international market where gold is also up by a similar margin.

What should investors watch next?

Keep an eye on oil, the dollar and bond yields in the coming days. The Fed's December meeting is the next big test. A lot of economic data, including inflation numbers for November and December, will be published before the December FOMC meeting. Markets currently expect a nearly 80% chance of a rate hike then. But these expectations may change quickly as more data comes in. A hotter inflation reading could make a hike even more likely. A softer one could cool the bets.