What Drives the Market? US Midterm Fallout, Iran Tensions and Central Bank Decisions Reshape Global Markets

Global financial markets are navigating a major shift in investor positioning as the US midterm election results, developments in the Iran conflict, falling energy prices and changing expectations for central-bank policy reshape the investment landscape.

The Democratic victory in both chambers of Congress has introduced fresh uncertainty around US fiscal policy, military spending and technology regulation. At the same time, hopes of a negotiated resolution to the Iran conflict have driven oil prices sharply lower, weakened the US dollar and bond yields, and helped gold extend its recovery.

Equity markets are experiencing a pronounced rotation away from artificial intelligence infrastructure stocks towards consumer, defensive and value-oriented businesses. Asian technology shares have come under particular pressure, while Chinese equities have advanced.

Attention now turns to the Bank of England’s interest-rate decision, US employment data and the sustainability of the post-election market rotation.

Market Snapshot

US Midterm Elections Reshape Market Expectations

The US midterm elections have delivered a significant political shift, with Democrats securing control of both chambers of Congress by a clear margin.

According to the supplied market report, Democrats hold at least 250 seats in the House of Representatives and at least 54 in the Senate. Their victories included districts that Republicans had previously redrawn in their favour.

The new congressional majority gives Democrats greater oversight powers, including the ability to conduct investigations and issue subpoenas. Investors are also assessing the possibility of a confrontation over the US debt ceiling in 2027.

The potential fiscal implications are particularly important for bond markets. A prolonged political dispute over government borrowing could increase uncertainty around Treasury issuance and fiscal negotiations.

President Donald Trump has adopted a more conciliatory tone following the Republican defeat, saying he can work with Democrats on a range of issues. Vice President JD Vance openly attributed part of the electoral setback to the war with Iran.

The market interpretation is that Washington now has a stronger incentive to pursue diplomatic progress rather than further military escalation.

Iran Conflict: Falling Oil Prices Drive Market Rotation

The possibility of a negotiated resolution to the Iran conflict has become one of the most important influences across global markets.

Brent crude has fallen towards $97 per barrel, while WTI has declined towards $88. The reduction in oil prices reflects expectations that diplomatic efforts could ease supply-disruption risks, particularly around the Strait of Hormuz.

Trump has indicated that there are currently no plans for further military action, while Qatar has increased its mediation efforts.

However, a resolution remains uncertain. An Iranian official has acknowledged that the two sides remain far apart, and the Islamic Revolutionary Guard Corps has reported fires involving two tankers and a tugboat in the Strait of Hormuz, alongside a tanker reportedly striking a mine while using an unapproved route. These incidents have not been independently confirmed.

The latest developments illustrate the fragile nature of the market’s optimism. Oil prices have fallen substantially, but the underlying geopolitical risks have not disappeared.

WTI Technical Levels

WTI is testing an important support area between $86.80 and $87.00, where the 100-day and 200-day moving averages converge with the 50% Fibonacci retracement of the July–September rally.

A sustained close below $86.80–$87.00 could expose WTI to further losses towards $82.21 and potentially $80.00.

For a recovery to gain traction, buyers would first need to reclaim $88.00–$88.75, followed by $95.00.

Nevertheless, renewed tanker incidents or an escalation in the Iran conflict could quickly reverse the current decline.

US Equities Rally as Investors Rotate Away from AI

Wall Street recorded a strong recovery, but the rally revealed a significant change in sector positioning.

The Dow Jones surged more than 1,570 points, approximately 3%, recording its strongest daily performance since April 2025. The S&P 500 gained 1.6%.

Falling oil prices helped support consumer and defensive stocks, with Walmart rising 3%, while Darden and Keurig Dr Pepper reached new highs.

The technology sector presented a different picture.

Hyperscalers advanced, and Apple reached an all-time high, as investors considered whether slower data-centre construction could reduce capital expenditure at Microsoft and Amazon and ease pressure on memory prices.

However, companies directly associated with AI infrastructure experienced selling pressure. Nvidia, AMD and data-centre operators including CoreWeave, Nebius and IREN declined.

The distinction is becoming increasingly important: investors are not necessarily abandoning artificial intelligence as a long-term investment theme, but are reassessing the scale, timing and profitability of infrastructure spending.

AI Investment Debate Intensifies

The market remains divided over the future trajectory of AI-related capital expenditure.

Citrini Research argues that the risks facing AI infrastructure have shifted towards the downside, suggesting investment growth may have peaked.

UBS takes a more constructive view, increasing its AI spending forecast to $1.4 trillion, although it identifies the 2027 US debt-ceiling confrontation as a significant risk for bond markets.

Goldman Sachs estimates that approximately 45% of planned US data-centre capacity is located in states where regulatory restrictions could tighten. It nevertheless expects any construction pauses to be relatively short-lived.

The market will continue to distinguish between companies benefiting from AI adoption and those dependent on sustained increases in infrastructure spending.

South Korea Suffers Severe Semiconductor Selloff

South Korea has experienced some of the strongest technology-sector selling in Asia.

The KOSPI declined approximately 4.8%, while the KOSDAQ fell around 4.3%. The scale of the selling triggered a sidecar mechanism, temporarily suspending program trading for five minutes.

Major semiconductor companies were heavily affected:

• SK Hynix fell approximately 9%.
• Samsung Electronics declined around 6.7%.

The weakness reflects concerns surrounding future AI infrastructure investment and the potential impact of tighter US regulation on data centres.

The KOSPI’s broader performance is also deteriorating. From its June peak near 9,000 points, the index has fallen towards 5,430, representing a decline of approximately 40%.

Despite record share buybacks by Korean companies during August and September, selling pressure has continued. The pace of buybacks is also slowing, suggesting corporate support has not been sufficient to offset capital outflows from AI-related equities.

Japan and China Deliver Contrasting Equity Performance

Japanese equities are experiencing a split between traditional sectors and heavily weighted technology companies.

The broad Topix gained approximately 1.4%, supported by real estate, retail and pharmaceutical stocks.

The Nikkei 225, however, declined around 1.5%, despite 168 of its 225 constituents advancing. Heavy losses in a handful of major technology stocks outweighed the broader market gains.

Key declines included:

• Advantest: -11.7%.
• Lasertec: -11.8%.
• Tokyo Electron: nearly -10%.
• SoftBank: approximately -5.8%.

SoftBank has faced additional pressure following the decline in Arm shares and China’s refusal to approve its proposed $5.4 billion acquisition of ABB’s robotics division.

China moved in the opposite direction.

Alibaba and Tencent each gained approximately 6.4%, while Baidu advanced around 4.9%.

Chinese technology companies are less directly exposed to concerns surrounding US data-centre regulation and have also benefited from the improvement in energy-market sentiment.

In Australia, the ASX 200 advanced approximately 1.4%. Data-centre operator NextDC surged 48% after Goodman Group and Digital Realty announced plans to acquire up to 9.9% of the company.

Foreign Exchange: Dollar Weakness Supports Major Currencies

The US dollar has weakened alongside oil prices and government bond yields, creating a more supportive environment for several major currencies.

The Australian dollar has moved above 0.70, supported by the country’s stronger trade performance. Australia’s trade surplus increased to A$2.8 billion, its highest level in seven months.

The Japanese yen is receiving support from the Bank of Japan’s September meeting minutes, which indicate that policymakers remain open to further interest-rate increases.

The British pound faces an important test as markets await the Bank of England’s policy decision.

The broader dollar outlook will remain closely linked to energy prices, Treasury yields and expectations for the Federal Reserve’s next policy moves.

Central Banks: Bank of England Takes Centre Stage

Monetary policy is becoming another major driver of market volatility as higher energy prices influence inflation expectations and central-bank decisions.

The Bank of England is expected to deliver a 25-basis-point increase, taking its policy rate to 4%. Markets will also focus on updated inflation forecasts and signals regarding the direction of future policy.

The Bank of Japan’s September meeting minutes indicate support for further tightening. The meeting resulted in a 7–2 vote for an increase to 1.25%, with one member leaving open the possibility of accelerating future rate increases.

Policymakers identified the approximately 50% increase in oil prices since July as an important inflation risk.

The Swiss National Bank is also facing renewed inflation concerns. Chairman Martin Schlegel acknowledged that October inflation of 1.5% surprised the central bank, strengthening expectations of a possible December rate increase.

Federal Reserve Policy Debate Changes with Oil Prices

Falling oil prices are complicating expectations for the Federal Reserve.

Futures markets continue to assign a high probability to a December rate increase, but Citi argues that a sustained reopening of the Strait of Hormuz could change the inflation outlook sufficiently to shift the Fed’s policy direction from increases towards cuts.

The relationship between energy prices and inflation expectations is therefore becoming increasingly important.

If lower oil prices persist, inflationary pressure could ease, potentially reducing the need for further monetary tightening. However, renewed supply disruption could reverse that calculation.

Gold Advances as Dollar and Bond Yields Decline

Gold has benefited from the changing relationship between energy prices, the US dollar and government bond yields.

The metal gained approximately 3% in the previous session, its strongest daily advance since August, and has continued higher towards $4,135 per ounce.

Unlike previous rallies driven primarily by escalating geopolitical tensions, the latest advance reflects a different combination of factors:

1. Lower oil prices easing inflation concerns.
2. A weaker US dollar improving the appeal of dollar-denominated gold.
3. Falling bond yields reducing the opportunity cost of holding non-yielding assets.
4. Changing expectations surrounding future Federal Reserve policy.

Citi sees the possibility of further gains, identifying a target of $4,500 within three months and $5,000 over six to twelve months if falling oil prices encourage a shift in Federal Reserve policy.

These are conditional projections rather than guaranteed price outcomes.

Corporate Earnings: Qualcomm and Arm Face Investor Scrutiny

Technology earnings continue to demonstrate that beating revenue expectations does not automatically translate into positive share-price performance.

Qualcomm

Qualcomm shares gained 5.3% during the session, reaching $173.19, following news of a multi-year agreement with SpaceX covering Starlink Mobile 5G network infrastructure.

The deal involves tens of thousands of cell sites.

However, the shares subsequently fell approximately 7.4% after the market assessed the company’s latest financial results and forward guidance.

The midpoint of next quarter’s adjusted EPS guidance, between $2.15 and $2.35, was below market expectations.

Qualcomm’s business mix is changing, with smartphone chip revenue weakening while automotive and data-centre opportunities expand.

The company expects revenue outside smartphones to grow by more than 60% in fiscal 2027. Its data-centre business is expected to generate more than $650 million in Q1 and reach a $7 billion annual revenue run rate by year-end, supported by its Amazon partnership.

Nevertheless, investors focused on higher-than-expected capital expenditure and rising semiconductor costs.

Arm

Arm also reported results above expectations but experienced continued share-price weakness.

Revenue increased 27% year-on-year to $1.44 billion, ahead of the $1.38 billion consensus estimate. Adjusted earnings per share reached $0.52, compared with expectations of $0.47.

Licensing revenue increased 50%, but royalties, the more recurring component of the business, disappointed at $670 million against an expected $712 million.

The next-quarter outlook only marginally exceeded consensus, leaving investors unconvinced despite longer-term ambitions for its AGI CPU processors and server-market expansion.

The reaction highlights how investors are increasingly scrutinising recurring revenue, capital expenditure and the quality of earnings rather than headline growth alone.

Other Corporate Developments

Several additional corporate announcements are influencing individual stocks.

• AppLovin: Shares jumped approximately 24% following stronger-than-expected results and guidance.
• Coherent: Gained around 7%.
• Expedia: Fell more than 7% following weaker guidance.
• Snap: Disappointed on user numbers, reporting 495 million.
• AstraZeneca: Reportedly offered approximately $10 billion for Rhythm Pharmaceuticals, whose shares advanced 28%.
• Berkshire Hathaway: Purchased an additional $27 million of Sirius XM shares, consistent with the wider rotation towards value-oriented investments.

European and Japanese earnings are also attracting attention.

Toyota reported operating profit of ¥1.13 trillion, comfortably above expectations of ¥965 billion. The company raised its full-year operating profit forecast to ¥3.90 trillion from ¥3.40 trillion and expanded its share buyback programme to ¥1.3 trillion.

ArcelorMittal reported weaker sales of $16.47 billion against expectations of $17.1 billion, although EBITDA exceeded estimates at $2.02 billion. Its results were affected by $852 million in impairments and a one-off $293 million charge associated with its Ukrainian operations.

Commerzbank reported net profit of €859 million, slightly above expectations, but operating profit missed consensus. The bank maintained its full-year net profit target of at least €3.4 billion.

Siemens Healthineers exceeded revenue expectations at €6.78 billion, slightly missed adjusted EBIT estimates and announced that it would rename itself Healthineers.

Bitcoin: $82,000 Becomes the Key Technical Level

Bitcoin has regained some momentum following the US election results, with buyers returning to the market.

The key level is approximately $82,000.

A sustained break above this level could create scope for a further recovery, while rejection could leave Bitcoin consolidating within its recent trading range.

Cryptocurrency markets are also being influenced by the same broader investment rotation affecting technology shares.

If investors continue reducing exposure to AI-related assets and other high-growth technology positions, risk appetite across digital assets could remain sensitive to wider equity-market sentiment.

Bullish Market Drivers

1. Potential Iran de-escalation: Diplomatic progress could reduce geopolitical risk premiums and support lower energy prices.
2. Lower oil prices: Reduced energy costs may ease inflation expectations and support consumer and defensive businesses.
3. Weaker US dollar: Dollar softness is providing support to several major currencies and gold.
4. Falling bond yields: Lower yields are improving the relative appeal of gold and other non-yielding assets.
5. Chinese equity strength: Gains across major Chinese indices demonstrate that technology-sector weakness is not universal.
6. Resilient corporate earnings: Companies such as Toyota and AppLovin have delivered encouraging results.
7. Strong Australian trade performance: The widening trade surplus is helping support the Australian dollar.

Bearish Market Drivers

1. Unresolved Iran conflict: Continued uncertainty around the Strait of Hormuz leaves energy markets vulnerable to sudden reversals.
2. AI infrastructure concerns: Selling in semiconductor and data-centre stocks reflects uncertainty over future investment and returns.
3. US debt-ceiling risk: A potential political confrontation in 2027 could create volatility across government bond markets.
4. Asian semiconductor weakness: Sharp declines in South Korea and Japan highlight pressure on technology-heavy equity indices.
5. Central-bank tightening: Expected rate increases in the UK, Japan and potentially Switzerland could create further market volatility.
6. Corporate guidance disappointments: Qualcomm and Arm demonstrate that strong headline results may not satisfy investors when forward expectations are weaker.
7. Energy supply disruption: Renewed incidents around the Strait of Hormuz could quickly reverse the decline in crude oil.

What Traders Are Watching

The immediate focus is on the Bank of England’s policy decision, US weekly jobless claims and the next round of corporate earnings.

The next US employment report will also be important in determining whether the post-election market rotation can continue or whether investors return to technology and AI-related assets.

Market Outlook for the Coming Sessions

Global markets are entering a period in which political developments, energy prices, monetary policy and corporate earnings are interacting more directly.

The decline in crude oil has provided an important catalyst for the latest equity-market recovery, but the rally has been uneven. Traditional consumer and defensive stocks have benefited, while semiconductor and AI infrastructure companies have faced renewed selling pressure.

Currency markets are reflecting the weaker dollar and changing central-bank expectations, while gold is benefiting from lower yields and easing energy-driven inflation concerns.

The most important uncertainty remains the Iran conflict. A diplomatic breakthrough could reinforce the current market rotation, while renewed disruption around the Strait of Hormuz could reverse the decline in oil prices and restore inflation concerns.

The Bank of England’s decision and subsequent guidance will provide another important test for global rate expectations.

Ultimately, investors are reassessing where capital should be positioned as the market moves away from a concentrated AI investment narrative towards a broader assessment of earnings, interest rates, energy costs and economic fundamentals.

Today Markets Analysis

The current market environment is being driven by three interconnected forces: political change in the United States, the possibility of de-escalation in the Middle East and a reassessment of the returns expected from artificial intelligence investment.

The US election has increased uncertainty around fiscal policy and technology regulation. Meanwhile, hopes of progress with Iran have pushed oil lower, easing inflation concerns and contributing to a weaker dollar and lower bond yields.

The resulting rotation is particularly visible in equity markets. Consumer and defensive shares are attracting interest, while semiconductor and AI infrastructure stocks are experiencing significant selling pressure. China has been a notable exception, with major technology indices advancing.

The central question is whether this represents a temporary repositioning ahead of further economic data or a more sustained change in market leadership.

For traders, the next direction will depend on the durability of the oil-price decline, central-bank decisions, employment data and whether investors continue to favour value and defensive sectors over AI-related growth stocks.

Currency Hedger View

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For importers, exporters and companies operating across multiple jurisdictions, the combination of lower oil prices, a weaker dollar and shifting exchange rates can create both opportunities and risks.

Businesses with dollar-denominated energy purchases may benefit from lower commodity prices, but exchange-rate movements can alter the final cost in their reporting currency. Companies receiving foreign-currency revenues may also experience changes in the value of those receipts as major currencies appreciate or depreciate.

The current uncertainty reinforces the importance of assessing commodity exposure and foreign-exchange risk together, particularly where contracts involve future payments, fixed-price agreements or extended settlement periods.

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Disclaimer: This article is provided for general market information and educational purposes only. It does not constitute investment advice, financial advice or a recommendation to buy or sell any financial instrument or commodity. Market prices, economic forecasts and technical levels are subject to change. Political developments, economic data and central-bank decisions can result in significant volatility. All market outlooks are conditional assessments and are not guarantees of future performance.

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