Tomorrow, November 3rd, is the main day of the US midterm elections, and early voting data suggest Republicans could lose dozens of seats in the House of Representatives. The Senate is also at risk, though Republicans have a better shot at keeping their narrow majority, with around a 25% chance.
What if Democrats take control of both chambers?
Trump’s legislative agenda would effectively grind to a halt, while he would have to spend much of his time dealing with Democratic investigations and impeachment threats. Without the Senate, he would also struggle to get his preferred cabinet members and judges confirmed.
As for foreign policy, a victory for the “Donkeys” could increase pressure on the White House to end the war with Iran, for example, by cutting funding for the military operation. Aid to Ukraine, in turn, could resume, while sanctions on Russia could tighten, with Democrats likely to oppose any easing of restrictions on Russian energy exports and diesel fuel.
A divided Congress could also make it harder to pass new laws and shape foreign policy, adding to market uncertainty. The dollar index could also come under pressure if investors interpret a Democratic victory as a sign of weaker political support for Trump’s economic agenda or increased uncertainty over the administration’s ability to implement its policies.
It’s worth noting, though, that the new Congress won’t take office until January 2027, giving Republicans time to push through key measures and limit the Democrats’ ability to reverse policies that matter to them.
Overall, how much changes will depend on the level of support Democrats receive and whether they can reach deals with Republicans to override Trump’s vetoes. Otherwise, Trump will retain considerable control over US foreign policy, including negotiations and sanctions.
As for why oil prices opened lower on Monday, it had less to do with hopes that Democrats could help bring the war in Iran to an end and more to do with Trump leaving the door open to diplomacy.
The catch is that Iran still refuses to reopen the Strait of Hormuz unless sanctions are lifted, while the US and Israel reportedly consider striking Mount Pickaxe, where Tehran may have resumed uranium enrichment.
Leave a Reply