Markets will take their cues from interest rates, inflation, jobs data and Iran, not from Congress alone, analysts told Khaleej Times, even though Democrats now control both the House and the Senate after the US midterm elections.
The result sets up divided government for the final two years of President Donald Trump’s term and makes large tax and spending changes harder to pass.
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Hamza Dweik, Head of Trading (MENA) at Saxo Bank, said the coming weeks would be “less about who won Congress”.
He said the focus would instead fall on what the new balance means for US rates, fiscal spending, Iran policy, energy supply and AI regulation.
Afonso Borges, Fixed Income Analyst, Julius Baer, said divided government is generally market-friendly because it narrows the range of fiscal and regulatory outcomes. He repeated the Swiss bank’s earlier call to “embrace the gridlock”. The main risk, he said, is renewed fiscal brinkmanship over the 2027 debt ceiling.
Gold: a lift, but not yet a trend
Gold shows the clearest reaction, though analysts differ on how far it will run.
On Thursday morning it traded at $4,138 an ounce, up 5.2 per cent, after slipping below $4,000 recently.
Vijay Valecha, Chief Investment Officer at Century Financial, called the result a positive trigger rather than a decisive win.
Gold remains below its level of a month ago, markets still price a strong chance of a Federal Reserve rate rise in December, and speculators trimmed their bets through October. A hold above $4,000 after this week’s jobs and inflation data would signal a lasting recovery, he said. Until then, he is neutral to mildly positive.
Dweik said the election matters less than its implications for fiscal policy, yields and the dollar. He noted that the World Gold Council has found no consistent link between the winning party and gold’s later performance, and that the initial moves after Trump’s 2016 and 2024 victories faded. Slower fiscal expansion could pressure yields and the dollar, which would generally support bullion, he said, while budget and debt uncertainty adds a safe-haven argument.
Borges was more cautious. Gold, the dollar and long-dated Treasuries are the “debasement” trades most sensitive to perceptions of Fed independence.
A Democratic Senate would not remove fiscal or inflation risks, he said, but it would ease the threat to institutional credibility, which would, all else being equal, be a headwind for gold.
Oil: Iran outweighs Washington
All three analysts see the physical market, not the ballot box, driving crude.
Valecha said Brent has fallen over the past week as Qatar-led talks raised hopes of reopening the Strait of Hormuz. Continuing attacks on ships limit the downside, he said, and oil is likely to stay volatile, easing while talks progress but with sharp upside risk if they fail.
Dweik noted that US crude output is already close to record levels, so the question is whether the election changes expectations for future supply. A Democratic Congress could slow parts of the deregulation agenda, limiting another surge in production. Tougher congressional pressure on Iranian sanctions could remove barrels from the market and benefit major Gulf producers. In the near term, though, geopolitics remains the stronger driver, as sharp price moves on US-Iran deal expectations have shown.
US dollar: a modest dip, with data in charge
Valecha is neutral on the dollar. Other major central banks are also signalling possible rate rises, he said, so US jobs and inflation figures will matter more than Congress.
Dweik said the initial bias could be moderately negative if investors read the result as a curb on deficit-funded spending, but he warned against forecasting a sustained decline. The Fed, inflation and labour market data will matter far more in the months ahead, he said, because the election “does not change monetary policy overnight”.
Borges called the implications ambiguous. Stronger institutional checks could support confidence in US assets, while lower yields could pull the other way. The currency’s response will depend more on the growth and Fed backdrop than on Congress, he said.
AI and tech stocks
Dweik expects AI and technology shares to see the greatest volatility. A Democratic Congress could bring closer scrutiny of semiconductor exports, competition, data-centre energy use and AI capital spending.
That must be weighed against the scale of the investment cycle, he said. Morgan Stanley expects US business investment to rise about 7 per cent year on year in the fourth quarter of 2026 and 8 per cent in 2027, with AI-related spending a major part. The likelier outcome is greater differentiation within the sector rather than the end of the cycle, favouring companies that can show earnings growth and tangible returns, Dweik said.
Valecha stays bullish, though he expects gains to be selective. He pointed to Vertiv raising its annual sales outlook, Arista posting its fastest revenue growth since listing and AMD’s data-centre sales nearly doubling. The main risks, he said, are tougher checks on data-centre permits and power use, especially after Democratic governor wins in states such as Texas and Georgia.
What it means for Gulf investors
Dweik expects the immediate effect to be mildly positive for gold, potentially negative for the dollar, mixed for oil and more volatile for AI stocks. He stressed, however, that election effects can be short-lived. For Gulf investors, the signals to watch are US rates, fiscal policy, Iran, energy supply and AI regulation, he said.
Source: Khaleej Times