US stocks surge as oil plunges below $100 on Iran war hopes after Democrats' win

US stocks experienced a significant surge following the Democrats' triumph in the midterm elections, driven by investor optimism that the outcome may prompt President Donald Trump to end the ongoing war with Iran. The electoral results also fostered expectations of lower energy prices and reduced geopolitical tensions. Oil prices plummeted sharply, with Brent crude futures plummeting nearly 9% overnight and falling below $100 per barrel for the first time in two months.

This was the lowest point for Brent crude in two months, with a broader decline of around 20% this week, according to Reuters. The drop in energy prices contributed to the rise in global stock markets and bond prices, easing concerns about inflation and encouraging investors to buy bonds, which pushed US bond yields lower. The weaker dollar also bolstered the broader market rally.

The US dollar hovered near a one-month low against the euro as markets reacted to the oil price decline and the election results. While the outcome of the midterm elections was not entirely unexpected, the Democrats' overwhelming victory exceeded expectations. Deutsche Bank strategist Jim Reid stated that the election results aligned with investor predictions, albeit Democrats outperformed market expectations.

Major Wall Street indexes closed higher on Wednesday, with the S&P 500 rising 1.6% by the end of trading. Renewable energy stocks also benefited from the Democratic victory, and oil prices remained under pressure as traders anticipated Trump's potential decision to avoid escalating the war with Iran. Crude oil traded around $95 per barrel, up 0.8% on Thursday, after losing nearly 10% in the previous two days.

President Trump acknowledged that the Iran war had contributed to the Republican Party's election defeat, with Vice President JD Vance directly attributing the losses to the conflict. In a post on X, Vance stated, "The reason we lost is the war." US government bond prices rose, pushing bond yields lower, with the 10-year Treasury note yield falling by 2 basis points to 4.87%.

Overall, the Democratic midterm victory generated positive reactions among investors, who hoped that political pressure could persuade Trump to reduce tensions with Iran. Falling oil prices bolstered global equities, bonds, and gold.