Bitunix Analyst: Midterms Become a Policy Watershed — Oil and Rate Expectations Face Recalibration

November 3 — The U.S. midterm elections entered voting day, with political outcomes and U.S.-Iran diplomatic progress simultaneously affecting global markets. Under Qatar's mediation, indirect contacts between the U.S. and Iran continue. Iranian President Pezeshkian stated that the Supreme Leader has granted the government partial negotiating authority; Trump said he is currently in no rush to decide whether to resume military strikes, and indicated that Iran wants to reach a solution as soon as possible.

Diplomatic hopes drove Brent crude down more than 7% at one point on Monday, as the market is giving back part of the war risk premium. However, negotiations have not yet achieved substantive breakthroughs. After Iranian and Qatari representatives concluded days of consultations, the draft agreement is still being circulated, and follow-up meetings remain to be scheduled. Major differences persist between the two sides over the nuclear program, lifting sanctions, and control of the Strait of Hormuz; within the United States, there are also differing positions supporting a diplomatic agreement, advocating a resumption of military action, and maintaining economic pressure. Therefore, the oil price decline reflects market expectations of de-escalation rather than the elimination of energy supply risks.

The U.S. midterm elections are the next policy watershed. JPMorgan's scenario analysis believes that a Democratic sweep of Congress has the highest probability, but Republicans maintaining control of both chambers may instead bring a relatively positive short-term stock market reaction. Historically, after the 11 midterm elections from 1982 to 2022, the S&P 500 rose within one year on all occasions, with an average gain of about 13.7%, but historical seasonality cannot replace fundamental judgment. Another policy signal comes from the Reserve Bank of Australia, which raised rates by 25 basis points to 4.85% in a 6-3 vote, reflecting that energy costs and domestic capacity pressures continue to keep inflation risks elevated.

The U.S. Treasury Department, meanwhile, lowered its fourth-quarter borrowing estimate to $618 billion, but this was mainly due to a higher beginning cash balance; excluding the cash factor, actual financing needs were instead higher than previously estimated. Overall, diplomatic progress helps reduce the short-term energy risk premium, but inflation, fiscal financing, and the post-election policy direction will still determine whether global financial conditions can truly improve.