Gulf markets gain, oil falls as Democrats win Congress

Gulf markets advanced and oil prices fell on Wednesday morning after Democrats took back the US Congress in the midterm elections as investors weighed the implications for Washington’s war with Iran.

What happened: The Democrats are on course for a larger-than-expected victory against the Republican Party in a resounding blow to the administration of President Donald Trump, whose eight-month war against Iran has pushed up gas prices and fanned inflation. 

As of 8:14 a.m. EDT, the Democrats had won 54 Senate seats, over the threshold of 50 to control the upper chamber, according to the Associated Press. The Republicans had 44, with two more seats to be called. For the House of Representatives, the Democrats had secured 228 seats, over the threshold of 218 for a majority. The Republicans had 139 seats, with 68 more to be called.

Gulf markets gained on the news. Qatar’s benchmark index, the QSI, rose 2.3% in early trading, with nearly all its constituents advancing, including Qatar Islamic Bank, which gained 3.3%.

Dubai’s main share index rose 2.1%, while Abu Dhabi’s index gained 0.9%. Saudi Arabia’s benchmark TASI rose 1.65%.

Oil prices fell on Wednesday amid hopes that a Democratic-led Congress could lead to more US restraint in Iran. Trump has reportedly been weighing renewed strikes on Iran after the midterms, but impending Democratic control of both chambers could increase pressure on him to pursue a deal to end the war.

Brent crude, the international benchmark, fell 2.02% to $101.50 a barrel, while West Texas Intermediate crude dropped 1.71% to $94.83 as of 8:12 a.m. EDT.

US stock futures initially fell following the election results before recovering. Futures for the tech-heavy Nasdaq 100 dropped 2% in early Wednesday trading, while S&P 500 futures fell 1.1%. By 8:14 a.m. EDT, they had reversed those losses to trade 0.02% and 0.75% higher, respectively.

Why it matters: Control of both the House and Senate will give Democrats more power to veto Trump’s policies and scrutinize his administration, including its handling of the Iran war. Republicans controlled both chambers during the first two years of his second term.

Trump admitted that his administration’s decision to go to war with Iran in February might have contributed to the poor Republican results, even as ⁠voters backed his handling of it. 

"I ⁠think a part of it was Iran, but at the same time people understood the importance of ​what I've done with Iran," Trump said in a telephone interview with Fox News late Tuesday.

The eight-month war has driven up energy prices. Brent traded at around $70 a barrel before the conflict. US retail diesel prices hit a record $6.53 per gallon in September before falling to $4.153 this week, according to the US Energy Information Administration.