Oil prices slide as Trump's midterm defeat rattles markets and sends dollar lower

The US dollar and oil prices fell as markets reacted to the Democrats' midterm election victory against Donald Trump.

The US dollar and global oil prices weakened on Wednesday as markets reacted to a heavy midterm election defeat for President Donald Trump, with the Democrats taking control of Congress.

Democrats seized control of both houses in a landslide victory that gives them the power to block legislation, launch investigations into Trump's administration and thwart his judicial and senior government appointments.

“Investors are trying to get their heads around what a Democrat landslide means for financial markets,” noted Russ Mould, investment director at AJ Bell.

“The big risk is uncertainty around how Trump could act in the coming months following such a result.”

Oil prices moved lower on Wednesday, with Brent North Sea crude falling 1.2% to $102.36 a barrel and US West Texas Intermediate (WTI) dropping 0.8% to $95.42. The declines came as investors assessed the implications of the Democrats' midterm election victory for US policy and the potential for political gridlock under President Donald Trump.

The dollar sank against other major currencies amid fears that the election outcome could lead to political gridlock in the US, after Trump warned that he would become “Mr Veto”.

Technology firms also slumped amid suggestions that Democrats could prioritise AI regulation.

But European stock markets posted gains in Wednesday morning trading.

London, Frankfurt and Paris all rose by more than 1% as investors brushed off official data showing eurozone inflation reaching a three-year high of 4.0%.

This followed a largely solid performance by equities across Asia, although Tokyo ended lower as its technology sector struggled.

Tens of millions of Americans voted in the crucial midterm elections, which were widely seen as a referendum on the White House, amid growing anger over soaring petrol prices, the impact of tariffs and the Iran war.

Chris Weston, an analyst at broker Pepperstone, stressed that Trump retained “considerable executive authority”, meaning the possible impact of the election result was “far from straightforward”.

Bond yields avoided the volatility seen recently, while gold benefited from its status as a safe-haven investment.

Aside from the US election, investors continued to monitor third-quarter earnings.

BMW said on Wednesday it would step up planned job cuts after reporting a drop in third-quarter profit, hit by cutthroat competition and falling demand in China, the world's largest car market.

Google, meanwhile, said it planned to invest $15 billion in Malaysia over the next two years to build data centres and other infrastructure.