Oil prices tumbled more than seven percent on Monday, the eve of crucial U.S. midterm elections, as signals that Tehran and Washington were renewing dialogue boosted hopes of ending Middle East conflict.
Iran said intensive exchanges were underway with the United States and offered to reopen the Strait of Hormuz under strict conditions, as efforts escalated to avert a return to conflict. Earlier, the Axios news outlet reported that U.S. Vice President JD Vance had sent a letter to Iranian national security chief Mohsen Rezaei about possible new talks — the highest-level move from the Trump administration in months.
Again Capital's John Kilduff described investors as experiencing "a violent change in market sentiment," adding that "we went from really, I think, expecting a major offensive after tomorrow's U.S. elections to a potential breakthrough." "All these losses will be taken right back if this doesn't pan out," Kilduff said.
The steep drop in oil prices translated into weakness among petroleum stocks. But Wall Street shares otherwise began the day with promise, bouncing back after last Friday's rout precipitated by worries over the tech industry's massive artificial intelligence spending.
Tech shares came under pressure as the session progressed, with the tech-focused Nasdaq slumping 1.1 percent. "This is still a market that is on edge," said Joseph Zidle, chief market strategist at Cresset Capital, who described unease about midterm elections as adding to worries about the AI boom.
"The two of them are actually related," Zidle said of midterms and AI, noting that opposition to data centers has animated many campaigns.
"AI has been 'on the ballot in so many places, both blue and red,' Zidle said. 'It seems like data centers are part of the kitchen table issues.'"
Pollsters expect Democrats to win back control of the House of Representatives, but view President Donald Trump's Republican party as potentially able to maintain a majority in the Senate. The loss of total Republican dominance would push the president into a lame duck period beset with high inflation at home, the sputtering war against Iran and hostile Democratic investigations into his activities in Washington.
"Investors are bracing for a fresh round of turbulence ahead of U.S. midterm election fireworks while they assess the extent that companies are burning through cash to keep the AI bonfires burning," said Susannah Streeter, chief investment strategist at Wealth Club.
On Tuesday, Asian shares were mixed as tech losses offset broader gains on Wall Street. South Korea's benchmark Kospi fell 2.5%, while Hong Kong's Hang Seng gained 0.3%. The Shanghai Composite index retreated 0.7%. Australia's S&P/ASX 200 rose 0.2%. Markets in Tokyo were closed for a holiday. The S&P 500 sank 0.5% after erasing a 1.1% gain earlier in the day, while the Dow Jones Industrial Average rose 0.4%. The Nasdaq composite fell 1.1%. Outside of AI and tech, the U.S. market did much better, and nearly seven out of every 10 stocks in the S&P 500 index rose. United Airlines flew 4.8% higher, Southwest Airlines climbed 3.6% and cruise operator Carnival rose 4.2% on eased oil prices. A report said U.S. manufacturing improved last month by more than economists expected, and a measure of inflation in the Institute for Supply Management survey showed prices were rising at a slower pace. In early Tuesday dealings, the price of Brent crude, the international standard, edged 0.1% higher to $104.81 a barrel. U.S. benchmark crude oil rose 0.2% to $96.68 per barrel.
