US Election Fallout: Oil Slides, Asian Chip Stocks Suffer Heavy Losses

Oil prices and semiconductor stocks came under pressure on Thursday as global financial markets reacted to the sweeping victory of the Democratic Party in the United States midterm elections, with investors betting that the change in congressional control could reshape Washington’s approach to the war with Iran and the rapidly expanding artificial intelligence industry.

Brent crude futures fell nearly 9 per cent overnight to around $94.21 a barrel, extending losses that have brought prices down by approximately 20 per cent this week. The decline followed comments by Vice President JD Vance, who attributed Republican losses partly to public dissatisfaction with the US-Iran war, raising expectations that President Donald Trump could face increased pressure to pursue a diplomatic settlement.

The prospect of reduced disruption to oil supplies through the Middle East helped ease concerns about energy-driven inflation. Falling crude prices also supported bond markets, pushing the yield on the benchmark 10-year US Treasury note down to around 4.85 per cent, while the US dollar weakened against major currencies.

However, the optimism was not shared across the technology sector. Semiconductor shares and companies supplying equipment and infrastructure to data centres faced selling pressure as investors considered the possibility of tighter oversight of the artificial intelligence industry under a Democratic-controlled Congress.

South Korea’s chip-heavy KOSPI index fell nearly 6 per cent on Thursday, while Taiwan’s benchmark index declined by more than 3 per cent. Japan’s Nikkei also dropped about 2 per cent, with technology equipment suppliers among the major sources of weakness.

The sell-off followed Democratic victories in key states, including Texas and Georgia, where concerns about the rapid expansion of data centres and their demands for electricity and water had become prominent campaign issues. Investors fear that Democratic lawmakers could intensify investigations, impose additional environmental and energy requirements, or seek restrictions on new data-centre projects.

The reaction has been particularly pronounced among smaller companies involved in building and operating AI infrastructure. Reuters reported that data-centre operators and equipment suppliers were under pressure, while investors showed greater confidence in some large technology companies with stronger financial positions.

Wall Street, meanwhile, experienced a broad rally on Wednesday after the election results became clear. The S&P 500 rose 1.6 per cent, the Nasdaq Composite gained 1.4 per cent, while the Dow Jones Industrial Average climbed approximately 3 per cent, adding more than 1,500 points.

The contrast reflected different expectations across sectors. Investors welcomed the prospect of a divided government limiting major policy changes, while companies exposed to energy, defence and AI infrastructure faced concerns about the direction of future government spending and regulation.

Oil-producing companies and major defence contractors also recorded losses. ExxonMobil and other energy firms came under pressure as crude prices declined, while defence companies faced the possibility that a Democratic-led Congress could challenge Trump’s proposed $1.5 trillion defence budget and scrutinise military spending.

In contrast, renewable energy shares advanced on expectations that Democrats would resist efforts to roll back clean-energy support. Solar companies, including First Solar, Sunrun and Enphase Energy, recorded gains as investors anticipated a more favourable policy environment for renewable power.

The election outcome has also raised questions about the future of businesses associated with billionaire Elon Musk, who spent heavily supporting Republican candidates. Tesla and other Musk-linked companies declined amid concerns about increased political and regulatory scrutiny.

Despite the sharp movements, analysts cautioned against interpreting the election as a decisive long-term turning point for financial markets. Corporate earnings, interest rates, inflation and the broader economic outlook are likely to remain more influential in determining share prices over time.

For now, investors are closely watching whether the new balance of power in Washington will translate into a shift in US policy towards Iran, energy markets and the technology sector. The extent to which Congress can influence those areas will depend on legislative negotiations and the powers retained by the president.