Democrats won majorities in both the US House and Senate in the midterm elections on 3 November. Most of the coverage has been about politics in Washington. I am more interested in what happened to two prices that matter a great deal in Australia, oil and bond yields, because both fell hard in the day after the result.
What moved
Oil fell first and furthest. On 4 November Brent crude futures dropped 8.67 per cent to settle at US$94.62 a barrel, and the US benchmark fell 8.29 per cent to US$88.12, according to CNBC. Reuters reported that Brent was down about 20 per cent over the week, and that if the move held to Friday's close it would be the largest weekly fall since April 2020. The market read was that a Democratic Congress makes an escalation of the war with Iran less likely, and possibly brings talks to end it closer.
Bonds rallied. The US 10 year Treasury yield fell more than 6 basis points to 4.884 per cent, and the 2 year yield fell more than 4 basis points to 4.573 per cent. Part of that was lower oil, and part was the view that a divided government will find it harder to push through large spending changes.
Shares rose. The S&P 500 had its best day in three months, up 1.6 per cent, as reported by AP. On 5 November the ASX 200 was up 2.3 per cent to 9,037 points in the afternoon and the Australian dollar was a little above 70 US cents, according to the ABC.
Why oil matters for the Reserve Bank
The Reserve Bank raised the cash rate to 4.85 per cent on 3 November, the day of the US vote. In its statement the board said the inflation outlook had been revised materially higher, partly because of fuel and other commodity prices affected by the conflict in the Middle East.
The forecasts behind that decision assumed an oil price for the December quarter about 35 per cent higher than in August, with front month Brent futures around US$115 a barrel. Brent is now below US$95. If that holds, one of the main forces pushing the inflation forecasts up is weaker than the bank assumed a few days ago.
That does not make the inflation problem go away. The bank also said domestic capacity pressures have been a little tighter than it thought, that inflation in many goods and services remains high, and that some measures of inflation expectations have risen. Fuel feeds into freight, construction materials and many other costs with a lag, and some of those increases are already in the system.
Why US bonds matter here
US Treasury yields are a global benchmark. When they move, Australian government bond yields usually move in the same direction, and those yields feed into the cost of fixed rate borrowing and wholesale funding for anyone who lends in Australia.
The Reserve Bank's own November outlook said the rise in global interest rates presents risks on both sides: it can signal stronger demand, but it can also mean tighter financial conditions than assumed. A fall in US yields after the election pulls slightly in the other direction. A one day move of 6 basis points is small next to how far yields have risen over the past few years, so I would not treat it as a turn.
How I read it
For property and credit in Australia, the practical question is whether the oil move lasts. The earlier inflation pressure came from a conflict that is still running, and markets can reprice quickly if talks stall or shipping is disrupted again. One week of falling prices is a signal worth watching, not a new trend.
Variable rates are still going up. The ABC reported that the major banks will pass the 3 November increase on to variable home loans from 13 November, so borrowers will feel this hike regardless of what oil does next. The effect of cheaper oil, if it lasts, would show up later, through inflation figures and through what the board is willing to do at future meetings.
For projects being funded or refinanced over the next year, today's rates are the known number. Lower energy prices are a possible improvement, but I would not count on them yet.
What I am watching
The Reserve Bank's next meeting is on 8 December. Before then I will be watching whether Brent stays below US$100, the monthly inflation figures, and whether Australian bond yields keep following US yields lower or settle back.
None of this is a recommendation to borrow, lend, invest or sell. Everyone's position is different.
Sources
Reuters via Investing.com, Oil and data centre stocks sink after US midterms (5 Nov 2026)
AP News, US stocks rally after the midterm elections (4 Nov 2026)
ABC News, Markets and business live, 5 November 2026
Reserve Bank of Australia, Statement on Monetary Policy November 2026, Outlook
Personal views, not financial advice.
Key questions
How did oil prices react to the 2026 US midterm elections?
Oil fell sharply after Democrats won majorities in both the House and the Senate. On 4 November 2026 Brent crude futures fell 8.67 per cent to settle at US$94.62 a barrel and US West Texas Intermediate fell 8.29 per cent to US$88.12, as reported by CNBC. Reuters reported that Brent had fallen about 20 per cent over the week to that point, as traders bet the result made an escalation of the war with Iran less likely.
What happened to US bond yields after the midterms?
US Treasury yields fell. CNBC reported the 10 year Treasury yield was down more than 6 basis points at 4.884 per cent on 4 November, and the 2 year yield was down more than 4 basis points at 4.573 per cent, as investors expected a divided government to make large fiscal changes harder and as oil prices dropped.
Why do oil prices matter for Australian interest rates?
The Reserve Bank of Australia said on 3 November 2026 that its higher inflation forecasts partly reflect fuel and other commodity prices affected by the conflict in the Middle East. Its November forecasts assumed an oil price for the December quarter about 35 per cent higher than in August, with front month Brent futures around US$115 a barrel. A sustained fall in oil would ease part of that pressure, although the bank also pointed to domestic capacity pressures and higher inflation expectations.
When is the next Reserve Bank of Australia decision?
The Reserve Bank's next Monetary Policy Board meeting is on 8 December 2026. The board raised the cash rate by 25 basis points to 4.85 per cent on 3 November 2026.
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