What will prevail — Oil or AI?

The Democrats’ victory in the U.S. midterm elections triggered two immediate reactions in the markets.

First, oil prices fell below $90 per barrel for the first time since August, as investors bet that the «donkeys» would increase pressure on the president to end the conflict in the Middle East.

Trump does seem to be softening his tone toward Tehran, saying further attacks on Iran are unlikely because much of its military capability has already been destroyed. In reality, though, it looks like talks are already starting, with one side agreeing to some budget spending and the other agreeing to end the war in Iran.

Either way, markets are hoping the biggest inflation risk is finally behind us, and the Fed won't have to get tougher on interest rates. The only thing we've seen this before: Trump talks about progress in peace talks, only to launch another strike on Iran a few days later.

And with the new Congress not taking office until January, he still has plenty of time to launch another military operation, especially as the Houthis continue to attack Yanbu after hitting Saudi Arabia's East-West oil pipeline, while Iran keeps blowing up tankers in the Strait of Hormuz.

Thus, hopes that the Middle East crisis is easing may be premature.

When it comes to AI stocks, fears that Democrats could tighten AI rules and slow the industry, along with growing doubts that all the money being poured into AI will ever pay off, have dragged down not just tech stocks but also related sectors and even the metals used to make chips.

Adding to the pressure is a scandal over Nvidia's CEO allegedly sharing sensitive information with a suspected Chinese spy. If it turns out that China got an edge in the AI race thanks to Huang, the whole market could take another hit.

Another risk for the market is Anthropic IPO.

The company's updated filing puts the share price at $70–78, valuing it at around $1 trillion. That's below the original $2 trillion or even $1.6 trillion estimates, but still a lot for a loss-making startup. If the stock fails to take off even at this lower valuation, the fallout could spread to the wider market.