Democratic Midterm Victory Shakes Global Markets as Wall Street Futures Rebound

The Democrats’ victory in the U.S. midterm elections, along with the possibility of gaining control of both chambers of Congress, triggered significant turbulence in global financial markets overnight Tuesday into Wednesday. However, markets staged a strong recovery Wednesday morning, with Wall Street futures erasing most of their earlier losses.

Nasdaq futures, which had plunged approximately 2.4%, recovered to trade just 0.4% lower. S&P 500 futures declined 0.3%, compared with an earlier drop of 1.4%, while Dow Jones futures remained virtually unchanged.

In Israel, following a flat close for the TA-125 index on Tuesday, trading opened with mixed results before the major indices fell by approximately 1%. The U.S. dollar, which climbed to NIS 3.177 earlier in the morning—its highest level since January—retreated to around NIS 3.166. The euro traded near NIS 3.545 after reaching NIS 3.578.

Asian markets also experienced sharp volatility. Japan’s Nikkei index plunged nearly 5% before recovering to close down 1.4%, while South Korea’s Kospi rebounded from a decline of approximately 4% to finish the session 0.6% higher. Meanwhile, gold surged approximately 2.2% to $4,027 per ounce, reflecting heightened investor demand for safe-haven assets amid market uncertainty.

Political Uncertainty Fuels Investor Concerns

At the center of investors’ concerns are Democratic proposals to restrict the construction of new data centers, alongside fears of political gridlock in Washington. The VIX volatility index, commonly known as Wall Street’s fear gauge, closed above 20 on Tuesday, signaling increased market anxiety.

Yossi Fraiman, CEO of Prico, told Ynet that falling stock prices and concerns over a potential escalation in security tensions were increasing demand for the U.S. dollar. Nevertheless, he assessed that the Israeli currency’s potential for further depreciation remains limited. “In the absence of extreme events in U.S. equity markets, the potential for depreciation is limited at this stage,” Fraiman said.

Or Poria, chairman of Poria Finance, noted that the Democratic victory had unsettled markets but could also present investment opportunities. “The Democratic victory is shaking the markets, but it could actually create buying opportunities,” he said, adding that the Israeli shekel is expected to strengthen again over the medium to long term.