Oil plunges 20% as Democrats’ Congress win shifts Iran war outlook
Australian cabinet ministers, diplomats and the country’s defence industrial sector closely watched this week’s US midterm results, which flipped control of Congress to the Democrats and badly dinted the outlook for Donald Trump’s final two years in office. Analysts said the forces behind the result — public fury over rising living costs, fuel prices in particular, and the impact of datacentres — carry warnings for Anthony Albanese’s government.
Observers said the Democrats’ victory should broaden Australia’s alliance with the United States, even as a new power base emerges in Washington with implications for Aukus, datacentre development and relations with China.
Bruce Wolpe, a senior fellow at the United States Studies Centre, said the cost of living had undermined Trump’s ability to rally voters, and that the Albanese government was taking a hit from the economic fallout of the Iran war. “I think a lot of people are wondering what does this [Australian] government do?” he said. “Have they lost control of the economy?”
“In January, before the Iran war, the outlook looked pretty good,” Wolpe said. “But now, after going through a budget process and the war … people are just very uncertain as to where this is going to end up. It is not an immediately solvable problem, and people really dislike it.”
The result also reordered the economic picture around the conflict. Westpac’s head of international economics, Elliot Clarke, said the landslide midterms result had “dramatically changed” the outlook for the Iran war, with potential consequences for Australia’s economy. “It has changed the ‘atmospherics’ around the Middle East conflict,” he said. “It’s positive news.” There was a steep drop in the global oil price as the results filtered out: Brent crude, which had threatened to pass its April peak, instead plunged by 20%.
Clarke said greater confidence in a potential Middle East resolution would also help curb inflation and help central banks hold back on rate hikes. “It definitely changes the calculus,” he said.
Trump claimed Republicans had fared poorly because he was not on the ballot, despite repeatedly urging voters to pretend he was on the ballot. The vice-president, JD Vance, called Trump’s war in Iran “the obvious culprit”.
Coalition frontbencher Andrew Hastie said the results showed economic messaging was critical. “People feel worse off after tariffs and after the war in Iran, and Donald Trump has said a few times now that he doesn’t really care,” he told 2GB. “Our job is always to deliver better outcomes for the Australian people.”
Arthur Sinodinos, a former ambassador to Washington, said the change on Capitol Hill was a chance for Australian officials to progress policy goals with both US parties, and to consider the relationship beyond the 2028 presidential election. “The main question mark is: ‘What is the impact on geopolitics across the world?’” he said. “Does this inject more uncertainty into American foreign policy? We’ve already had a lot of volatility in that regard.”
Sinodinos said Congress may put more pressure on the administration to support Ukraine and pass measures that involve funding munitions to Ukraine. He said he thought the Chinese would “feel more emboldened” but did not believe that would translate into sudden action on Taiwan, noting Trump has made clear in the past that they would do nothing on his watch and would feel bound to act if they did. Sinodinos praised Albanese’s professional approach to dealing with the often unconventional US president, saying the government’s reaction after the vote was to “keep working with the administration, keep their heads down”.
Abe Denmark, a partner at The Asia Group and an architect of the Aukus agreement in the Biden administration, warned against over-interpreting the results for Australia. “What will change is how power is distributed in Washington,” he said, describing new centres of power to engage: Democratic chairs controlling authorisations and appropriations, Republicans more willing to break ranks, and 2028 hopefuls from both parties looking to stand out. “While this gives Australia more points to engage, it also generates more noise. The challenge for Canberra, as with all allies and partners, will be to differentiate political positioning from durable policy.”
Denmark said the Democrats could take a different view from Trump on Aukus spending, as the US submarine industrial base needs a dramatic step up in production. He said a government funding deal and passage of a key defence spending bill were urgent priorities for Congress.
Ed Husic, a former industry minister, called for a radical shake-up of the alliance. “The moment to reset the relationship with the Trump administration is right now,” he said, arguing that a “completely different Congress” would require the administration to do things differently, “including not hurting allies – friends, such as Australia – with tariffs.” Husic also flagged possible changes to the US approach to AI regulation, and a flow-on effect as the Albanese government prepares major legislation for 2027. Vermont senator Bernie Sanders has already called for a moratorium on new construction, warning that voters wanted the environment and humanity itself protected.
Greens senator Sarah Hanson-Young said it was no coincidence that datacentre hotspots such as Texas, Georgia and Ohio had shifted to support the Democrats. “Communities are being asked to hand over their land, water and power to some of the world’s wealthiest tech companies, yet the benefits for ordinary Australians remain remarkable difficult to identify,” she said.
The acting prime minister, Richard Marles, said cost-of-living and datacentre anxiety was at play in both countries. “What we are very mindful about here is that you’ve got to get the social licence right in respect of datacentres – where they’re built, and the place where they shouldn’t be built is in suburbs – and also making sure that the right power and the right water is brought to these datacentres,” he said.