Brent crude closed at $116.72 a barrel on Friday, its highest price since late April. Israel heads to the polls tomorrow to elect a new parliament while the US will do so next week to decide control over the Congress.
Israel’s last published opinion polls before the vote show neither bloc winning a majority pointing to a hung parliament as the most likely outcome. All three main TV polls put Gadi Eisenkot’s bloc ahead with 52 to 56 of the Knesset’s 120 seats, against 50 for Prime Minister Benjamin Netanyahu’s bloc. No poll showed either side reaching the 61 seats needed for a majority. Some parties in Eisenkot’s camp have ruled out working with the Arab-majority parties, which leaves his bloc short. President Isaac Herzog will decide which party gets the first attempt at forming a government. If no side can build a majority, Israel could face another election with Netanyahu staying on as caretaker.
Across the Atlantic Ocean, opinion polls in the US favour the Democrats to win the House. The party leads the generic congressional ballot by about 9 points. Decision Desk HQ gives Democrats a 79% chance of taking the House. Republicans currently control the chamber by a narrow margin, and a majority requires 218 of the 435 seats. The Senate is harder for the Democrats to win. Republicans hold 53 of the 100 seats, so Democrats need a net gain of four seats to take control. Decision Desk HQ puts their chance at 56%, so control remains uncertain. Close races include Alaska, Iowa, Kansas, Ohio, Maine, Michigan and Texas. It is well within the realm of possibilities for a Democratic House and a Republican Senate to be the outcome of this election.
Trump’s low ratings weigh on his party. His approval rating stands at 36.7%. About three in four voters disapprove of his handling of the economy and the cost of living. Living costs dominate voters’ concerns. In an AP-NORC poll, 85% of voters named the economy as a top issue and 84% named the cost of living, while 64% cited the war with Iran. The war has raised the cost of gasoline, home heating and diesel. Energy prices were up 20.4% on a year earlier. Trump and his allies say the war was needed to stop Iran getting a nuclear weapon, and most Republican voters still support it.
The war with Iran makes these two elections intertwined. Trump endorsed Netanyahu last week and wrote that if Israel chose anyone else, the US would have to do the work itself and he was not inclined to. US officials told The New York Times that the US and Israel have plans for fresh strikes on Iran after the midterms. Trump told Fox News it is “getting to be decision time” on a deal with Tehran. Neither government has announced a date for any action.
Oil markets seem to have already started pricing in the risk of renewed fighting. Brent rose 6.2% last week, its third weekly gain in a row, as investors increasingly expect the US to resume strikes. Earlier this month, oil flows through the Strait of Hormuz ran about 30% below pre-war levels. Costlier crude feeds the inflation that the world’s largest central banks are trying to contain. The Fed’s September rate rise was driven in part by the energy shock from the Iran war.
The midterms are unlikely to bring a quick shift in US trade policy. BNY expects Trump’s tariffs to persist after the vote. Democrats appear inclined to protect key manufacturing sectors while cutting tariffs on some consumer goods, and their bills in the new Congress may signal how they want tariffs adjusted. Even a Democratic Congress would struggle to rein in tariffs, however, as legislation limiting executive actions would face frequent presidential vetoes. A Democratic win would not automatically undo existing tariffs, since the president keeps substantial influence over trade whichever party controls Congress.
What does this mean for Sri Lanka?
The main risk for Sri Lanka is renewed fighting after the US vote. The US and Israel have drawn up plans for fresh strikes on Iran after the midterms, targeting its energy infrastructure, nuclear sites and missiles,. Trump has not approved a new offensive and has postponed earlier ones. The US expects its full military assets to be in place by early November. Iran has warned that it could retaliate against Saudi oil refineries and undersea internet cables. The White House says the US will not attack Iran before the midterms. Israel’s result will shape how hard Israel presses for renewed strikes. Netanyahu firmly favours renewed action against Iran, though Israeli sources say the decision rests with Trump. Eisenkot’s camp promises more diplomacy. If the vote ends in stalemate, a repeat election next year would leave Netanyahu in power with full authority over decisions such as going to war.
If fighting resumes, Sri Lanka’s fuel import bill can worsen. Sri Lanka has already spent US$4.07 billion on fuel imports in the first eight months of 2026, up 61.6% on a year earlier. Higher fuel costs helped widen the trade deficit to US$7.18 billion in the first eight months. Energy costs have also kept inflation above the Central Bank’s target.
The midterm elections are not expected to bring quick tariff relief for Sri Lankan exporters. Democrats have campaigned on blocking Trump’s tariffs and ending the Iran war. The 10% tariff on Sri Lankan goods was set by the US Trade Representative under Section 301, rather than by Congress.