Flydubai, Emergency Powers and the 2026 Midterms: The Macro Risk Markets Could Be Underpricing

On 30 September a Flydubai flight from Dubai to Tel Aviv, FZ1073, diverted to Tabuk in Saudi Arabia after a violent struggle in the cockpit that Israel’s government calls an attempted terrorist attack. It landed in the same week that President Trump’s August remark about an election-related national emergency (“Stranger things have happened”) keeps circulating, and five weeks before the US midterm elections on Tuesday 3 November 2026. A national emergency does not give a president the power to postpone those elections. Federal law fixes the date and the Constitution fixes when congressional terms end. The real market question is different: what happens if traders start pricing a Middle East security shock, a fight over emergency powers and an election into the same risk regime, at a time when oil, inflation and the Fed are already moving the tape?

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I don’t particularly like connecting dots for the sake of connecting dots. Markets already have enough misinformation flying around without turning every unusual headline into evidence of a grand plan. But every now and again, several genuinely important stories land close enough together that it is worth asking a better question. Not “are these things secretly connected?”, but what happens if markets begin treating them as part of the same risk regime? That distinction matters, and it is the whole point of this piece.

What happened on the Flydubai flight?

Flydubai flight FZ1073 left Dubai for Tel Aviv on the morning of 30 September with around 170 to 180 people on board, most of them Israeli. About two hours in, tracking data showed a sharp drop in altitude and the aircraft squawked a hijack code before diverting to Tabuk in north-western Saudi Arabia, where it landed safely. According to Israeli Prime Minister Benjamin Netanyahu, one pilot stabbed the other and apparently tried to crash the aircraft. Israeli officials identified the alleged attacker as the Omani co-pilot, and Saudi authorities arrested him.

Accounts of how the aircraft was recovered still differ in the details. Israeli passengers describe entering the cockpit and overpowering the attacker, while other reports credit off-duty pilots on board with taking control and landing the aircraft. Israel’s defence minister, Israel Katz, went further than Netanyahu and called it an attempted “jihadist terrorist attack”, saying preliminary information showed the attacker intended to crash the aircraft with everyone on board.

That is the Israeli government’s assessment based on preliminary information, and it is not the same thing as an independently established motive. Flydubai confirmed “an altercation occurred in the flight deck” and said the reasons and motives “are unknown and remain subject to a formal investigation”, urging everyone to “refrain from premature speculation”. I am treating it exactly that way: a serious, confirmed security incident with a motive that is still being investigated.

This did not happen in a geopolitical vacuum

The incident arrived while the Middle East was already carrying an unusually large geopolitical risk premium. US-Iran negotiations remain fragile and are running through Qatari mediators, with the two sides still far apart on who moves first. Oil has reacted violently to every perceived improvement or deterioration in diplomacy, and Brent was on course for a monthly gain of around 13% in September even after Tuesday’s 2.6% drop on recovering Middle East exports.

That feeds straight into the chain every macro trader should already have in their head. The number is not the trade, and neither is the headline. The trade comes from what that headline changes further down the chain.

That is especially important right now because the Federal Reserve has already gone back to tightening, with a hike to 3.75% to 4.00% on 16 September. Softer US inflation data on 30 September cut the odds of another move in October: core PCE rose 0.2% in August and 3.0% on the year, against the 3.3% economists expected, and a hold became the more likely October outcome on CME FedWatch. But oil is the obvious variable that could put inflation pressure straight back into the conversation.

So when another Middle East security event hits the tape, I am not simply asking whether it is bullish for gold. I am asking whether it changes oil. If it does, does it change inflation expectations? If it does, does it change the Fed path and Treasury yields? Only then do I care about the trade.

Build the environment first. Then look for the trade.

The 2026 midterms add another layer

The United States holds its midterm congressional elections on Tuesday 3 November 2026. That date matters because politics adds another layer of uncertainty just as markets are trying to price war, oil, inflation and monetary policy at the same time.

There has also been an unusual development. In an interview in August, the conservative commentator Wayne Allyn Root suggested President Trump could declare a national emergency ahead of the midterms to impose voter ID, proof-of-citizenship and mail-in ballot rules if the SAVE America Act did not pass the Senate. Trump cut in: “Let me just say that stranger things have happened, OK? I’ll leave it at that.” That exchange is real, and Democrats and voting groups are already preparing litigation in case an emergency order touches the election.

What followed online was a much bigger claim, that Trump could simply declare an emergency and postpone the midterms. Root’s suggestion was about election rules, not the election date, and on the legal framework in force today the postponement claim jumps several steps too far.

Can Trump postpone the 2026 midterms by declaring a national emergency?

No, not by declaring one. Federal law (2 U.S.C. § 7) sets the Tuesday after the first Monday in November of every even-numbered year as the day House members are elected, and Senate elections run on the same federal schedule. The 20th Amendment ends congressional terms at noon on 3 January, with no emergency exception. Changing the election date would take an act of Congress, not a presidential order.

Emergency declarations unlock specific powers that Congress has already delegated to the executive branch. They are not a general power to rewrite federal election law. The Brennan Center, which has catalogued those emergency authorities, puts it plainly: “presidents do not have the power to rewrite election rules, even during a real emergency, let alone a fake one.” A federal court has also ruled that because the Constitution gives election regulation to Congress and the states, a presidential command of that kind “exceeds the President’s authority”.

That doesn’t make the story irrelevant. It changes the story.

The interesting macro question is not whether Trump will cancel the election, because there is no established legal basis for presenting that as a scenario. The better question is what happens to markets if a worsening security crisis collides with a fight over emergency powers, election administration and the legitimacy of the process. Markets can price uncertainty long before a court decides the legal argument, and that is where this gets interesting.

Three macro scenarios worth thinking about

Scenario 1: the security incident stays isolated

This is the least complicated path. Investigators find the Flydubai event was isolated, with no wider network and no escalation, diplomacy continues and energy markets gradually remove some of the geopolitical premium. In that world oil matters more than the original headline. If crude rolls over, inflation fears ease and the market keeps trimming expectations of aggressive Fed tightening, Treasury yields could soften.

That mix would generally be more constructive for rate-sensitive risk assets. It could also support gold through lower real yields, even as some of gold’s pure geopolitical bid fades. This is exactly why “peace means gold down” and “war means gold up” are too simple. Gold trades the entire macro response, not the headline.

Scenario 2: another security shock pushes markets towards classic risk-off

Now imagine a second serious incident. The first response could look conventional: equities lower, volatility higher, and safe-haven demand showing up in Treasuries, the dollar, the yen or gold depending on where the shock comes from. But even here traders need to be careful. If the escalation threatens energy supply at the same time and sends crude sharply higher, bonds may not behave like a textbook safe haven, because the market starts pricing another inflation shock instead.

Then you can get an uncomfortable combination of oil higher, yields higher, the dollar stronger and equities under pressure. Gold gets much more complicated in that environment. Safe-haven demand helps it, while higher real yields and a stronger dollar hurt it. Whichever force wins tells you what regime the market is actually trading.

Scenario 3: geopolitical risk becomes election risk

This is the tail scenario worth watching, not because it should be assumed but because its market consequences would be different. Suppose a significant security escalation leads to emergency measures in the United States, and then to court battles or political conflict over how those powers interact with the election process. Again, that does not mean a president can simply postpone the midterms. But a contested process could create something markets dislike almost as much: uncertainty about the rules themselves.

That is where volatility can become self-reinforcing. Political risk becomes fiscal risk, fiscal risk feeds the Treasury market, Treasury volatility feeds equities, and dollar moves spill into global liquidity. Suddenly a story that started as geopolitics has become a rates trade, and that is the chain I would watch.

How has the S&P 500 performed after midterm elections?

There is a reason traders talk so much about the period after US midterm elections. Historically it has been unusually strong, but you have to be precise about the sample, because different studies use different start dates and methods.

So yes, the “stocks always rise after midterms” statistic you have probably seen is real under certain definitions. The Fidelity series starts earlier, in 1938, and since Capital Group finds no negative year after 1950, its misses sit in that earlier stretch, which is why its hit rate is 95% rather than 100%. That is not a contradiction. It is what happens when researchers use different start dates and windows.

The lesson is not “midterms happen, therefore buy stocks”. That would be lazy. The more useful reading is that markets have historically struggled with uncertainty into the vote and then often performed better once some of it cleared. BlackRock also found that midterm years have been the weakest of the four-year cycle, with the S&P 500 up 7.5% on average against 12.4% across all years, which fits the same pattern of pressure before the vote and relief after it.

Right now, though, far more than politics is competing for the market’s attention: oil, inflation, Fed policy, Treasury yields, war, fiscal risk, and now aviation security. That is precisely why I would be very careful about applying the seasonal pattern to 2026 without thinking. Past midterm statistics tell us what markets have done. They do not tell us what markets must do.

What I’m watching instead of trying to predict politics

The mistake here would be trying to forecast every political decision, and it isn’t necessary. Markets will tell us whether the risk is becoming economically important. If Middle East tension escalates, I want to know whether Brent sustains the move, then whether inflation expectations move with it, then whether Treasury yields confirm it. After that I check whether the dollar strengthens or loses its yield advantage, and only then do I look at gold and US equities.

That sequence is far more useful to a trader than spending all day arguing about a headline. Data, then expectations, then rate pricing, then yields, then capital flows, then the market. That is the framework.

The bottom line

I am not saying the Flydubai incident, the US emergency-power discussion and the midterms are secretly connected. There is currently no evidence that establishes that. What I am saying is that they are arriving inside the same increasingly fragile macro environment, and markets do not need a conspiracy to move. They only need probabilities to change.

If the probability of a wider security shock rises, oil changes. If oil changes enough, inflation changes. If inflation changes, the Fed changes, and if the Fed changes, yields change. Once yields move, almost everything else has to reprice around them.

That is the story worth watching. Not because the strangest theory has to come true, but because sometimes the possibility of a different regime is enough to move billions of dollars before anybody knows the final answer.

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Ken Chigbo is the founder of KenMacro and a macro trader who covers economic data, central banks, rates, currencies and commodities. About Ken.

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