Trump Has 12 Days. Iran Knows It. What Happens to Oil, Gold and the Dollar Next?
Donald Trump has 12 days until the US midterm elections on 3 November. Iran knows that, and I think the significance of the timing is being seriously underestimated. On Tuesday, Reuters reported that senior Iranian officials see prolonging negotiations with Washington as a way of increasing political pressure on Trump ahead of the vote. On Wednesday, the US ordered non-emergency government staff and their families to leave Saudi Arabia after a run of Houthi attacks on civilian airports and critical infrastructure.
Brent crude settled at $113.17 on Wednesday, its highest close since early May, and was still trading above $110 a barrel on Thursday. On Thursday morning NPR reported, citing a person briefed on the planning, that the United States and Israel are preparing for a possible attack on Iran in early November, after the midterms. Trump has said there will be no new American strikes before the election, and no new operation has been approved.
Think about that sequence. Trump is approaching an election with energy prices elevated, US inflation at 3.7% and little evidence of a lasting diplomatic settlement. Tehran is under enormous economic and military pressure of its own, but it also understands the domestic political difficulty Washington faces. Meanwhile, investors are trying to price what happens if negotiations drag on, Saudi infrastructure stays exposed and the possibility of further military escalation moves closer.
But here is the part of this story I find particularly interesting. Despite the renewed rise in oil, US Treasury yields are falling. The American bond market is behaving very differently from what a straightforward inflation story would suggest, and I think that tells us something important about where financial markets could be heading.
The numbers behind the story
| Indicator | Latest reported figure | Why it matters |
|---|---|---|
| US midterm elections | 3 November 2026 | The political deadline approaching for Washington |
| Brent crude | $113.17 close on 21 Oct; above $110 on 22 Oct | Highest close since early May on renewed geopolitical and energy risk |
| US headline CPI | 3.7% y/y in September (August 3.4%) | Inflation is moving further above the Fed’s 2% target |
| US gasoline CPI | +9.1% m/m in September | Energy costs are already reaching consumers |
| US 10-year Treasury yield | About 4.97% on 21 Oct, down more than 18bp | Investors bought government bonds despite elevated inflation |
| Federal Reserve | 3.75-4.00%; next decision 27-28 October | The last major rate decision before the midterms |
| US-Israel military planning | Possible post-election action reported | Contingency planning, not an authorised operation |
Iran has a political clock to work with
One of the more revealing developments came on 20 October. Three Iranian officials and an insider told Reuters that Tehran has been deliberately prolonging the talks, partly because it believes doing so increases political pressure on Trump, and that it will not make concessions it thinks could hand him a political victory. One official said Iran is preparing for renewed attacks rather than a deal. That does not mean every decision in Tehran revolves around the American election, because Iran is also dealing with sanctions, military threats, severe economic disruption and a deep lack of trust in Washington.
But the electoral calendar adds another consideration. Trump needs to convince American voters that the economic situation is improving, and lower petrol prices or a credible diplomatic agreement would help. A further surge in fuel costs, alongside another regional escalation, would present a far more difficult political picture. Iranian officials understand that Washington is working against a deadline, which gives Tehran an incentive to hold back on concessions as long as its leadership believes the cost of waiting remains bearable.
It is also a dangerous calculation. Delaying negotiations may raise the political cost for Washington, but it could equally raise the chance of a military response. That is becoming particularly relevant as we approach November.
What happens after 3 November?
According to NPR’s source, Israel originally wanted to strike in mid-October, before its own elections on 27 October, and Trump objected. The US is now reported to be building up forces so that it is ready to act by early November, although those preparations could also be part of a campaign to pressure Iran into a deal. Iran’s foreign minister, Abbas Araghchi, told Iranian state media that Tehran is as prepared for diplomacy as it is for war.
These reports describe military preparations and options under consideration. They do not establish that Trump has approved a new operation, or that one will inevitably happen. Nevertheless, they matter, because if investors start assigning a higher probability to renewed military action after the election, that risk can move oil, currency positioning and demand for safer assets well before anything takes place. Markets respond to changes in expectations, not only to completed events, and the possibility of escalation arriving just as the political calendar turns is something I am watching closely.
Saudi Arabia has introduced another layer of risk
The latest Houthi attacks make the situation more complicated. The State Department said the Iranian-backed Houthis have increasingly attacked Saudi Arabia, including civilian airports and other critical infrastructure, causing civilian casualties and severe travel disruption. The order covers the embassy in Riyadh and the consulates in Jeddah and Dhahran, which have not closed, and the department called an earlier media report of departures across US embassies in the Gulf “inaccurate”.
That distinction is important, but so is the fact that the decision was taken at all. Saudi Arabia is one of the most important oil producers in the world, and its infrastructure, export terminals and shipping routes are critical to global energy markets. When attacks start hitting civilian transport and oil facilities, investors have to consider the possibility of further disruption even while production keeps running.
The concern is no longer only whether traffic through the Strait of Hormuz can recover. There are now additional questions about the security of energy facilities and transport links elsewhere in the region, and this is where the oil market becomes particularly interesting.
Gulf exports have recovered. So why is Brent still above $110?
Here is the apparent contradiction. Kpler estimates that Middle Eastern crude exports averaged about 17.3 million barrels a day in October, slightly above the 16.9 million average before the conflict began. Alternative export routes, ship-to-ship transfers and changes to regional logistics have helped producers keep substantial volumes moving, although flows through the Strait of Hormuz itself, at about 11.7 million barrels a day, are still below normal.
Yet prices remain elevated, because restoring physical shipments is not the same as removing geopolitical risk. Insurance and freight costs are far higher, the workarounds are operationally fragile, and the market has to price what happens if another major disruption takes place. A barrel arriving today does not guarantee that the next cargo will travel under the same conditions.
That is why a market can have healthy current export volumes while still carrying a considerable premium for the possibility of future supply disruption. Thursday’s attacks on Saudi targets pushed Brent up again even as regional exports sat above their pre-war average. I think that distinction deserves a lot more attention than it gets.
US inflation at 3.7% is becoming harder to ignore
The latest inflation figures explain why this energy story matters so much. On 14 October the US Bureau of Labor Statistics reported that consumer prices rose 0.6% in September and 3.7% over the year, up from 3.4% in August. The gasoline index jumped 9.1% in a single month, making it the biggest single driver of the monthly increase.
Central banks generally try to look through temporary swings in commodity prices, but persistent increases in energy costs can gradually spread into the rest of the economy. Transport becomes more expensive, businesses face higher operating costs and households have less disposable income. Some companies absorb the increase in their margins and others pass it on to consumers, and if the shock persists it can start to affect inflation expectations as well.
That makes the Federal Reserve’s job considerably harder. Policymakers have to judge whether higher energy prices are creating another sustained inflation problem, or whether the squeeze on spending and business activity will eventually weaken the economy. Those outcomes are not mutually exclusive, which is the real difficulty of an energy shock: it can push prices up while it slows growth down.
The IMF highlighted that broader challenge in its October 2026 World Economic Outlook, which projects global growth of 3.1% this year and treats renewed conflict escalation as a major downside risk. I covered that report in The IMF Upgraded World Growth. It Also Pushed Back the Hormuz Recovery. But something is happening in the bond market that makes me reluctant to view everything through inflation alone.
Why are Treasury yields falling when oil and inflation are rising?
This is the part I really want traders to pay attention to. After September’s hot CPI release the initial reaction made sense: Treasury yields rose, the dollar strengthened and investors increased their expectations for tighter Fed policy. Then the move reversed, as government bonds attracted demand and pushed their prices higher and their yields lower.
On Wednesday 21 October the US 10-year Treasury yield fell by more than 18 basis points to about 4.97%, its lowest level in almost a month, even with Brent closing above $113. That is fascinating, and there is a perfectly understandable reason it can happen. Bond prices and yields move in opposite directions, so when investors buy existing fixed-rate government bonds their prices rise and the yield available to a new buyer falls.
During periods of economic concern, US government bonds attract buyers looking for liquidity and relative safety. If investors start to worry that high interest rates will cause serious economic damage, longer-term yields can decline even while current inflation stays uncomfortable. An inflation reading tells us about prices over the previous twelve months, while a bond yield reflects expectations for future interest rates, inflation, growth and the compensation investors demand for holding debt. Those expectations can move in different directions, and right now investors appear to be weighing two competing risks.
The inflation risk
The growth risk
Importantly, that equity weakness cannot all be attributed to Iran. Worries about AI spending, the big technology companies and their valuations played a major role as well. That is why I watch several markets together: oil alone does not tell us which force is dominant, and the relationship between oil, Treasury yields and equities is often far more revealing than any individual chart. For more on the CPI reaction and my dollar outlook, read Hot CPI. Falling Bond Yields. Is the US Dollar Setting Up for a Correction?
What this means for the US dollar, gold and the Nasdaq
This is where understanding the macro environment becomes useful when building a trading view. An escalation in the Middle East does not automatically mean the dollar rises, gold rallies and stock markets collapse. The actual reaction depends on what is already priced in, how interest-rate expectations respond, and whether investors are more worried about inflation or about growth.
US dollar: I would not assume the bigger bullish story is finished
We have seen the dollar give back gains as Treasury yields retreated. That supports my view that a near-term dollar correction can develop even while some of the longer-term arguments for dollar strength remain intact. If US yields keep falling relative to other major economies, the dollar could lose some of its interest-rate advantage, but another inflation shock that changes expectations for the Fed could turn that picture around again.
The dollar can also attract demand during international financial stress, even when Treasury yields are declining. So I am not prepared to treat every dollar pullback as the start of a lasting bearish trend. I am watching whether the weakness is being driven by narrower yield differentials, by deteriorating global risk appetite or by both, because they carry different implications for what happens next.
Gold: geopolitical uncertainty is not the only consideration
The possibility of further military escalation can encourage safe-haven demand for gold, and falling real yields can make an asset that pays no interest more attractive. But if energy prices push inflation expectations higher and investors begin to expect a more restrictive Fed, rising real yields or a stronger dollar can make life considerably harder for gold. That is why I do not buy the assumption that every geopolitical escalation must produce an immediate gold rally.
People keep asking me why gold has been under pressure during a war, and this is the answer: oil is bid, and that is the inflation trade. My own view, as I said on this morning’s London session, is that both the macro and the technicals still lean bearish for gold, and a move back up towards 4,200 is where I would look at a swing short. That is my positioning view, not advice, and the direction and composition of bond yields will decide whether it holds.
Nasdaq: why I was looking for shorts
Overnight into Thursday, around 1am UK time, I took a short position on Nasdaq futures, and I woke up in profit. The geopolitical situation fed into my wider macro view, with energy prices elevated and uncertainty building around US policy, but I was not simply selling because a worrying headline appeared. Nasdaq had been printing bearish flags, I took the breakout, and I used my KenMacro Structure Indicator as additional technical confluence, with the liquidity around 29,000 as the area I expect price to be drawn towards.
The macro picture told me why I was interested in downside. The technical setup told me where an entry made sense. Those are different jobs, and treating them separately is an important part of trading consistently, because a strong macro argument does not make every short entry a good one. Timing, market structure and risk still matter.
Macro and technical analysis, taught together
Three scenarios I am watching ahead of the midterms
Nobody knows whether negotiations will produce a credible settlement before 3 November, and reports of military preparations are not evidence that another strike has been authorised. What we can do is identify the developments that would change the market outlook, and decide in advance what each one would mean.
Scenario 1: credible diplomatic progress
If Washington and Tehran make meaningful progress, particularly on security arrangements, sanctions or energy shipping, some of the geopolitical premium in oil could start to ease. That may reduce inflation concerns and improve investor confidence. But do not automatically assume lower oil means lower Treasury yields: if the same agreement improves growth expectations and encourages investors to rotate out of government bonds into riskier assets, yields could rise. The wider reaction will depend on which expectations change most.
Scenario 2: negotiations drag on and energy stays expensive
This is perhaps the most complicated scenario for traders. Oil stays elevated without any single development forcing a resolution, businesses keep absorbing high energy costs and consumers feel the squeeze on spending power. The Fed stays cautious while investors repeatedly reassess how much damage prolonged restrictive policy could do, and in those conditions we could keep seeing sharp rotations between inflation fears and growth fears. That is an environment where reacting to every headline without understanding the bond market can become expensive.
Scenario 3: renewed escalation after the elections
This is the scenario that deserves particular attention given the recent reporting. Renewed military strikes, or a serious disruption to Saudi energy infrastructure or regional shipping, could send oil sharply higher. The first response might favour the dollar and other liquid defensive assets while putting pressure on equities, but the move in Treasury yields that follows would tell us a great deal.
If yields rise alongside oil, investors are probably focusing on the inflationary consequences. If yields fall while oil rises, markets are putting more weight on the damage to growth and on demand for safer assets. Neither outcome is guaranteed, and what matters is identifying which reaction is actually developing rather than insisting the market should behave in a particular way.
The market signals I will be watching
| Market | What I am looking for |
|---|---|
| Brent crude | Sustained pressure above recent highs, or a decline after credible diplomatic progress |
| US 10-year yield | Whether yields extend their decline or reverse as inflation expectations change |
| US dollar index | Whether the correction continues, or higher yields and defensive demand restore support |
| Nasdaq | Weakness or recovery in the big technology stocks, alongside broader market structure |
| Gold | Whether safe-haven buying outweighs pressure from real yields and the dollar |
| Federal Reserve | Any change in how it weighs inflation against growth at the 27-28 October meeting |
These markets need to be read together. If oil rises while equities fall and Treasury yields decline, I want to understand whether investors are reassessing the economic outlook. If oil rises alongside Treasury yields and the dollar, I would examine whether inflation and policy expectations have become the bigger concern, and if the situation de-escalates, I would watch how much of the geopolitical premium is genuinely removed from oil. That is the framework I am using as we approach the elections.
What happens after the US midterms?
The biggest mistake would be assuming that 3 November itself guarantees a change in policy. It does not, but an election can change the political incentives around a difficult decision. For Trump, the next twelve days carry an obvious domestic economic dimension, while for Iran the approaching vote may shape the timing and perceived value of any concessions. For markets, the issue is whether expectations of diplomacy, military action or further energy disruption shift as that deadline passes.
Oil and government bonds are already showing how differently investors can respond to the same geopolitical backdrop. Oil reflects the continuing cost and risk of energy disruption, while Treasury yields also reflect uncertainty about growth and about how long the economy can carry elevated borrowing costs. I think that tension could become one of the defining market stories of the final weeks of 2026, which is why I will keep watching the dollar, gold, the Nasdaq and Treasury yields alongside developments in the Middle East.
The political headlines will attract plenty of attention. What investors do with their capital after those headlines is where I think we will learn the most.
Frequently asked questions
Why is Iran important to the 2026 US midterm elections?
The conflict has contributed to higher energy costs and greater economic uncertainty in the run-up to the 3 November vote. Reuters reported on 20 October that senior Iranian officials see prolonged negotiations as a way of increasing political pressure on President Trump. Iran’s approach is also shaped by sanctions, security concerns and distrust of Washington.
Why can Treasury yields fall when oil prices and inflation are rising?
Yields can fall when investors buy government bonds because they are worried about economic growth, financial stability or future interest-rate cuts. Higher demand pushes bond prices up and yields down, which can happen even while current inflation remains elevated. On 21 October the US 10-year yield fell to about 4.97% while Brent closed above $113.
Will another Iran escalation push gold and the US dollar higher?
Both can benefit from safe-haven demand, but their response depends on interest rates, real yields and broader market expectations. Higher oil can lift inflation expectations and potentially support the dollar, while falling real yields can support gold. Neither move is automatic.
What happens to the Nasdaq if oil prices keep rising?
Higher energy costs can add to inflation and squeeze company margins and consumer spending. If that leads investors to expect higher interest rates or slower growth, equities can become vulnerable. Technology earnings, valuations, positioning and wider financial conditions also drive the Nasdaq.
Ken Chigbo is the founder of KenMacro and a macro trader and financial-markets educator with about 18 years in the markets. Through KenMacro he publishes educational analysis on central banks, inflation, interest rates, currencies, gold and commodities, built around understanding the economic forces behind a market before evaluating the chart. Follow his analysis on YouTube, and find more research in the KenMacro Macro Insights. About Ken.
This article is general financial-market education and research as at 22 October 2026. It presents dated market observations and the author’s interpretation of macroeconomic developments. It does not constitute personalised investment advice, a trade signal or a promise of future returns, and market prices and policy expectations may change after publication. Market scenarios are conditional, and trading leveraged products involves substantial risk. The KenMacro Trading Club is a KenMacro product and the terms on the Club page and at checkout apply.
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