Global energy prices are plunging after US vice president JD Vance blamed the Iran conflict for Republican losses in last night’s midterms, a development traders are reading as the first clear sign that Washington’s appetite for the war is fading.

In a lengthy post on Twitter/X, Vance suggested that the decision to attack Iran had cost Republicans the House and Senate. His intervention added to signs of growing dissent over the war among party insiders – and to reports that Donald Trump is considering replacing Pete Hegseth as defence secretary – leading markets to imagine the administration will find a pretext to end the war before the new Congress sits in January. Front-month Brent crude is trading below $95 a barrel, down from over $115 on Monday, West Texas Intermediate is going for $88, and the European Dutch TTF natural gas benchmark is down 9% on the day.

Caution is warranted for now. The realities Vance describes are real, but they have been evident since the first week of the war. It is not obvious that the president himself has changed his thinking, or that he will bend to pressure from his party now that the midterms are over. Even if he does seek a ceasefire, Iran may not prove amenable, and traffic through the Strait of Hormuz could remain constrained. Market participants should maintain a defensive base case for now.

Corporate hedgers should nonetheless recognise that a sustained decline in energy prices could overturn many of the assumptions now embedded in global financial markets. Lower living costs might support a broadening of household consumption across most advanced economies, lifting growth trajectories unexpectedly. The balance of power in the Ukraine war could shift as Russian export revenues fall. And inflation pressures may ease enough to let central banks scale back monetary tightening, relieving strain on bond markets and offering some respite to parts of the technology sector – along with overindebted sovereigns like France.

Currency markets could suffer another bout of volatility. After having drawn support from safe-haven flows and its status as a net energy exporter for much of this year, the dollar could extend its losses as risk premia evaporate. Energy importer currencies – including the euro, pound, yen, won, and rupee – might rally as a global terms-of-trade shock eases. The Canadian dollar may underperform many of its peers given its residual sensitivity to oil, but should grind higher against the greenback nonetheless.

In a very real sense, the biggest tail risk facing global currency markets could come from a positive shift in the economic landscape.