Geopolitics & Business Report: Defense Stocks Slide as Democrats Take Congress and Iran Warns of a ‘Nightmare’, Nov. 4, 2026

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Good evening, and welcome to The Boston Report’s geopolitics and business report for Wednesday, Nov. 4, 2026. I’m Morgan Ledger. Democrats won both houses of Congress on Tuesday, and tonight we look past Wall Street’s rally to what that shift means for money around the world: the defense contractors that live on Pentagon budgets, the war with Iran, peace talks over Ukraine, Europe’s energy-fueled inflation, a looming fight over America’s debt limit, and China’s tightening grip on critical minerals.

Defense Stocks Take the First Hit

Defense contractors were among the day’s clearest losers. Lockheed Martin fell 3.6%, RTX and Northrop Grumman each dropped more than 3%, and L3Harris slipped more than 2%, CNBC reported. The worry is simple. These companies run on federal money, and a Democratic Congress will have a bigger say over how it’s spent. Lockheed gets about 70% of its sales from Washington, and L3Harris drew 75% of its fiscal 2025 revenue from U.S. government sales, including foreign military sales.

“A Democratic sweep is a headline negative for defense stocks,” Wolfe Research analyst Myles Walton wrote. But he called the sell-off “potentially short-lived.” After the 2006 midterms, the last time Democrats took both chambers from a sitting Republican president, the sector dipped roughly 2% and then recovered as budgets kept climbing to pay for the Iraq War. Wolfe sees the fiscal 2027 budget as the near-term test, with Republicans possibly racing to pass a package in the lame-duck session. Follow the budget fight in our defense spending coverage.

Iran Answers the Vote

The Iran war is where the new Congress could matter most. Laurel Rapp of Chatham House told CNBC that Democrats will hold votes to restrain the administration on war powers and could use their control of spending to limit funding. Whether that binds the White House is another matter, she said, because a bill ordering an end to U.S. involvement would need two-thirds of both chambers to override a veto. Berenberg chief economist Holger Schmieding predicted one last round of bombing, followed by a deal to reopen the Strait of Hormuz by 2027.

Tehran answered quickly. Iran’s parliament speaker, Mohammad Bagher Ghalibaf, posted on X that “Americans said NO TO WAR,” and warned that “our NO comes with a Nightmare” if Washington ignores its voters, CNBC reported. Asked whether the war hurt Republicans, President Donald Trump told The Wall Street Journal that “Iran was a piece of it,” but added, “I did the right thing.” The Journal and The New York Times have reported that the U.S. is preparing for possible renewed strikes.

The American Prospect’s editor at large, Harold Meyerson, wrote that in Monday’s closing pitch beside the Reflecting Pool, Trump praised the oil industry’s record profits and hailed victory in the war. Meyerson quoted the president: “drill, baby, drill. And that’s what’s happened. And we’re making an absolute fortune in our country.” Voters were paying those energy prices at the pump.

Ukraine Talks and Europe’s Energy Bill

The war in Ukraine is moving on its own track. Russia confirmed that talks with Ukraine and the U.S. will go ahead in Abu Dhabi on Nov. 10 and 11, with Putin aide Vladimir Medinsky leading Moscow’s side, CNBC reported, citing Reuters. The Kremlin also wants a leaders’ meeting of Russia, the U.S. and China. Ukrainian President Volodymyr Zelenskyy has insisted on “Nothing about Ukraine without Ukraine.” J.C. Lintzenich of the German Marshall Fund said a Democratic Congress means closer oversight, including of Ukraine aid that the law requires. Schmieding said that if Trump leaned on Kyiv, Europe would likely step up, but couldn’t fully replace American military and intelligence help. The Financial Times reported that European leaders hailed the midterm result as a rebuke of Trumpism.

Europe is already paying for the Middle East war. Euro zone inflation hit 4% in October, up from 3.8% in September and the highest since 2023, a flash estimate showed. Energy inflation climbed to 20.8%. Lithuania ran hottest at 6.1% and Malta coolest at 2.3%, which leaves every member above the European Central Bank’s 2% target. Markets now see better than a 72% chance that the ECB lifts its 2.5% key rate in December. Robert Mertens of Validus Risk Management warned that turmoil in the French bond market is boxing the bank in.

Washington’s Debt Fight Becomes a Global Risk

The biggest money risk from the new Congress may be the debt limit. Congress set it at $41.1 trillion in 2025, and the Bipartisan Policy Center expects the Treasury to reach it by midsummer, according to CNBC. Accounting moves could push the so-called X-date into late 2027. This time Democrats will hold the leverage, and Goldman Sachs analysts said they could tie an increase to limiting the Iran war or rolling back tariffs. “I don’t think they realize how aggressively Democrats plan to take 2027,” said Aniket Shah of Jefferies. PGIM’s chief U.S. economist, Robert Sockin, said a technical default isn’t his base case, but “the risk is higher than ever.” Treasury securities are the lifeblood of the global financial system, so a missed payment would be felt far beyond the U.S. Congress. The Economist also looked at how Democrats will wield their new power.

China Tightens Its Grip on Critical Minerals

Beijing, meanwhile, is pressing its own advantage. China is mobilizing state-linked companies to buy bigger stakes in mines abroad, CNBC reported. Chinese mineral acquisitions overseas reached $8.8 billion in the first three quarters of this year, already the highest annual total since at least 2018, according to the Rhodium Group. China refines about 92% of the world’s rare earths, the International Energy Agency says, and has required export licenses for seven medium and heavy rare earths since last year. That’s economic warfare with a price tag. Japan has felt it most. Chinese customs data show yttrium oxide shipments to Japan collapsed to 4,000 kilograms in September from 51,000 a year earlier, and outside China the oxide reportedly sells for about $1,150 a kilogram, versus about $9 inside. Some companies are pushing back: the Financial Times reported that Belgium’s Solvay struck a rare earths deal that will reduce global dependence on China.

By the Numbers: What the Data Shows

By Boston Report calculations from CNBC’s figures, China’s yttrium shipments to Japan fell by 47,000 kilograms, or about 92%, in a single year, and the price outside China is roughly 128 times the price inside it. That gap is the cost of controlling the refinery. In Europe, energy inflation rose 1.9 percentage points in a month while the headline rate rose 0.2 points, so energy is doing most of the damage, and the headline rate is now double the ECB’s goal. In Washington, this year’s $1.99 trillion federal deficit equals almost 5% of the entire $41.1 trillion borrowing limit, which shows how quickly the ceiling fills. And Lockheed’s one-day drop was already deeper than the roughly 2% sector dip that Wolfe Research cited after the 2006 election.

What It Means for Your Money

Wherever you’re listening from, the lesson tonight is that politics now runs through nearly every asset you own: contractors’ order books, Europe’s energy bills and interest rates, the market for U.S. government debt, and the metals inside electric cars, computer chips and jet engines. Next week, watch the Abu Dhabi talks. In December, watch the ECB, and keep an eye on any lame-duck deal on the defense budget or the debt limit. That’s the geopolitics and business report for Wednesday, Nov. 4. I’m Morgan Ledger. Thanks for listening, and I’ll see you tomorrow.

Sources

• CNBC: Defense stocks slide on fear Democrats will curb spending
• CNBC: What Trump losing power over Congress means for Iran, Ukraine and foreign policy
• CNBC: Americans have said ‘NO TO WAR,’ Iran speaker says as Democrats take Congress
• CNBC: Russia confirms new Ukraine peace talks
• CNBC: Euro zone inflation hits 4% for first time in three years
• CNBC: The Democrats have one chance to extract concessions from Trump. Markets will hate it
• CNBC: China expands overseas mining stakes, tightening grip on critical minerals
• The American Prospect: Even With a Wave, Democrats Shouldn’t Get a Swell Head (Harold Meyerson)
• Financial Times: Europe hails Democrats’ US midterm victory as a rebuke of Trumpism
• Financial Times: Solvay strikes rare earths deal that will reduce global dependence on China
• The Economist: How Democrats will wield their new power