US congressional elections are tomorrow. Their outcome can already be forecast with about a 90% probability. However, market participants worry less about how many chambers the Republicans will lose. They are more concerned about a possible renewal of war in the Middle East and the consequences that would follow.

Recall that the probability of a renewed conflict between Iran and the U.S. is also about 90%. In my view, that is already apparent to both Tehran and Washington. In recent months both countries have spent time actively preparing for new hostilities, so the intensity and scope of a conflict at the end of 2026 could match the spring battles around the Strait of Hormuz.

Still, a scenario of new mutual strikes between Iran and the U.S. can be considered, paradoxically, the most optimistic outcome for the world. Why? Because the world has learned to live with military conflict involving Israel, Iran, and the U.S., with participation from some other Middle Eastern countries. If the geography of the conflict expands, however, it could become a new shock for everyone. The conflict could spread to neighboring countries or to the Bab el-Mandeb Strait. In practice this would mean that the second oil artery in the Middle East could be at real risk of being cut. Involving new participants would also mean even more strikes on refining and production infrastructure. It is probably unnecessary to spell out what that would mean for energy markets.

At present, Donald Trump has concentrated around Iran three aircraft carriers, 17 warships, and 20,000 troops. So if anyone thinks war could be renewed, then most likely that impression is correct. No sane actor deploys such a large strike group purely for intimidation. And Iran has already proven it cannot be intimidated. Therefore, the force will have to be used. Trump plans strikes on nuclear facilities and energy infrastructure. In particular, experts name Mount Kolang—which houses one of Iran's nuclear complexes—as target number one. I have already said that Iran had enough time to prepare, so enriched uranium is most likely concealed so that even U.S. intelligence would not find it. A nuclear facility can certainly be damaged, but fully destroying a site embedded in rock is unlikely.

From all this it follows that routine escalation may be ignored by markets. Extended escalation could trigger a new wave of panic and capital flight into the dollar.

Other articles to read:

Analysis of EUR/USD. November 2. Preparations for elections in full swing

Wave analysis for EUR/USD:

Based on my EUR/USD analysis, I conclude that the instrument remains within a global corrective segment of the trend labeled A-B-C-D-E. However, this structure looks complete and may be finished. In my view, now is a good time not only to buy the European currency but also to expect a full bullish trend segment. According to the higher timeframe, one should expect a rise of at least 17–18 figures. An unsuccessful attempt to break 1.1126, which corresponds to 50.0% on Fibonacci (lower chart, higher timeframe), also indicates market readiness to buy.

Wave analysis for GBP/USD:

The wave picture for GBP/USD has become fairly clear. Charts show a distinct corrective A-B-C-D-E structure that may be complete. A similar structure on EUR/USD may also be complete. If that assumption is correct, the pound has finished its decline. If correct, sterling has begun forming a bullish trend segment with targets above the peaks of waves B and D—i.e., above the 37-figure. Two waves of the first wave of the new bullish segment are already built. Therefore, the advance may continue toward targets near 1.3531 and 1.3651, which correspond to 76.4% and 100.0% on Fibonacci.

Key principles of my analysis:

1) Wave structures should be simple and understandable. Complex structures are hard to trade and often change.

2) If you are not confident in what is happening in the market, it is better not to enter.

3) There is no such thing as 100% certainty in the direction of movement. Do not forget protective stop-loss orders.

4) Wave analysis can be combined with other types of analysis and trading strategies.