After the Democratic sweep: is AI at risk, will data centres lose their shine, is climate back, and what does it mean for oil?

Introduction: Congress has changed, the White House has not

The US midterm elections of 3 November 2026 handed Democrats control of both the House and the Senate, with at least 54 Senate seats and a comfortable House majority. President Donald Trump, however, remains in office until 2029 and keeps his veto.

The result is divided government, not a policy revolution. The new Congress can investigate, hold hearings, block legislation and use the power of the purse. It cannot, on its own, undo what the administration has built. And it arrives at a fraught moment: a war with Iran, a disrupted Strait of Hormuz, and US household power bills up more than 10% since 2024.

Four questions matter for Iraq in particular. Is AI at risk? Will data centres lose their shine? Is the environment back on the agenda? And how does all this feed into the oil price that funds more than 90% of Iraq’s budget?

Is AI at risk? No, but the blank-cheque era is over

AI is not a partisan file that a new majority can switch off; it is an investment and geopolitical race with China. What has changed are the terms. More than half of voters in exit polling said AI and data centres were a crucial or major factor in their vote. The technology has moved from the tech pages to the ballot box.

Markets read it precisely. US stock futures fell overnight on fears of tighter regulation, then recovered, because divided government limits big swings either way. Prominent investors call fears of a broad halt exaggerated, while warning that extra rules could delay 10 to 15 gigawatts of planned capacity.

The real risk is financial rather than political. In the view of Mr. Khaled Al-Jabri, President of the Osoul Foundation for Economic Development and Sustainable Development, the world owes roughly three times what it produces, and generative AI has become, since late 2022, the growth engine through which that debt is managed, financed by bonds on the promise of future returns. If that growth stalls, he warns, the whole world economy slows and every country is exposed: “a costly mistake for even the cleverest”.

Nobel laureate Daron Acemoglu makes a related point: he estimates AI’s total factor productivity gains in the US may be no more than about 0.7% over a decade. The gap between massive spending and still-modest proven returns is what makes the sector so sensitive to any rise in costs, whether from regulation, energy or interest rates.

Bottom line: AI stays, but at a higher cost, under closer scrutiny and at a slower pace than unconditional expansion.

Will data centres lose their shine? No, they are looking for a new address

Data centres were the clearest losers of this election. In Ohio, residential bills rose more than 20% in two years, and more than 60% of the capacity-cost increase in the largest eastern grid is attributed to data-centre demand. That demand has lifted US wholesale power prices by about 6.9% nationally and up to 15% in hot spots.

Voters connected their bill to the server farm next door. More than 570 local restrictions exist across 46 states, and over 45 projects were disrupted in the second half of 2026 by local opposition. In Texas, the winning gubernatorial candidate pledged to pause new data-centre construction until water and power safeguards are in place.

Yet global demand has not changed. Data centres used about 415 TWh in 2024 (1.5% of world electricity) and are projected to reach about 945 TWh by 2030, roughly Japan’s consumption. Investment needs to 2030 are estimated at about $6.7 trillion, $5.2 trillion of it for AI, with about a quarter flowing to energy suppliers. The range of uncertainty is wide: from $3.7 trillion to $7.9 trillion.

What is happening is geographic reallocation. Capital will look for cheap energy, land, cooling and local consent. Even Elon Musk quipped that “data centres in space” now look appealing. The nearer frontier is the Gulf and the wider Middle East.

Here the global debate meets Al-Jabri’s view. He has stated that AI needs water cooling and enormous power, and that Iraq’s own need of 60,000 to 65,000 MW looks small next to AI’s appetite, which equals 50 to 70 times Iraq’s generation. Iraq, he insists, should present itself not as an “investment opportunity” but as a “partner” in the new global economic agenda.

Is the environment back? Yes, through the power bill rather than the climate

The environment will return, but in a different language. American voters did not vote on emissions; they voted on electricity bills, fuel prices and local water. Environmental files will therefore resurface as cost-of-living issues: who pays for grid expansion, who bears the water used for cooling, and whether tech firms pay their fair share.

The limits are clear. Congress cannot pass major climate legislation over a presidential veto. It can use appropriations and hearings to slow regulatory rollbacks, while states and cities tighten local conditions on new data centres. Expect gradual regulatory pressure, not a full return of the climate agenda.

For our region the environment is not a political choice. International estimates suggest parts of the Middle East could lose 15 to 20% of per-capita output by the end of the century even under current policies. Iraq sits at the heart of that zone: heat, water scarcity and a grid that buckles each summer. Adaptation is an economic necessity, whoever governs in Washington.

Will all this move the oil price? Yes, but the strongest channel is Iran, not AI

The day after the vote, Brent fell about 8.5% to around $95 a barrel and WTI to about $89, down more than 15% on the week. Brent had swung between $70 and $120 since the war began. Markets read the result as pressure for de-escalation, after the President and Vice President acknowledged that the Iran war and fuel prices cost Republicans seats.

The four channels carry different weights:

The economic conclusion: what lowers oil today is a retreat in geopolitical risk; what may lower it tomorrow is slower growth if the AI wave falters. Conversely, any new escalation in Hormuz would send prices up within days, because inventories have been drawn down.

Al-Jabri also reads the link in reverse. Energy is the “first driver” of AI growth, and any disruption to its supply raises the cost of AI and weighs on it, which is why he does not count on AI alone as a global growth engine. He calls Hormuz “the strait of energy and food”, warning that “all fragile and rentier economies are the first victims” of such shocks, because they lack shock absorbers.

The Iraqi view: cheaper oil is bad news for the budget and an opening for the economy

Iraq stands on both sides of the equation. De-escalation reopens Hormuz to its exports, but strips out the price premium that has financed part of the deficit. The problem is not the price itself but the exposure to it: a rentier economy without buffers, as Al-Jabri describes it.

The opening lies in data centres searching for energy-rich homes. Al-Jabri argues that pricing AI use by units makes power-plant construction a profitable private investment rather than a burden on the state alone. Water remains the binding condition: given current scarcity, no facility should be allowed to cool with drinking water.

Recommendations

1. Ministry of Finance: stress-test the 2027 budget at $80, $70 and $60 Brent before approval, publish the deficit impact of each dollar, and tie any additional spending to a conservative price.
2. Council of Ministers and the National Investment Commission: a regulatory framework for data centres that requires self-supplied power off the national grid, so that Iraq does not repeat what American households saw on their bills.
3. Ministries of Oil and Electricity: offer flared associated gas as fuel for such projects through private partnerships, turning waste into a competitive edge.
4. Ministry of Water Resources: require closed-loop cooling or non-potable water, with metering and transparent pricing.
5. The government’s foreign file: position Iraq as a partner in energy security and supply chains (energy and the Development Road), not merely an oil seller, and engage the new Congress early.

Conclusion

The election did not kill AI, nor fully revive the climate agenda. It repriced risk: a higher cost for technology and a smaller premium on oil. An Iraq that waits on the barrel price loses either way; an Iraq that sells energy, location and partnership wins either way.

Why Osoul?

The Osoul Foundation for Economic Development and Sustainable Development bridges global evidence and Iraqi decision-making. It monitors the Iraqi economy daily, runs field surveys of households and firms, and drafts policy briefs to international standards. It convenes workshops bringing together legislators, officials and the private sector, and advises on tax reform, the business environment and economic legislation. Its aim: every economic decision built on a documented number and a tested experience.

Sources

• CBS News, 2026 midterm election live updates — https://www.cbsnews.com/live-updates/election-day-2026-midterms/
• The National, “Brent oil slides to $94 on Iran uncertainty after US midterms”, 4 Nov 2026 — https://www.thenationalnews.com/business/energy/2026/11/04/brent-oil-slides-to-94-on-iran-uncertainty-after-us-midterms/
• Transport Topics, “Oil prices and midterm results”, 2026 — https://www.ttnews.com/articles/oil-prices-midterm-results
• Euronews, “Backlash to AI data centres reaches ballot boxes”, 4 Nov 2026 — https://www.euronews.com/2026/11/04/us-midterm-elections-backlash-to-ai-data-centres-reaches-ballot-boxes
• Fox Business, “Democrats’ midterm sweep raises questions for stocks, AI investment”, 2026 — https://www.foxbusiness.com/politics/business-leaders-investors-weigh-impact-democrats-midterm-sweep-markets-ai-travel
• Forbes, “Data centers are key issue in midterm battleground states”, 2 Nov 2026 — https://www.forbes.com/sites/maryroeloffs/2026/11/02/data-centers-are-key-issue-in-midterm-battleground-states-as-household-electric-rates-soar/
• International Energy Agency, Energy and AI, 2025 (via Scientific American) — https://scientificamerican.com/article/ai-will-drive-doubling-of-data-center-energy-demand-by-2030
• McKinsey, The cost of compute: a $7 trillion race to scale data centers, 2025 — https://www.mckinsey.com/industries/technology-media-and-telecommunications/our-insights/the-cost-of-compute-a-7-trillion-dollar-race-to-scale-data-centers
• Daron Acemoglu, The Simple Macroeconomics of AI, NBER Working Paper 32487, 2024 — https://www.nber.org/papers/w32487
• OECD, OECD-CASGEM: the macroeconomic cost of climate change, Economics Department Working Paper No. 1875, 2026.