Goldman Sachs chart: "Gasoline prices determine the US midterm election"! Prediction market shows "Democrats have a 65% chance of sweeping both chambers"

With only 26 days left until the US midterm elections, the latest "US Election Monitor: October 8 Update" released by Goldman Sachs' Washington political team reveals a picture that investors can't ignore: Prediction markets currently give a 65% probability for Democrats to sweep both the House and Senate, while the probability for Republicans maintaining a majority in the House is now less than 10%.

More crucially, Goldman Sachs ties the Democrats’ lead directly to US retail gasoline prices—the price of gasoline soared from about $3/gallon at the start of 2026 to nearly $5 in spring, then fell back to about $4 in summer before rising again. The Democrats’ lead in the general vote also widened from about 5 percentage points to nearly 9, with the two curves moving almost in sync.

This is not just a political contest; it is also a risk signal for asset allocation. Bank of America Merrill Lynch strategist Michael Hartnett has issued a clear warning: a Democrat sweep would trigger "significant risk-off moves," leading to a drop of over 10% in the stock market, a weakening dollar, and declining bond yields. A month ago, the probability of a sweep was still a "flip of the coin" at 52%; now it has become the base scenario.

Meanwhile, the shock to oil prices caused by the Iran war, Hurricane Isaias shutting down 63% of offshore oil production in the US Gulf of Mexico, and the delayed Republican fundraising offensive together form the core variables for the final 26 days of this election.

Gasoline Prices and the Ballot: Goldman Outlines the Most Critical Chart

Goldman analysts Alec Phillips and Abhay Duggirala present in their report the most striking chart of this election analysis: overlaying Democrats’ general vote lead with average US retail gasoline prices.

Data shows that gasoline prices spiked from about $3/gallon at the start of 2026 to nearly $5/gallon in spring as the Iran war broke out, then pulled back to about $4/gallon in summer before rising again recently. In parallel, the Democrats’ lead in the popular vote widened from around 5 percentage points to almost 9 percentage points.

Goldman's original statement is:

"The Democrats’ advantage has gradually widened since the spike in gasoline prices due to the outbreak of the Iran war. The two data series have recently moved in the same direction."

Another Goldman chart further shows that inflation and the economy top the list of voter concerns, while Trump’s net support on these two issues is "deeply negative”—Net support on inflation is about -48, and on the economy about -33.

From 52% to 65%: Sweep Probability Surges in a Month

A month ago (September 7), the probability of Democrats sweeping both chambers had just hit a historic high of 52%. Now, citing Polymarket data, Goldman notes that this probability has risen to around 65%, while the odds of Republicans retaining a House majority have fallen below 10%.

Goldman’s chart shows the “Democrat sweep” curve rising almost vertically in September, while the probability for “Republicans holding the Senate and Democrats winning the House” (which was still the market consensus until last fall) has dropped below 30%.

What does this mean for the markets? Bank of America Merrill Lynch chief strategist Michael Hartnett characterizes a Democrat sweep as a "major risk-off" event, and expects it to lead to:

• Stock market down more than 10%

• Weaker US dollar

• Declining bond yields

Hartnett's preferred hedging strategy is to short financial stocks and the dollar. His main argument is that investors have so far largely ignored election risk. Now, a sweep has shifted from being a 52% "coin toss" to a clear base case scenario.

House: Democratic Advantage is Almost "Locked"

Notably, the result in the House appears to be nearly decided in the prediction markets’ view.

The probability given by the prediction markets for Democrats to net at least three seats (thus reclaiming the House majority) is over 90%. Currently, Democrats lead Republicans in the general vote by 8.9 percentage points; Goldman notes this implies a swing of about 12 percentage points compared to Republicans’ 2.6 percentage point advantage in 2024, when they won the House.

The 29 Republican-held districts where Trump’s 2024 winning margin was less than 12 percentage points are precisely the seats prediction markets and analysts expect will flip.

As for the highly anticipated “decennial redistricting” for Republicans, Goldman’s conclusion is concise and direct: “Overall, redistricting is only expected to net a small number of seats for the Republicans.” Prediction markets currently give Democrats at least a 50% chance of winning in 25 Republican-held seats, while Democrats only need to net three seats to take the majority.

It is also worth noting that, while “Republicans lead in head-to-head campaign spending in most key House districts,” much of this money is being spent in seats that the market already considers lost for them.

Senate: The “Coin Flip” Behind 65% Probability

The Senate situation is far more complex than the House, and is where the real uncertainty lies.

Democrats currently hold 47 seats, and need a net gain of 4 seats to win a Senate majority. Prediction markets give Democrats a 65% probability of winning the Senate. Goldman’s charts show that Democrats are leading in all key districts except Nebraska and South Carolina, but most of these leads are within the margin of error.

Goldman sees the Senate-wide probability converging to that of the “tipping point seat,” arguing that “this suggests the market is more confident that Democrats have multiple paths to a majority, higher correlations among districts, or both.”

Currently, the “tipping point seat” determining whether Democrats can win the 51st seat is Ohio. States to watch include: Alaska, Texas, Ohio, Maine, Iowa, and Kansas—all Republican-held seats, most in Republican-leaning red states.

Republicans’ Last-Minute Fightback: $240 Million Spent in Final Two Weeks

If Republicans are able to turn the tide, it would be a “turnaround bought with money.”

According to Goldman data, Republicans’ Senate campaign spending advantage has exceeded $200 million, and this edge has only emerged recently—Republicans lagged Democrats all summer in Senate campaign spending until overtaking them in September and widening the gap. In the past two weeks, Republicans spent $240 million versus Democrats’ $130 million—a spending ratio of about 1.85 to 1 in favor of Republicans.

The direction of spending is also notable: Republicans increased defensive spending by $8 million in Kansas and $5 million in South Carolina, for a total of $13 million—no one would spend this money in a seat they consider safe.

However, the actual effectiveness of this spending is discounted. Goldman points to two reasons:

1. Super Political Action Committees (PACs) pay higher ad rates than direct candidate purchases, and the majority of Republican spending is from PACs;

2. Ad slots closer to Election Day command a premium, and Republican spending is heavily backloaded, while Democrats locked in ad space earlier.

Additionally, absentee ballot applications in Ohio, Maine, and North Carolina are more favorable to Democrats than in 2024, although Goldman notes these may only comprise about 25% of all absentee ballots (based on 2022 midterm data).

Goldman’s Reservations: Historical Patterns Suggest Democrat Advantage May Be Overestimated

Goldman does not fully accept the prediction markets’ optimism and makes two key historical warnings in its report:

First, the probability of the challenging party sweeping in history tends to narrow before election day. Reviewing the 2002, 2006, 2010, 2018, and 2022 midterms, Goldman found that “the challenging party’s sweep probability drops by about 5 percentage points on average before election day.” Based on the current 63% probability for a Democrat sweep, historical patterns would suggest a final probability of 58%—still a high chance, but with much less comfort.

Second, polls in red states have historically overestimated Democrat performance. Goldman plotted past Senate poll errors against state partisanship and found that “Midterm Senate polls tend to underestimate Democrats in blue states and Republicans in red states,” matching the pattern that voters “come home” to their party at the end of the election cycle. This effect has become more pronounced in recent data: the R² for fit was 0.65 for 2018-2022 midterms, versus just 0.26 for 2002-2022 as a whole.

This directly challenges Democrats’ lead in states such as Iowa, Kansas, Maine, Ohio, Texas, and Alaska. Goldman partially counters: nationwide Senate polls only overestimated Democrats by 0.4 percentage points at this point in the cycle, so overall bias is not severe—but the Senate majority will be decided precisely in those red states.

The Real Key Variable: Oil Prices, Not Polling

Goldman’s conclusion points to a clear investment logic: In the next 26 days, the path of the energy market is worth more attention than any poll data.

The energy market currently faces multiple shocks:

• The Iran war continues to disrupt the Strait of Hormuz, with Iranian state media reporting more tankers striking mines south of the strait;

• Trump announced on Truth Social that “there would be no strike on Iran before the midterms,” sending oil prices lower temporarily before rebounding on reports of new mine strikes;

• Hurricane Isaias shut down 63% of US Gulf of Mexico offshore oil production, with Jefferies warning this is a “fuel supply shock event on top of an already strained supply system due to the Iran war.” Diesel prices are now at $6.30/gallon, compared to just $3.68/gallon a year ago.

Goldman’s argument ultimately boils down to: If the charted relationship between gasoline prices and ballots holds, what the White House needs is a tank of cheap gas, not another round of advertising.

Bullish logic for Democrats: High and expanding general vote lead, absentee ballots leaning blue, the market seeing multiple paths to 51 seats, and gasoline prices rising again.

Bullish logic for Republicans: Nearly a 2-to-1 spending advantage (albeit late), historical narrowing of challenger sweep probabilities by about 5 percentage points before election day, and the long-term pattern of red state voters “coming home” to their party.

The final swing factor is something no amount of advertising can buy for either party: whether oil and gasoline prices rise or fall on November 3—the day of the election.