An election held 13,000 km away is affecting Indian markets more than any domestic event this week. On Thursday, the Indian rupee rose for the fifth session in a row, crude oil prices fell further and the equity benchmarks jumped nearly 2 per cent each. Behind all three moves is the same bet: that the Democrats' sweeping gains in the US midterm elections will push President Donald Trump towards ending the Iran war.

The rupee opened 29 paise higher at 94.35 per dollar, compared with Wednesday's close of 94.64. Meanwhile, Brent crude futures fell $1.16 to $93.46 a barrel, their fourth straight session of losses. US West Texas Intermediate (WTI) futures dropped $1.47, or 1.66 per cent, to $86.65.

These declines come after a much bigger fall. Both benchmarks tumbled about 10 per cent in the previous session and settled below the $100-per-barrel mark. Crude prices have now fallen nearly 16 per cent so far this week.

Why Washington's vote matters to India's import bill

The market logic is simple. The Democrats won both chambers of Congress, which is a major setback for Trump and his Republican Party. A Democratic-controlled Congress could limit the president's military options and tighten spending on the conflict. That would give him more reason to seek a negotiated exit rather than risk further escalation.

Congress has already pushed back before the vote. With four Republican representatives voting alongside the Democrats, the House had already voted to constrain Mr Trump's war powers, although the Senate did not follow suit. Spending is also a key lever, since all appropriations bills have to start in the U.S. House of Representatives.

Reports suggest that a full-scale assault on Iran now looks less likely. Trump has also reportedly said that Washington has no immediate plans to strike Iran. On the supply side, crude shipments through the Strait of Hormuz, the main route for most Gulf oil, have recovered to close to pre-war levels, although at a higher cost.

For India, which imports most of the crude it uses, each dollar off the price of a barrel lowers the import bill and reduces pressure on the rupee. The currency also got help from a softer greenback. The dollar index fell 0.06 per cent to 101.41, after a 0.36 per cent decline in the previous session.

Dalal Street joins the rally

Equities followed the same trend. The BSE Sensex opened at 78,910.94, up more than 1,600 points or 2 per cent. The NSE Nifty 50 began trade at 24,378.05, up 417.45 points or 1.74 per cent, on strong global cues.

Still, a rupee near 94 per dollar shows how much damage the conflict has done, and five days of gains have not undone it. Lasting relief depends on whether market hopes turn into actual diplomacy. For now, traders are betting that political pressure in Washington will lead to an exit from the war, and that the rupee and Indian markets will keep benefiting from it.