Flávio Bolsonaro unexpectedly finished ahead of President Luiz Inácio Lula da Silva in the first round of Brazil’s presidential election while conservative allies dominated downballot, setting the nation up for a sharp shift to the right.

Bolsonaro earned 47.2% to the leftist Lula’s 44.7% with about 97% of votes counted, according to Brazil’s electoral court, which said the two candidates would advance to a runoff on Oct. 25.

Polls had suggested Bolsonaro, the eldest son of former President Jair Bolsonaro, would trail Lula in the first round. Instead, his overperformance headlined a night of major victories for the right, which also secured substantial gains in the Senate and key governors races.

The results are virtually certain to boost Brazilian assets when markets open Monday morning, as investors have aligned behind Bolsonaro on the view that he’s more likely to rein in the country’s mounting fiscal deficits and rising public debt levels.

The numbers dealt a massive blow to Lula, who enters the runoff as an underdog in what may be the final race of his long political career.

His Workers’ Party and its allies came into the evening aiming to hold onto the presidency while thwarting Bolsonaro in the Senate and key governors races. But the party that has won five of the last six presidential elections now faces fresh evidence that its message no longer resonates with Brazilians as it once did.

The right’s success followed similar gains in municipal elections two years ago. Still, Bolsonaro’s performance caught Lula’s campaign by surprise, with aides concluding that voters had expressed a broader rejection of the Workers’ Party that went beyond dissatisfaction with Lula.

The campaign is now preparing for a more confrontational runoff, but acknowledged the first round result will require a deeper reassessment of its strategy, according to two people familiar with the situation.

The implications of the election will rumble far beyond Brazil. A victory for Bolsonaro would accelerate President Donald Trump’s effort to reassert U.S. primacy over the Americas after conservative allies won recent votes in Colombia, Chile and Peru.

Brazil under Lula has been among the last holdouts to Trump’s so-called “Donroe Doctrine” for the Western Hemisphere, remaining a bellwether of the regional embrace of China the U.S. leader is trying to reverse.

Trump has played an outsize role in the nation’s politics since last year, when he slapped tariffs on Brazil in an unsuccessful bid to help Jair Bolsonaro escape conviction.

He later reconciled with Lula and lifted the levies. But he reimposed tariffs in July, handing Lula an opportunity to argue that Trump was interfering in Brazilian affairs to boost Flávio Bolsonaro, who has pledged to move the country closer to the U.S.

Brazil’s race, however, has largely focused on another object of voter concern: corruption, fueled primarily by a probe into Banco Master SA, the failed lender at the center of a $10 billion fraud investigation that has repeatedly upended the race.

Bolsonaro sagged behind Lula earlier this year amid revelations that he’d sought money from Daniel Vorcaro, the bank’s jailed former owner, for a film about his father — links that are now subject to federal investigation. (Bolsonaro denies wrongdoing.)

But the scandal later dented Lula’s reelection bid after leaked messages deepened ties between Supreme Court Justice Alexandre de Moraes and Vorcaro.

An ensuing institutional crisis inside the powerful top court fueled a surge in momentum behind Bolsonaro, who used it to renew calls for Moraes’ impeachment while painting the judge who oversaw his father’s conviction as a close Lula ally.

Economy and markets

That’s largely distracted from economic issues, even as the candidates offer competing visions. Lula, who has long favored a spend-to-grow approach with a focus on stimulating consumer demand, has overseen steady expansion and near-record low unemployment.

But growth has begun to slow amid high interest rates meant to bring inflation back to the central bank’s target, and borrowing costs that remain at 13.75% have weighed on major Brazilian companies and consumers alike.

The nominal fiscal deficit, meanwhile, has risen to nearly 10% of gross domestic product while public debt has soared above 80%, leaving investors scouring the race for plans to shore up accounts in a way that would make it easier for policymakers to reduce rates.

Lula and his advisers have alternated between pledges to tackle the debt and questioning the need to: “We need to stop this nonsense about running budget surpluses,” Lula said at one event in the race’s final stages.

Bolsonaro, in a nod to the austerity drive led by libertarian Argentina leader Javier Milei, has wielded scissors to promise a “big cut” in spending. He’s provided little detail about his plans, but it’s made him the preferred choice of investors who see him as more likely to pursue fiscal adjustments.

Lula has unleashed a rash of stimulus this year in a bid to help consumers access cheaper credit and ease debt pressures. In the race’s final weeks, he boosted social welfare benefits and unveiled a plan to use public funds to buy delinquent debts.

He also banned online gambling, which he’s blamed for plunging Brazilians into the red.

For decades, such policies worked: A former trade unionist, Lula became a global icon as president from 2003 to 2010, when he guided Brazil through an explosive period of growth and lifted millions out of poverty.

He surged back to office four years ago with a promise to restore the same prosperity.

But while he remains revered by a large base of supporters, he’s struggled to convince many voters he’s capable of delivering on the demands of a Brazil much different from the one he previously governed.

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