The 117th Congress two years ago began with an insurrection. This year, the 118th Congress is beginning with an insurgency over the vote for speaker. But there’s a bigger takeaway than who is ultimately elected speaker for markets and investors. Wall Street likes gridlock in government. It may not like chaos.

There are several reasons why Rep. Kevin McCarthy (R-CA) has struggled to get the 218 votes necessary to be elected speaker as a cadre of far-right Republicans have held firm in opposing him. For one, several of these Republicans distrust McCarthy, viewing him as inauthentic and willing to say whatever it takes to win votes.

Additionally, there is a small wing of the Republican Party, which came to prominence with the Tea Party movement a dozen years ago, that is less interested in governing and more interested in fighting. The fight is not a means to an end but an end unto itself.

Finally and most importantly, Republicans failed to win a convincing majority in the midterm elections. Republicans today have the same margin – 222 to 213 – that House Democrats won in 2020. While then-Speaker Nancy Pelosi (D-CA) was able to cajole enough votes, it belied how difficult narrow margins can be for leadership. Every member has enormous leverage and this small wing of Republicans has decided to use its leverage to try to topple McCarthy. So for the first time in 100 years, the House could not elect a speaker on the first ballot, with the outcome still up in the air.

For McCarthy, the question is whether enough of these Republican holdouts can be brought back into the fold with reasonable concessions that are acceptable to the broader Republican conference. The irony is that these holdouts could and did receive more concessions from McCarthy, who may be a weaker leader than an alternative speaker. But toppling McCarthy may be the point for enough of these holdouts, in which case, an alternative to McCarthy won’t have to offer as much to become a consensus candidate.

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Next in line would be Rep. Steve Scalise (R-LA), the second-ranking House Republican. The Louisianan is viewed as more conservative than McCarthy but also well-liked throughout the Republican conference.

Even House Minority Leader Hakeem Jeffries (D-NY) described having a “much warmer” relationship with Scalise than with McCarthy. Now, some Republican holdouts may insist on the same conditions they are putting before McCarthy. Some, like Rep. Matt Rosendale (R-MT), said he wouldn’t support any member of current Republican leadership for the speakership. Any Republican can only afford four defections if every member-elect votes for someone.

If Scalise can’t get the votes, then all bets are off on what happens next. But the current Republican holdouts will lose any negotiating leverage they currently have if they bring down two speaker candidates. After McCarthy and Scalise, the window opens for getting Democratic cooperation on electing a speaker.

No matter if it’s McCarthy, Scalise, or someone else, if a handful of Republicans can hold the party and entire House hostage over a historically ceremonial election for speaker, it portends real dysfunction for actual governing. House Republicans will have a hard time cultivating a united front in negotiations on must-pass items like appropriations, defense authorization, and raising the debt limit, which could risk a government shutdown, a weaker military, and the first-ever default on U.S. debt.

A final irony of this far-right battle against McCarthy is that it could end up empowering moderates on some of these must-pass items. Republican leadership will need Democratic votes. That may require rebuffing these far-right holdouts in lieu of getting moderate support. There’s even the possibility of House conservative priorities being ignored entirely with Democrats and a few moderate House Republicans circumventing Republican leadership with a procedural maneuver called a discharge petition. It has been attempted on the debt limit in the past. Either way, House Republican leadership will be at the weakest it’s ever been in the majority, creating a chaotic governing environment.