Investment - Articles - US action in Venezuela a geopolitical shock but markets calm

Commenting, John Wyn-Evans, Head of Market Analysis at Rathbones, says: “The removal of President Nicolás Maduro marks a significant geopolitical moment, but from a market perspective, its impact is expected to be limited. Venezuela represents just 0.1% of global GDP and contributes around 1% of the world’s oil supply - a stark contrast to the 1970s when those figures were 1% and 8%, respectively. This long-term decline is largely attributable to poor governance. While Venezuela claims 17% of proven global oil reserves, unlocking that potential would require vast investment in infrastructure. Moreover, its crude is “heavy,” yielding lower refining margins than Brent or WTI, making any immediate surge in supply - and the associated deflationary impulse - highly unlikely. Markets have taken the news in stride. Equities opened firmer, and bond markets remain largely unmoved. The US’s actions are expected to have a far greater impact on the geopolitical front, continuing the trend of unconventional and disruptive behaviour that has characterised the second Trump presidency.”

Chris Beauchamp, Chief Market Analyst at IG: "Markets have so far shrugged their shoulders at the weekend’s Venezuela news, though questions linger over the longer-term geopolitical precedent it may set. Oil prices weakened initially, but losses have since been pared back given that any increase in production remains months away at the earliest. Equity markets continue to focus more squarely on this week’s payrolls report and the imminent start of earnings season, though investors can be forgiven for wondering whether the US move increases the risk of geopolitical instability around Taiwan. Of potentially greater relevance is whether Washington continues to press its claims over Greenland, and how this may further strain cohesion within the Western alliance."