Markets take a wait-and-see approach to US action in Venezuela

The capture of Venezuela President Nicolas Maduro, and US President Donald Trump’s pledge to temporarily “run” the South American country, has resulted in major geopolitical questions and uncertainties. But stock markets largely took the news in stride, seemingly accepting that geopolitical uncertainty is now part of the macro environment.

The S&P 500 Index rose 0.6% on Monday, driven largely by US energy companies.¹ Europe’s Stoxx 600 Index closed 0.9% higher, with defense companies seeing notable gains.² Japan’s Nikkei Index rose about 3%, fueled by semiconductor chip-related companies.³

What could this mean for oil?

Most of the immediate attention was focused on oil markets and Trump’s statement that US oil companies would spend billions to improve Venezuela’s oil infrastructure. In 2024, Venezuela accounted for 17.5% of global oil reserves, but only 1.0 of global oil production.⁴

Unleashing those reserves could have a big impact on global oil supply, so it might be expected that this news could have depressed global oil prices. However, oil prices were surprisingly resilient in the immediate aftermath of the US intervention.

There are a number of reasons why this may be the case:

• There are many uncertainties surrounding Venezuela and the involvement of the US. In particular, will the US really be able to dictate what happens to oil reserves?
• Even if US oil companies were given the green light to exploit those reserves, they may need to see higher oil prices before committing to Venezuela, especially given the uncertainties.
• It could take years for the unexploited reserves to come into production.
• Venezuela is a member of OPEC, which could complicate the ability to raise production. At the moment, Venezuela is exempt from OPEC+ production targets, but that would presumably change if its output were to rise significantly. And, any rise in production may be offset by cuts from other large OPEC producers such as Saudi Arabia and Russia.
• If the global economy accelerates, which we anticipate as part of our 2026 annual outlook, then rising oil demand could at least partially offset production increases.

Overall, a rise in Venezuelan oil production could impact the global oil market, but not for a few years. That may put downward pressure on prices but, given the uncertainties, it is not guaranteed to happen. In the meantime, we expect an accelerating global economy to boost demand for oil and support prices.

Geopolitics and markets

Once again, it’s important to remember that high-profile geopolitical events and military conflict often weigh on investors’ nerves, but they haven’t had as large of an impact on markets as investors suspect. In fact, markets have tended to perform well in the 12 months following a spike in the Geopolitical Risk Index.

We examined 11 points in history where we experienced a peak in the Geopolitical Risk Index — from the 1962 Cuban Missile Crisis to the 2023 Israel/Hamas conflict — and the return of the S&P 500 Index 12 months after that peak. In most cases, the stock market rose in the year following peak geopolitical risk, with an average rise of 15.3% across all 11 conflicts.⁵

So, while wars, military conflicts and historic events in general may seem like the perfect time to reexamine an investment plan given the seemingly heightened risk, keeping a long-term perspective is key. 

With contributions from Paul Jackson, Global Market Strategist, EMEA