Venezuela's political upheaval: Why has the oil market remained unaffected, and why is there little turbulence in global financial markets?
The geopolitical shockwaves caused by Venezuelan President Maduro being detained by the US military did not trigger the anticipated turmoil in global financial markets. This Latin American country, which in the 1970s accounted for about 1% of global GDP and 8% of global oil supply, now has negligible influence on the world economy, allowing markets to keep this political storm at bay.
According to reports by Xinhua and CCTV News, at noon local time on January 3 (early morning January 4 Beijing time), US President Trump and Secretary of Defense Hegseth held a press conference at Mar-a-Lago, Florida regarding US military action against Venezuela and the control and removal of Venezuelan President Maduro.
Bloomberg columnist and senior market editor John Authers pointed out in his latest comment that the dramatic decline in Venezuela’s economic significance is the main reason for the market’s muted response. The country currently accounts for only 0.1% of global GDP, with daily crude oil output around 1 million barrels, just 1% of global supply, ranking 18th among global oil-producing nations. Years of mismanagement have made the country “a mess”, and even the most severe upheaval would have very limited impact on the world economy.
The regime change triggered by the US “Operation Resolute Determination” barely impacted oil prices after the Asian markets opened. At the same time, global stock markets continued to rise, with the tech industry logic centered on AI computing power and storage chips remaining insulated from geopolitical concerns, and robust fundamentals driving Asian stock indices and the semiconductor sector to new highs. Geopolitical risks were reflected more in safe-haven assets like gold, rather than a large-scale sell-off of risk assets.
The Disappearance of Venezuela's Economic Influence
Neil Shearing, chief economist at Capital Economics, summarized Venezuela’s decline trajectory. Mismanagement under the Chávez and Maduro regimes caused persistent crises and hyperinflation, with real GDP plunging 70%. Migrants have flooded into neighboring countries and the US, while oil production has dropped from around 3.5 million barrels per day in the 1970s to about 1 million barrels today.
Rob Thummel of Tortoise Capital Management believes the current global oil market is oversupplied and Venezuela’s situation will not change this dynamic. Although the country’s oil infrastructure seems intact, reducing the risk of a supply cut, substantial output increases would take years. The reaction in crude prices at the opening of Asian markets on Monday confirmed this view—rather than the usual increase, markets saw a surprising decline.
Market Reaction: Rationality Prevails Over Panic
Although the Venezuelan situation brings new geopolitical risks for global investors, the initial market response was relatively calm. Equity prices rose, technology and defense sectors performed strongly, the dollar firmed, while geopolitical risks mainly appeared in precious metals and other safe-haven assets. David Chao, Invesco Asia Pacific global market strategist, stated:
"Given Venezuela’s relatively minor role in today’s energy landscape, developments over the weekend are unlikely to have any major immediate impact on the global macro environment or markets. That’s why oil prices, US index futures, and other major macro assets showed no significant volatility."
He added that the broader takeaway is that geopolitical uncertainty has become a component of the macro environment and should continue to support demand for precious metals.
Charu Chanana, chief investment strategist at Saxo, summarized current market characteristics as:
"We are in an environment where geopolitical tensions have become a constant rather than a surprise. Unless they threaten the wider supply chain, investors tend to fade the initial shock and refocus on rates, earnings, and positioning. Right now, this is more of a geopolitical shock than an oil shock."
US Strategic Intent and Market Expectations
President Trump stated last Saturday that the US would "manage" Venezuela, deploying "ground forces" if necessary. This statement was made while markets were closed, avoiding potential panic reactions. By the end of the weekend, Secretary of State Marco Rubio had significantly downplayed any ideas of an Iraq-style occupation, saying that the US would use its leverage over Venezuelan oil exports to maintain order in the country and was prepared to work with Maduro’s vice president, Delcy Rodriguez.
This strategic choice greatly reduced market concerns. Authers noted that it was reminiscent of last year’s decision to bomb Iran’s nuclear facilities—a spectacular precedent and an impressive military achievement, but Trump made it clear he had no intention of escalating further, and oil prices soon declined.
Marko Papic of BCA Research commented on Trump’s remarks on Cuba:
"Could Cuba be next? Yes, very likely. But unless you’re in commercial real estate (specifically hotels), we don’t see any market impact."
Reversal of American Exceptionalism and Market Rotation
Although the Venezuelan incident itself has limited impact, full-year data for 2025 reveals a more significant market trend: the relative performance of the US market has reversed dramatically. The S&P 500 index, measured in US dollars and compared to other global markets, has lagged by 9.9%—its worst relative performance since 2009, roughly comparable to the weakest since 1993.
Andrew Lapthorne, chief quantitative strategist at Societe Generale, found that a country’s performance in 2024 says little about how it will do in 2025, but starting valuations matter a lot. Countries with lower price-earnings ratios at the start of 2025 tend to perform better.
Authers argues this phenomenon has multiple positives. First, if investors are already looking for cheaper stocks and markets, it’s hard to say the world is in some “universal bubble” driven by AI. Markets remain reasonably rational. Second, as investors begin searching for undervalued opportunities, this trend has plenty of room to continue because most markets outside the US remain cheap.
Tai Hui, J.P. Morgan Asset Management’s Asia-Pacific chief market strategist, said:
"So far the lack of reaction is due to two factors. Venezuela’s oil output is very small relative to global supply. Years of underinvestment mean it cannot quickly ramp up production or increase global supply."
Vishnu Varathan, head of macro research at Mizuho Asia (excluding Japan), pointed out:
"We’re reminded that geopolitical risk is much greater than certain trade figures. Sanctions on Venezuela and its special reliance on oil exports mean that regime change will have limited and isolated impact via trade and investment channels. That’s why you don’t see large-scale sell-offs."
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