Venezuela's political situation has suddenly changed, why is the oil market unaffected and global financial markets remain calm?
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Venezuela's political situation has suddenly changed, why is the oil market unaffected and global financial markets remain calm?
Investors are more focused on AI fundamentals and interest rate trends, with geopolitical risks only reflected in safe-haven assets such as gold.
Navigating Web3 tides with focused insightsWritten by: Zhang Yaqi
Source: Wall Street News
The geopolitical shock of Venezuelan President Maduro being detained by the U.S. military has not stirred the anticipated waves in global financial markets. This Latin American country, which once accounted for about 1% of global GDP and 8% of global oil supply in the 1970s, now has minimal influence on the global economy, allowing markets to keep this political storm at bay.
According to reports from Xinhua News Agency and CCTV News, at noon local time on January 3 (early morning on January 4, Beijing time), U.S. President Trump and Secretary of Defense Hagseth held a press conference at the Mar-a-Lago estate in Florida regarding the U.S. military's action against Venezuela, the control and extradition of Venezuelan President Maduro.
In his latest commentary, Bloomberg columnist and senior markets editor John Authers pointed out that the sharp decline in Venezuela's economic importance is the core reason for the market's muted reaction. The country now accounts for only 0.1% of global GDP, with daily oil production of about 1 million barrels, merely 1% of global supply, ranking 18th among global oil producers. Years of mismanagement have turned the country into "a mess," and even the most severe turmoil would have an extremely limited impact on the global economy.
This regime change triggered by the U.S. "Operation Absolute Resolve" had almost no impact on oil prices after Asian markets opened. Meanwhile, global stock markets continued their upward trend, with the technology industry logic centered on AI computing power and memory chips operating independently of geopolitics. Strong fundamentals drove Asian stock markets and semiconductor sectors to new highs. Markets reflected geopolitical risks more in safe-haven assets like gold rather than through large-scale selling of risk assets.
The Disappearance of Venezuela's Economic Influence
Capital Economics chief economist Neil Shearing outlined Venezuela's trajectory of decline. Under the Chavez and Maduro regimes, mismanagement-induced crises led to hyperinflation and a 70% plunge in real GDP. A wave of Venezuelan migrants flowed to neighboring countries and the U.S., while its oil production fell from about 3.5 million barrels per day in the 1970s to around 1 million barrels currently.
Rob Thummel of Tortoise Capital Management believes the current global oil market is oversupplied, and the situation in Venezuela will not alter this dynamic. Although the country's oil infrastructure appears intact, reducing the risk of production cuts, achieving significant production increases would still take years. The reaction of crude oil prices at the opening of Asian markets on Monday confirmed this judgment—instead of rising as usual, the market unexpectedly fell.
Market Reaction: Rationality Over Panic
Although the situation in Venezuela brings new geopolitical risks for global investors, the initial market reaction has been relatively calm. Stocks rose, with technology and defense sectors performing strongly, the dollar strengthened, while geopolitical risks were primarily reflected in safe-haven assets like precious metals. David Chao, Invesco's Asia-Pacific global market strategist, stated:
"Given Venezuela's relatively minor role in today's energy landscape, the weekend's developments are unlikely to have any significant near-term impact on the global macro situation or markets. That's why oil prices, U.S. stock index futures, and other major macro assets haven't shown significant volatility."
He added that the broader message is that geopolitical uncertainty has become a component of the macro environment, which should continue to support demand for precious metals.
Saxo's chief investment strategist, Charu Chanana, summarized the current market characteristics as:
"We are in a regime where geopolitics has become a persistent feature rather than a surprise. Unless it threatens broader supply chains, investors tend to downplay the initial shock and refocus on rates, earnings, and positioning. For now, this looks more like a geopolitical shock than an oil shock."
U.S. Strategic Intent and Market Expectations
President Trump stated last Saturday that the U.S. would "manage" Venezuela and would use "ground forces" if necessary. This statement was released while markets were closed, avoiding a potential panic reaction. By the end of the weekend, Secretary of State Marco Rubio had comprehensively downplayed any idea of an Iraq-style occupation, stating the U.S. would use its influence over Venezuela's oil exports to maintain order in the country and was prepared to work with Maduro's vice president, Delcy Rodriguez.
This strategic choice significantly reduced market concerns. Authers noted that this recalls the decision to bomb Iranian nuclear facilities last year—a spectacular precedent and impressive military achievement, but Trump made it clear there was no intention to escalate further, and oil prices subsequently fell.
BCA Research's Marko Papic, commenting on Trump's remarks about Cuba, said:
"Could Cuba be next? Yes, quite likely. But unless you are a commercial real estate developer (specializing in hospitality), we see no market impact."
The Reversal of American Exceptionalism and Market Rotation
Although the Venezuela event itself has limited impact, the full-year 2025 data reveals a more significant market trend: a notable reversal in the relative performance of the U.S. market. The S&P 500 Index, measured in U.S. dollars, lagged behind the rest of the world by 9.9%, marking its worst relative performance since 2009, roughly equivalent to its weakest performance since 1993.
Research by Société Générale's chief quantitative strategist, Andrew Lapthorne, shows that a country's performance in 2024 is almost no predictor of its 2025 performance, but starting valuations matter a great deal. Countries with lower price-to-earnings ratios at the start of 2025 tended to perform better.
Authers believes this phenomenon has multiple positive implications. First, if investors are already searching for cheaper stocks and countries, it's hard to say the world is in some kind of AI-driven "full-blown bubble." Markets remain reasonably rational. Second, since investors have started looking for value, this trend has plenty of room to run, as most markets outside the U.S. are still cheap.
Tai Hui, J.P. Morgan Asset Management's chief market strategist for Asia Pacific, stated:
"The lack of reaction so far is due to two factors. Venezuela's oil production is small relative to global output. Years of underinvestment mean it cannot ramp up production quickly and add to global supply."
Vishnu Varathan, head of Asia (ex-Japan) macro research at Mizuho, pointed out:
"We are reminded that geopolitical risks are far greater than certain trade figures. Due to sanctions on Venezuela and its peculiar dependence on oil exports, this means the impact of a Venezuelan regime change through trade channels, investment channels is naturally limited and isolated. That's why you don't see massive selling."
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