Business
Global markets absorb Venezuela shock amid rising geopolitical risks
Asian equities rallied at the start of the week, while oil prices edged lower and gold posted modest gains as safe-haven demand ticked up, Reuters reported. The muted reaction in global markets came after U.S. President Donald Trump said Washington would assume control of the oil-rich South American nation—an intervention without precedent in Latin America since the U.S. invasion of Panama in 1989.
However, despite the scale of the development, investors largely remained calm, reflecting views that Venezuela’s current oil output represents a relatively small share of global supply and that any meaningful production recovery would require years of investment, analysts told Reuters. This perception has limited immediate spillovers into energy markets.
Trump’s broader rhetoric, including threats directed at Colombia and Mexico, underscored a more aggressive U.S. posture in the Western Hemisphere. The change in the shift has raised concerns about wider regional stability and the potential for second-order effects across financial markets.
Market participants cited by Reuters warned that geopolitical risk is often poorly priced until it directly disrupts supply chains or economic activity. While near-term volatility has been contained, the longer-term implications for investor sentiment remain uncertain, especially given the precedent such actions may set.
The U.S. administration has indicated that American energy companies are prepared to re-enter Venezuela and invest in restoring production capacity. Over time, such a move could unlock vast oil reserves and potentially support risk assets, though analysts cautioned that political and operational challenges remain significant.
Markets Face First Major Test of 2026
Global equities entered 2026 on a strong footing after closing 2025 near record highs, buoyed by double-digit gains despite a turbulent year marked by tariff disputes, shifting central bank policies, and ongoing geopolitical tensions, Reuters reported.Analysts expect the most immediate market impact to be felt in the defence sector, as governments worldwide continue to boost military spending amid renewed concerns over U.S. willingness to deploy force as part of its foreign policy strategy, Reuters said. At the same time, heightened uncertainty around U.S. policy direction could weigh on the dollar’s traditional safe-haven appeal.
The dollar strengthened slightly at the start of the week but remains under pressure after recording its worst annual performance since 2017, falling more than 9% against major currencies in 2025, Reuters data showed.
Beyond Latin America, investors are increasingly assessing what the U.S. action in Venezuela could signal for Washington’s approach to other geopolitical flashpoints, including China’s stance on Taiwan and potential regime pressure on Iran. However, some regional investors indicated that markets do not currently expect an imminent escalation involving Taiwan.
According to the analysts, global investors have grown more accustomed to sudden foreign policy moves under Trump, often treating them as episodic shocks rather than structural shifts unless they directly affect economic fundamentals.
The U.S. intervention in Venezuela is being viewed more as a geopolitical event than an immediate economic or energy-market disruption. Unless broader supply chains or global trade flows are threatened, investors are likely to refocus on interest rates, earnings, and positioning rather than sustained geopolitical risk repricing, Reuters said in its report.
