Global investors are facing a fresh surge in geopolitical risk after the United States capture of Venezuelan President Nicolas Maduro, a move that could unlock the nation’s vast oil reserves and boost risky assets over the longer-term but prompt a flight to safety when trading resumes.
President Donald Trump said the US would take control of the oil-producing nation, while Maduro, whom the US has repeatedly accused of running a “narco-state” and rigging elections, was in a New York detention centre on Sunday awaiting charges.
Washington has not made such a direct intervention in Latin America since the invasion of Panama in 1989.
“The events are a reminder that geopolitical tensions continue to dominate the headlines and drive the markets,” said Marchel Alexandrovich, an economist at Saltmarsh Economics.
“It is clear that the markets are having to cope with significantly more headline risk than they are accustomed to under the previous US administrations.”
Mohamed El-Erian, a former chief executive of bond fund giant PIMCO, said in a post on X that the economic and financial reaction to Maduro’s toppling was unclear.
“We would have probably seen an immediate decoupling of oil prices (lower on the prospect of increased Venezuelan exports, depending on the leadership succession there) from gold (higher due to safe haven flows amid heightened uncertainty”, had markets been open, he wrote.
Just hours after capturing the Venezuelan leader, Trump said American oil companies were prepared to spend billions to restore Venezuela’s crude production, something that could give global growth a lift as greater supply lowers energy prices.
“From an investing perspective, this could unlock massive quantities of oil reserves over time,” said Brian Jacobsen, chief economic strategist at Annex Wealth Management.
“Markets sometimes swing into risk-off mode on expectations of conflict, but once the conflict starts, they rotate quickly to risk-on.”
Still, most strategists agree it could take years to meaningfully boost Venezuelan output, which has plummeted over the past decades due to mismanagement and a lack of foreign investment after the government nationalised oil operations in the 2000s, including the assets of ExxonMobil and ConocoPhillips.
Any interested companies would need to deal with security concerns, dilapidated infrastructure, questions about the legality of the US operation to snatch Maduro and the potential for political instability, analysts said.
REUTERS
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