The seismic geopolitical shock of Venezuelan President Maduro's detention by US forces has failed to trigger the anticipated turbulence in global financial markets. This Latin American nation, which in the 1970s accounted for approximately 1% of global GDP and 8% of the world's oil supply, now wields minimal influence over the global economy, allowing markets to effectively shut out this political storm.
On January 3rd local time (early January 4th Beijing time), former US President Trump and then-Defense Secretary Hagerty held a press conference at Mar-a-Lago in Florida regarding US military action in Venezuela, the detention of President Maduro, and his subsequent transfer out of the country.
Bloomberg columnist and senior markets editor John Authers pointed out in his latest commentary that the core reason for the market's muted reaction is Venezuela's drastically diminished economic importance. The country now accounts for a mere 0.1% of global GDP, with daily oil production of about 1 million barrels, constituting just 1% of global supply and ranking 18th among global oil producers. Years of governance failures have turned the country into a "mess," meaning even the most severe turmoil has an extremely limited impact on the global economy.
The regime change triggered by the US "Operation Absolute Resolve" caused almost no shock to oil prices as Asian markets opened. Concurrently, global stock markets extended their gains, with the technology sector's core logic—centered on AI computing power and memory chips—operating independently of geopolitical tensions, as strong fundamentals propelled Asian equities and semiconductor stocks to new highs. The market channeled geopolitical risk more into safe-haven assets like gold rather than triggering a large-scale sell-off of risk assets.
Neil Shearing, Chief Economist at Capital Economics, summarized Venezuela's trajectory of decline. Under the Chavez and Maduro regimes, persistent crises stemming from mismanagement triggered hyperinflation and a 70% plunge in real GDP. A wave of Venezuelan migrants fled to neighboring countries and the US, while its oil production plummeted from around 3.5 million barrels per day in the 1970s to roughly 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 largely intact, reducing the risk of production cuts, achieving a significant output increase would still take years. The reaction of crude oil prices at the opening of Asian markets on Monday confirmed this assessment—instead of the customary rise, prices unexpectedly fell.
Despite the Venezuelan situation introducing new geopolitical risks for global investors, the initial market reaction was relatively calm. Stocks rose, with technology and defense sectors performing strongly, the US dollar strengthened, while geopolitical risk was 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. This is why oil prices, US index futures, and other major macro assets have shown no notable volatility."
He added that the broader message is that geopolitical uncertainty has become an integral part of the macro environment, which should continue to support demand for precious metals.
Charu Chanana, Chief Investment Strategist at Saxo, summarized the current market characteristic 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 is more of a geopolitical shock than an oil shock."
Former President Trump's statement on Saturday that the US would "manage" Venezuela and, if necessary, use "ground troops" was made while markets were closed, avoiding a potential panic reaction. By the end of the weekend, then-Secretary of State Marco Rubio had thoroughly downplayed any notion of an Iraq-style occupation, indicating the US would leverage its influence over Venezuelan oil exports to maintain order and was prepared to work with Maduro's Vice President Delcy Rodriguez.
This strategic choice significantly reduced market concerns. Authers noted this recalls the decision last year to bomb Iranian nuclear facilities—a spectacular precedent and impressive military achievement, but Trump made clear there was no intent for further escalation, after which oil prices fell.
Commenting on Trump's remarks about Cuba, Marko Papic of BCA Research said:
"Could Cuba be next? Yes, quite possibly. But unless you are a commercial real estate developer specializing in hospitality, we see no market impact."
Although the Venezuela event itself has limited impact, data for the full year 2025 reveals a more significant market trend: a notable reversal in the relative performance of the US market. The S&P 500, measured in US dollars, has underperformed the rest of the world by 9.9%, marking its worst relative performance since 2009 and roughly equivalent to its weakest showing since 1993.
Research from Andrew Lapthorne, Société Générale's Chief Quantitative Strategist, shows that a country's performance in 2024 is a poor predictor of its 2025 trajectory, but starting valuations matter significantly. Countries with lower price-to-earnings ratios at the start of 2025 have tended to perform better.
Authers believes this phenomenon has multiple positive implications. Firstly, if investors are already seeking cheaper stocks and countries, it's hard to argue the world is in some sort of AI-driven "full-blown bubble." Markets retain a considerable degree of rationality. Secondly, since investors have begun searching for value, this trend has significant room to continue, as most markets outside the US remain cheap.
Tai Hui, Chief Market Strategist for Asia Pacific at J.P. Morgan Asset Management, 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 quickly raise production and increase global supply."
Vishnu Varathan, Head of Economics and Strategy for Asia ex-Japan at Mizuho, pointed out:
"We are reminded that geopolitical risk is far greater than some trade figures. Due to sanctions on Venezuela and its peculiar reliance on oil exports, this means the impact of a Venezuelan regime change through trade channels and investment channels is naturally limited and isolated. That's why you don't see a massive sell-off."
