Why Markets Are Smiling at Developments in Venezuela

Global equity markets appear largely unfazed by renewed geopolitical developments in Venezuela, with investors instead focusing on potential upside for energy stocks and broader market stability.

In Athens, the Greek stock market is attempting to consolidate 16-year highs reached during the first trading session of the year. Investor interest has broadened to include smaller-capitalisation stocks, while continued sector rotation—particularly within large caps—signals an evolving market landscape. Against this backdrop, attention has shifted toward geopolitical risk, though markets have so far shown limited concern over developments in Venezuela.

Energy stocks have moved higher, driven by expectations that they could benefit from a rebuilding of Venezuela’s oil infrastructure, should political changes allow for renewed investment and production capacity.

Geopolitical Shocks Often Short-Lived

Citigroup has noted that the market impact of geopolitical risks tends to be short-lived, provided there are no major disruptions to oil prices. According to the bank’s historical analysis, geopolitical events often present buying opportunities for higher-risk assets, rather than prolonged downturns.

Over the past 60 years, global markets have only suffered sustained collapses when energy-sector disruptions were severe enough to push the global economy into recession. In the absence of such shocks, equity markets typically recover quickly.

Capital Economics has also assessed that developments in Venezuela are unlikely to materially affect the global economy, given the country’s sharply diminished economic weight.

In the 1970s, Venezuela accounted for approximately 1% of global GDP and produced 3.5 million barrels of oil per day, representing around 8% of global oil supply. Today, its share has fallen to just 0.1% of global GDP and roughly 1% of global oil production.

Political Implications More Significant

While the economic impact may be limited, analysts suggest the political and geopolitical consequences could be more significant.

Capital Economics argues that recent developments may be interpreted as an attempt by the United States to reassert influence in its regional sphere, but they may also reflect broader U.S.–China strategic tensions. Venezuela has been one of China’s—and Russia’s—most reliable allies in Latin America.

Should a new Venezuelan government align more closely with Washington, another key raw-materials producer could shift away from Beijing’s orbit, mirroring trends already seen in other energy-rich nations such as Saudi Arabia.