- Venezuelan President Nicolas Maduro captured by US, facing charges of narco-terrorism conspiracy; “Monroe Doctrine 2.0”, which seeks to reassert US sphere of influence, in full effect
- Key aspect at play is Venezuela’s large oil reserves, though actual output has significantly declined, limiting any immediate global supply fears and geopolitical risk premium spikes
- Venezuela's oil is predominantly extra-heavy crude, requiring high oil prices and substantial investment for viability
- Long-term development of Venezuela's vast reserves is highly uncertain and unlikely to cause a substantial oil price crash even in the future
- Beneficiaries from the new era of US intervention and heightened geopolitical tensions include safe haven gold and defence contractors
Related insights
Another year, another armed conflict. Long-standing tensions between the US and Venezuela finally reached a tipping point this year; on 3 Jan 2026, the US launched military strikes on Venezuelan targets, capturing its president Nicolas Maduro and his wife in Caracas. Maduro has since been indicted in a federal court in New York and is facing charges of narco-terrorism conspiracy. Concurrently, Maduro’s former deputy Delcy Rodriguez has assumed leadership in Venezuela, though President Trump has announced that senior US officials will oversee an interim governance period until a safe transition is arranged. This operation confirms the “Monroe Doctrine 2.0”, reasserting America’s sphere of influence and accelerating a regional shift toward market-friendly governance. Reactions to this paradigm-shifting event have been starkly divided, with some critics, including Venezuela’s allies and other Latin American leaders, decrying the strikes as a clear violation of international law, while others have praised the downfall of an authoritarian regime. While the morality of the situation is subjective, the impact on markets is clearer; there is a clear reignition of regional (and perhaps global) geopolitical risk and that will have broader spillover effects on risk assets.
No significant short-term impact on oil prices. Seeing as how Venezuela holds the world’s largest proven oil reserves on paper – higher than Saudi Arabia (though this should be taken with a pinch of salt, as explained later) – oil is perhaps the most logical place to begin our analysis. Will the conflict in Venezuela move the needle when it comes to oil prices? Years of mismanagement, underinvestment, and sanctions have reduced Venezuela’s output to a fraction of historical levels, and it is no longer a significant player in global oil supplies. In the short term, we do not think there will be direct material impact on global crude supply amid current oversupply trends, but risk premiums could inch up along with higher volatility – amounting to a spike of up to 10% before re-adjusting. For now, our view on oil prices remains – rangebound at USD60-65/bbl levels for Brent in the near term. Nonetheless, Venezuela’s heavy crude grade is difficult to replace in certain refining processes, so prolonged disruption could tighten specific refined product markets like diesel and jet fuel.
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