Viewing Venezuela Through a Market Lens

Editors’ Note: MarketMinder Europe is nonpartisan, favouring no politician nor any party. We assess developments for their economic and market implications only.

With regional conflict flaring in the Western hemisphere and global headlines we follow making big statements about the potential implications, it seems relevant for us to issue what we think is a key, timeless reminder: Years of research tell us markets look only at what is relevant to them. Not sweeping political issues, soundbites, theories or anything in the vast realm of general sociology. In our view, markets look through all that to the simple truth of supply and demand. When assessing the market effects of any event, we think investors benefit from doing so, too.

So, then, about Venezuela. At the core, we have a small military flareup that started decades ago with sanctions, escalated in 2025 with a US naval blockade and culminated with the removal of President Nicolas Maduro, who now awaits trial on drug trafficking charges in the US.^[i] Replacing him is Vice President Delcy Rodríguez, a longtime member of the far-left regime founded by late President Hugo Chavez. The longer-term implications aren’t clear to us, but for now we think the new boss seems a lot like the old boss—a hardcore socialist under US and European sanctions. Similarly, the army and police, which constitute the government’s chief source of legitimacy, seemingly remain on side with Rodríguez. The faces have changed, but it doesn’t seem like the regime has, at least for now. So looking at this from markets’ standpoint, we see a brief armed skirmish resulting in a surface-level leadership change in a country whose gross domestic product (GDP, a government-produced measure of economic output) is about 0.07% of the world’s.^[ii]

We have seen some headlines pointing to the US-orientated S&P 500 index’s 0.6% rise in US dollars Monday as markets cheering the action and outcome.^[iii] To us, that seems a stretch. Based on our research, markets generally move past regional conflict very quickly. Sometimes, fear of conflict erupting hits sentiment and sparks volatility in the run-up to the first shots. But we find that uncertainty generally fades quickly as investors do the maths, see the risk is confined to a tiny sliver of world GDP and rightfully realise life and commerce will continue as normal in the rest of the globe. It seems to us markets did these maths swiftly this time. Higher or lower, we think the short-term wobbles surrounding regional conflict reflect sentiment, nothing more.

Given Venezuela has big oil reserves, most of the market-related discussion we have seen surrounds the Energy sector, where the sentiment moves are more mixed.^[iv] Some US Energy firms seemingly got a boost Monday on hopes they will soon have more access to Venezuela’s heavy crude, which most US refineries are equipped to process (the light, sweet crude that gushed from America’s shale boom is a better fit for Europe and Asia to refine).^[v] Canadian Energy firms got the opposite, a sharp hit on speculation that US refineries will buy less from heavy oil producers in Western Canada’s oil sands.^[vi]

To us, both reactions seem like a stretch. Yes, we have seen a lot of talk about returning a private sector presence to Venezuelan oil production, which has been state-run and badly mangled since Chavez expropriated private oil interests over 20 years ago.^[vii] But we find it highly unlikely something happens in the short term. When these situations arise, we have found private firms tend to move slowly, taking a fool me once, shame on you, fool me twice … approach. They tend to wait a bit to minimise the risk that they lose out again.

Consider Argentina, which renationalised local producer YPF under former President Cristina Fernández de Kirchner in 2012, effectively expropriating it from Spanish Energy firm Repsol.^[viii] It took several years of expensive legal wrangling for Repsol to get compensation that turned out to be below market-value.^[ix] When free market-orientated Mauricio Macri replaced Kirchner in 2015, attracting foreign energy investment topped his agenda.^[x] But the deals were slow, in our view partly because local regulations made oil more expensive to tap, and partly because firms chose to wait for more evidence they wouldn’t get burned again, should the government’s position flip again. (In this sense, we find the situation in Venezuela even less clear, since the regime is still technically in power.)

Even as the money did come in, it took years for the investments to bear fruit. Argentine oil production declined during Macri’s term.^[xi] It didn’t start recovering meaningfully until his successor, Peronist President Alberto Fernández, was in office.^[xii] When he largely extended Macri’s energy policies rather than reverting to Kirchnerism, it gave more US producers the confidence to invest in underdeveloped resources like the vast Vaca Muerta shale field, which led to surging output under Fernández and his successor, the free market-championing current president, Javier Milei.^[xiii]

Exhibit 1: Argentine Oil Production’s Slow Recovery

Source: FactSet, as of 5/1/2026. Monthly Argentine oil production, January 2000 – August 2025 (latest available).

In our view, all of this took far longer to play out than markets would generally have cared about when Kirchner left office. Our research finds stocks look only about 3 – 30 months out and tend not to price in the fruit of far-flung investments.

Also. When markets do price investments, we find they look at the entire picture through the lens of corporate earnings. To us, those cheering the effects of a Venezuelan leadership change appear to have overly positive revenue expectations here. But generating revenue from an oil well means generating, well, oil, and that is a costly endeavour. To call Venezuela’s oil infrastructure dilapidated is an understatement, in our view, as Chavez and Maduro chose to live large off oil’s proceeds rather than reinvest them. The more credible estimates we have seen peg the up-front costs of reviving and modernising the industry at about £74 billion, with the fruit perhaps a decade out.^[xiv] So even if big global Energy firms do return to Venezuela, in the near term, we suspect it is mostly going in the cost column. Any earnings boost is likely a long way out (which means any meaningful competition for Canada is also likely a ways out).

Near-term, we doubt the oil market changes much. Venezuela generates less than 1% of global oil supply.^[xv] Most of that goes to teapot refiners in China.^[xvi] Maybe it gets redirected now, much as Russian oil redirected after Vladimir Putin invaded Ukraine four years ago.^[xvii] But our research finds oil prices are generally set globally, on total worldwide supply and demand. If, say, the US gets a little more from Venezuela and China claims some of Russia’s seaborne supply glut, we doubt it means much for prices overall. Supply and demand in that scenario aren’t meaningfully changing, just rerouting. And as for the speculation surrounding Canada, Venezuela’s entire daily production is only about one-fourth of what the US imports from Canada daily.^[xviii] Canada is also in the process of building infrastructure to export more crude for Asia.^[xix] So in the long run, if Venezuela ramps up and sells more oil to the US, we doubt Canada will be starving for business. Years of experience tell us the global market is a wonderfully adaptive machine.

Thus, the weekend’s events seem to us like a damp squib for markets. In the short term, some chop may be attributable to it. However, we doubt these events have any material effect on markets in 2026. Yes, the downstream uncertainty the move creates about US foreign policy is probably worth bearing in mind. The flood of headlines makes sense on that front. But in our view, markets have already known history doesn’t stop, and stocks have dealt with sabre rattling since the dawn of trading.