Key Takeaways
- US military actions to remove Venezuelan President Maduro came as a surprise over the weekend.
- Beyond some marginal moves in ‘safer assets’ there has been little response from markets. The oil price has moved lower.
- The US is clearly keen to be heavily involved in Venezuelan oil, but it will be some time before the country’s vast reserves hit global markets.
- Recent actions further underline a shift away from political norms of the past 70 years.
- Despite geopolitical uncertainty the outlook for markets remains positive with supportive fundamentals and global growth resilient.
Welcome to the first market perspectives of 2026. Today we focus on geopolitics and US actions in removing Venezuelan President Maduro over the weekend. The move came as something of a surprise even though we have seen a military build-up over the past few months and witnessed the US attacking alleged drug shipments from Venezuela destined to the States. Few people expected the speed and scope of the move that we saw over the weekend, but the actions were obviously a long time in planning. What comes next remains to be seen.
From a financial markets point of view all is seemingly well. We have seen slight moves at the margin in terms of flights to safety – the US dollar, the Swiss franc and gold. The oil price has moved lower and of course that trend is significant. Venezuela holds 18% of global oil reserves but only makes up around 0.8% of world supply (most of their exports going to China) so there is no significant disruption expected. However, if exports were unlocked and Venezuelan oil flows into global markets it could prove to be a significant trend – albeit one that will take time. Clearly President Trump is keen for US companies to facilitate the trend but this this is going to take several years.
When we have geopolitical shocks, markets do tend to initially sell off before fundamentals quickly reassert themselves. I think this move from the US Administration’s point of view could be beneficial – midterm elections are looming, and lower oil prices and interest rates will be helpful from a votes point of view.
From a geopolitical viewpoint the weekend’s events further highlight increasing polarisation among the political superpowers with each increasingly willing to take actions that show little regard for international law or the norms of the past 70 years. Authority from international bodies such as the United Nations is being bypassed completely and it is interesting that the US government has chosen to also bypass their own Congress. For now, the powers of Congress in the US remain diminished though that may well change after the midterm elections. The geopolitical shifts serve as a reminder for European leaders that there is a need for unity and to ramp up their own defence spending at a time when the old-world order post-World War 2 of ‘Pax Americana’ is coming to an end.
I think we need to be positive from a markets point of view and notwithstanding ongoing geopolitical uncertainty the outlook remains upbeat – global growth is resilient and fiscal stimulus to extend the cycle across the US, Europe and Japan is either in place or being put into place. Monetary policy is still supportive given we expect more rate cuts across the US and the UK over the coming months. In Japan the narrative is anchored around further hikes being implemented in a slow and steady manner. Against the backdrop of solid earnings growth, we still see lots of questions out there around tariffs, AI and elevated valuations but we need to remember that fundamentals are still supportive and the global economic outlook for 2026 is relatively upbeat. On balance there are plenty of reasons to be optimistic right now.
