Market implications of US-Venezuela conflict

Highlights: The US conducted targeted military strikes in Venezuela over the weekend, increasing short-term geopolitical uncertainty but with limited immediate spillover across global markets. Market reaction has been contained, reflecting Venezuela’s low to nil weight in most bond and stock benchmarks, and its modest current oil output of roughly 800,000 barrels per day (less than 1% of global supply). Still, there is short-term geopolitical uncertainty around domestic political changes in Venezuela and the role of the US in the political transition. Therefore, we continue to manage potential mild market dips with alternatives and multi-asset strategies.

• While Venezuela holds the world’s largest proven oil reserves, near-term risks are more focused on potential production and export disruptions rather than a sustained rise in oil prices, given ample global supply. Energy markets remain well supplied, with global oil supply currently exceeding demand by approximately 3.8m barrels per day, limiting upside pressure on prices
• In the longer term, oil production in Venezuela could increase, but this is probably quarters to years away. Any longer-term increases in supply could add to the disinflationary narrative, helping cap bond yields and supporting equity valuation multiples
• Gold prices rose on safe-haven demand following the strikes, reinforcing gold’s role as a portfolio diversifier amid geopolitical uncertainty and USD diversification trends
• Short-term risk appetite across Latin America could soften as political uncertainty persists, particularly following strong regional market performance in 2025
• This situation reinforces the case for our Q1 second priority action — “Manage market dips with alternatives and multi-asset strategies” — for diversification through multi-asset strategies, with an emphasis on alternatives, gold, and volatility-management tools