US action in Venezuela with the removal of president Nicolás Maduro, has created something of a geopolitical shock, but will have a limited market impact.
“The removal of President Nicolás Maduro marks a significant geopolitical moment, but from a market perspective, its impact is expected to be limited,” said John Wyn-Evans, head of market analysis at asset manager Rathbones.
Venezuela represents just 0.1% of global GDP and contributes around 1% of the world’s oil supply – a stark contrast to the 1970s when those figures were 1% and 8%, respectively.
“This long-term decline is largely attributable to poor governance,” noted Wyn-Evans.
“While Venezuela claims 17% of proven global oil reserves, unlocking that potential would require vast investment in infrastructure,” added Wyn-Evans.
“Moreover, its crude is ‘heavy,’ yielding lower refining margins than Brent or WTI, making any immediate surge in supply – and the associated deflationary impulse – highly unlikely,” he added.
There is no doubt markets have taken the news in its stride.
“Equities opened firmer, and bond markets remain largely unmoved,” added Wyn-Evans.
“The US’s actions are expected to have a far greater impact on the geopolitical front, continuing the trend of unconventional and disruptive behaviour that has characterised the second Trump presidency,” Wyn-Evans said.
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