Oil: the true determining factor behind the intervention in Venezuela
13 JAN, 2026
By Nanette Abuhoff Jacobson, Multi-Asset Strategist at Wellington Management
The capture and detention of Venezuelan president Nicolás Maduro on January 3 will have wide-ranging geopolitical and global market implications, potentially for years to come. Although the situation remains uncertain and there are many unknowns, risk markets are pricing events positively, with Venezuelan bonds and equities rising at the time of writing, as well as equities across many Latin American and developed markets.
Developed-market bond yields have fallen on expectations of lower inflation, giving the US Federal Reserve (Fed) room to continue cutting rates this year and maintain favorable conditions for risk-taking. Oil prices have risen due to short-term supply risks, but possibly also because positioning was already short. Gold prices have also increased.
Based on the many conversations I have had with analysts and portfolio managers across the firm, I believe the positive short-term reaction is supported by widespread expectations that Venezuela will ultimately be able to produce far more oil than the roughly one million barrels per day it currently produces. The country’s oil reserves total approximately 300 billion barrels, representing 20 percent of global reserves, with significant growth potential.
After more than a decade of neglect and mismanagement by Venezuelan leadership, US President Donald Trump has focused on revitalizing the industry, increasing production, and facilitating a transition from the Maduro government to a new administration aligned with US interests.
Key sources of uncertainty
In this context, I am monitoring four potential sources of uncertainty:
Time and capital
Restoring production will require time, capital, and a regulatory framework. Estimates suggest USD 80 to 100 billion will be needed to restore facilities. I will be watching closely for signs of investment.
Political instability
At present, free elections are not being considered, despite María Corina Machado and her opposition party enjoying popular support. I am monitoring potential strikes, violence, and other forms of unrest.
Degree of compliance
Hardline Maduro supporters remain in control of the military and intelligence services. Can interim president Delcy Rodríguez meet US demands if the defense minister and intelligence chief remain committed to regime survival? I am watching for shifts within the regime.
Broader conflict
At this early stage, it is unclear under what conditions the US government might undertake further military action. There are also broader geopolitical questions. If spheres of influence are hardening, will the US withdraw from Ukraine or Taiwan? Could we see an escalation in tensions between the US and Iran, given Iran’s close relationship with Venezuela and US concerns over Iranian nuclear, missile, and drone programs? This may be another reason oil prices rose following the US incursion. On the other hand, as China and Canada are negatively affected by efforts to redirect Venezuelan oil to the US, President Trump may gain additional leverage in trade negotiations.
Investment implications
Despite these risks, I see several positive short-term investment implications:
For risk assets
Expectations of increased oil supply and lower prices are likely to cap headline inflation, even if the impact on services inflation is limited. Lower inflation supports further Federal Reserve easing, which is a powerful signal for increased risk-taking and improved financial system liquidity.
For US oil refineries
With lower heavy crude prices, refineries can purchase feedstock at a discount and sell refined products at prices linked to global benchmarks, boosting margins. By contrast, I see a negative impact on US oil producers, given the outlook for lower oil prices.
For emerging markets
I see opportunities in selected debt and equity markets. Latin America, in particular, could benefit from closer political and trade relationships with the United States.
For precious metals
Rising geopolitical volatility and fragmentation of the global order are likely to support precious metal prices. Mining companies may also benefit, as energy is their largest cost.
For long-term sovereign bonds
Given relatively steep yield curves across the developed world, lower inflation expectations and potential Fed easing would be supportive for bonds.
