Key takeaways:
- The US removal of Venezuela’s President Maduro signals a strategic step toward stability rather than rapid democratisation. The current Chavismo regime remains entrenched, and Washington’s approach emphasises transactional engagement over regime collapse, prioritising energy security and migration control.
- Markets should anticipate gradual and conditional sanctions relief and slow oil production recovery. Near-term oil price softness and easing inflation pressures could support risk appetite, while geopolitical spillovers, in our view, appear limited for now.
- Investors should also monitor US-Venezuela negotiations on oil access and migration and any new election triggers. Lower inflation driven by oil prices is possible. Navigating geopolitical uncertainty can be achieved through employing diversification and discipline when investing in emerging markets.
A step towards stability?
The start of 2026 has already been eventful with the recent developments in Venezuela. My last visit to Caracas was in 2017, after many trips before that, and it was disheartening to witness a country with immense potential deteriorate into one of the poorest and most repressive nations globally. While the manner of US intervention is surprising, the removal of a key actor offers some hope for the nation. Nevertheless, scepticism remains about whether this will lead to genuine normalisation. More than two decades of the current Chavismo regime and entrenched vested interests make rapid democratisation unlikely, though US involvement may bring incremental improvements even if full democracy is not imminent.
What happened in Venezuela?
Venezuela’s President Maduro was captured in a highly coordinated US special operation, signalling a decisive shift in Washington’s approach after months of mounting pressure. Contrary to expectations of regime collapse or an opposition-led takeover, the Chavista (Chavismo) system remains intact. Vice President Delcy Rodríguez has assumed leadership and is viewed as a pragmatic, transactional figure capable of maintaining stability – Washington’s preferred outcome. Senior regime actors such as Diosdado Cabello Rondón, Padrino López, and Jorge Rodríguez remain in place, ensuring continuity. The smoothness of the US operation suggests that there was inside support for the operation.
US objectives – Trump administration needs stability while bargaining
President Trump and US Secretary of State Rubio have signalled a preference for stability over regime change. Democracy appears to be a secondary, longer-term goal, though pressure from the Republicans and potentially the streets of Venezuela could emerge. Washington seeks guarantees on oil access, migration cooperation, and curbing illicit flows. Securing Venezuelan heavy crude strengthens US strategic positioning, reduces vulnerability to Gulf disruptions, and offers a buffer against supply shocks. Venezuela’s vast oil reserves, the largest globally, and critical minerals make it a potential long-term strategic asset. US pressure for Venezuela to exit the Organization of the Petroleum Exporting Countries (OPEC) at some point is a possible scenario. Immigration concerns also play a role, with Rodríguez showing willingness to accept deportees. Finally, the operation serves as geopolitical signalling, demonstrating US resolve in the Western Hemisphere without broad military escalation. The operation was narrowly focused, with no sustained US footprint, reflecting a calculated approach to avoid the costs and risks of full-scale regime change.
What’s next for Venezuela?
In our view, Rodríguez will likely lead a caretaker government for the next 12–18 months. Opposition figures remain sidelined despite winning the 2024 election, as Washington doubts their ability to govern effectively. Nevertheless, political normalisation could take at best several years with Chavismo still holding a very strong control of Venezuela. The regime holds a weak hand and will likely grant concessions on oil access, migration, and illicit flows while maintaining hostile domestic rhetoric.
Market and geopolitical implications
In summary, the ramifications for markets and geopolitics are as follows:
- Oil prices: Near-term bias lower as expectations shift from disruption to supply recovery. Medium-term downside risk persists if production ramps up, though this requires significant capital after many years of underinvestment. Brent Crude, the international oil benchmark, has fallen below US$60 a barrel on 5 January 2026.
- Inflation: Lower oil prices should ease Consumer Price Inflation (CPI) pressures, aligning with Trump’s domestic priorities (key ahead of mid-term elections) and supporting risk sentiment.
- Broader geopolitics: Limited short-term spillover to Russia or China. The operation signals US resolve, potentially recalibrating global risk perceptions. Whether this emboldens or deters China regarding power over Taiwan and Russia in Eastern Europe remains debated. On one hand, US actions could legitimise similar actions, but on the other hand, decisive US action could lead to a more cautious China and Russia.
- Regional impact: Base case is stability as Chavismo endures in the near term. Normalisation would benefit neighbours like Colombia and Ecuador, while conflict remains a risk.
What should investors watch for?
The US is prioritising stability to secure concessions on energy and migration rather than pursuing rapid democratisation. For markets, the key drivers are expectations of oil normalisation and easing inflation, which should support risk appetite. Geopolitical uncertainty persists, but near-term spillovers appear limited. However, watch for US and domestic pressure for elections, which could destabilize the transition. While the road to re-democratisation for Venezuela is long and uncertain, recent developments offer cautious optimism.
The events highlight the benefit of navigating geopolitical uncertainty through a diversified, active management approach that is disciplined, risk-aware and supported by on-the-ground research to fully understand the potential risks and opportunities when investing in emerging market countries. We are actively monitoring the situation and its potential market implications.
Diversification neither assures a profit nor eliminates the risk of experiencing investment losses.
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Emerging market investments have historically been subject to significant gains and/or losses. As such, returns may be subject to volatility.
Sovereign debt securities are subject to the additional risk that, under some political, diplomatic, social or economic circumstances, some developing countries that issue lower quality debt securities may be unable or unwilling to make principal or interest payments as they come due.
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