Venezuela: What do recent events mean for markets?

Since the disputed 2024 election, President Maduro of Venezuela has not been recognised as the legitimate leader of the country by the US, EU or UK. While others will debate the rights, wrongs and legalities of the US intervention, we are concerned about the financial market implications where the initial reaction has been positive for Venezuelan assets and muted elsewhere.

Realpolitik in action

Venezuela has the world’s largest proven oil reserves, but that potential has been untapped for many years. Output of 3.5 million barrels per day in the 1970s dwindled to less than a quarter of that in recent years. Investment to turn that around will take several years, but we believe a substantial increase in production is possible with sufficient time and money.

The US operation confirms the return of Realpolitik, where great powers assert regional hegemony and try to prevent the emergence of alternative regional hegemons. Most see the need for security in a world without an ultimate arbiter as the key motivation for such behaviour, but in this instance Venezuelan oil also seems to have played a role.

Should we expect similar interventions in other countries in the western hemisphere? Looking at 20th century history would suggest that you can never rule it out.[1] The lack of such incidents since the turn of the century is the outlier not the norm.

Market moves and portfolio implications

Venezuelan sovereign debt is a small, but volatile, part of the hard currency emerging market debt indices[2] and has been marked up by around 20% in early trading. Precious metals and defence stocks have both rallied a couple of percent in response to the heightened geopolitical uncertainty. As mentioned, market moves have been muted elsewhere.

Maduro’s exit had been largely priced in by bond markets since the US military build-up began in August last year, though the precision of the operation over the weekend came as a surprise. Looking ahead, we believe that investor attention could shift to President Trump’s commitments to revitalise Venezuela’s economy, particularly through increased US involvement in the oil sector. In our view, Venezuela’s growth trajectory will hinge on renewed investment in oil sector, fresh flows of dollars into the economy and a degree of political stability. 

Venezuelan bonds nearly doubled in value over the course of 2025 and have rallied up to 10 points in initial trading. While many other EM sovereigns appear expensive to us, we believe Venezuela offers a compelling story and potential relative value that could sustain investor interest (the EMBIGD single B index is currently yielding 7.6%[3]). Although still distant, we believe the possibility of a debt restructuring could provide additional upside potential. Estimated recovery values for Venezuelan government bonds are in the mid-to-high 40s.

Our current exposure in fixed income portfolios to Venezuelan government bonds is currently broadly neutral versus the benchmark. For now, we are comfortable maintaining this position.

Past performance is not a guide to the future. Assumptions, opinions, and estimates are provided for illustrative purposes only. There is no guarantee that any forecasts made will come to pass.

[1] United States Interventions | ReVista
[2] 1% of the JP Morgan EMBI Global Diversified index at the end of 2025.
[3] Source: Bloomberg, 5 January 2026.