Global financial markets, with the notable exception of India, opened the week on a strong bullish trend. This surge came even as geopolitical tensions escalated sharply following US military actions in Venezuela over the weekend, which resulted in the capture of the country's leader, Nicolás Maduro, and his wife.
Asian and Western Markets Defy Geopolitical Shock
Key Asian benchmarks extended their gains from the previous session. The Nikkei 225, KOSPI, and Shanghai Composite each climbed more than 1% by the day's close. This positive momentum followed a strong overnight session on Wall Street, where all three major US averages posted sharp gains. The Dow Jones Industrial Average even reached a fresh record high.
In Europe, the rally continued. The pan-European Stoxx 600 index advanced 1.6% in today's trading, building on a 1% gain from Monday. Other major indices like the UK's FTSE 100 and Germany's DAX also traded higher, rising 0.60% and 0.14% respectively.
Why Investors Looked Past the Venezuela Crisis
Typically, major geopolitical flare-ups, such as the ongoing Russia-Ukraine war or past Middle East conflicts, dampen risk appetite and roil markets. However, the market reaction to the US intervention in Venezuela has been strikingly different. Analysts suggest investors are looking beyond the immediate conflict, focusing instead on the potential long-term economic implications.
The key driver of optimism is the strong possibility of significantly higher crude oil supplies from Venezuela. On Saturday, US President Donald Trump stated that Washington would take control of Venezuela's vast oil reserves, with American oil majors poised to invest billions to revive the country's crippled industry and infrastructure.
This prospect triggered a rally in shares of major US oil producers like Chevron and ConocoPhillips on Monday. Investors anticipate these firms could benefit from increased US influence over one of the world's largest crude reserves. Higher global oil supplies could help drive down inflation and potentially lead to further monetary easing by central banks.
Venezuela's Oil Potential and Long-Term Market Impact
Despite holding roughly 18% of the world's proven oil reserves, Venezuela currently contributes less than 1% to global production due to years of economic mismanagement, hyperinflation, and underinvestment. Production has plummeted from a peak of 3.5 million barrels per day in the 1970s to an average of about 1.1 million barrels per day last year.
Prashant Vasisht, Senior Vice President and Co-Group Head for Corporate Ratings at ICRA, noted, "The US actions in Venezuela, along with the possibility of lifting sanctions and investing in the oil industry, could be positive for global oil markets."
He added, "Investments in the oil industry and ramp-up of production could take years but may eventually lead to significantly higher supplies, thereby easing oil markets." This long-term bearish outlook for oil prices, stemming from a potential supply glut, appears to be outweighing immediate geopolitical risks for global investors.
Alongside the oil narrative, the continued rally in artificial intelligence (AI) and semiconductor-related stocks also provided support to the upbeat global market sentiment, helping investors shrug off the weekend's dramatic events.
