How Venezuela Events Could Affect Markets and Policy

The recent U.S. capture and arrest of Venezuelan President Nicolás Maduro signals a shift toward a more unilateral and fast-paced U.S. foreign policy, reinforcing a global trend of multipolarity where economic and national security interests are deeply linked. While Venezuela holds 17% of global oil reserves, its production accounts for less than 1% of global output, leading to minimal immediate impact on oil prices despite the geopolitical volatility. However, the intervention has triggered significant movement in the sovereign bond market, where investors are bidding up prices in anticipation of a faster debt restructuring and higher recovery values. This event also increases U.S. leverage in upcoming USMCA reviews, likely pressuring Mexico to limit Chinese influence. Domestically, the reliance on executive authority over congressional consensus suggests a higher risk premium and increased policy uncertainty for global investors navigating the Western Hemisphere.