What market signals are investors watching after U.S. Venezuela strike
Markets are weighing whether the Venezuela episode marks a turning point in how political power is priced into assets, or whether it will become another headline shock that fades quickly from portfolios. Gold prices advanced over 2% to $4,419 per ounce on Monday, while the dollar firmed modestly. The dollar index, which measures the greenback’s value against a basket of six major currencies, strengthened around 0.2% to 98.662. Other market levers remain relatively muted. U.S. Treasury yields are little changed, with yields on the 10-year and 2-year relatively unchanged at 4.187% and 3.475%, respectively. The MSCI All Country World Index, a measure of global stock market performance, inched up 0.48%. “While the headlines are unsettling, the market response so far has been notably restrained,” said Jung In Yun, founder and CEO of Fibonacci Asset Management, adding that the movements so far reflect “modest hedging rather than flight-to-safety.” Investors are eyeing a handful of signals as they try to distinguish between headline shock and economic transmission. 1. Oil market structure, not spot prices The first test of whether the developments in Venezuela matter systemically for the markets is not where oil trades today, but how the market is structured. “The key here is whether the oil market supply tightens,” said Billy Leung, senior investment strategist at Global X ETFs. “As long as Brent trades around US$60 and the forward curve remains in contango, the market is signalling ample supply and limited concern about disruption from Venezuela. “A shift toward backwardation would indicate that this is becoming a real supply issue rather than a headline event. Which is not happening right now.” When a crisis truly threatens oil supply, buyers usually rush to secure barrels immediately, pushing near-term prices above future prices. That creates a market structure known as backwardation, and it’s a classic sign of scarcity or panic. Until the oil curve tightens, investors do not see developments in Venezuela as a threat to the global energy system. That message is echoed across the energy complex. Venezuela produces roughly 1 million barrels a day, which amounts to around 1% of global supply. Additionally, key infrastructure has remained operational. OPEC+ has paused supply hikes, inventories are ample, and global surplus conditions continue to dominate pricing, other energy experts noted. As Norbert Rücker, head of economics and next generation research at Julius Baer, puts it: “We believe that these events pose minimal near-term supply risks and thus offer minimal chances of a meaningful oil price bounce… The oil market appears to be in a lasting surplus.” 2. Volatility pricing Another clear sign of market complacency is volatility — or rather, the lack thereof. The Volatility Index, which tracks expected volatility in the U.S. equity market for the next 30 days, currently stands at 14.5. The figure is well below stress levels and far from the 50+ spike seen during last year’s tariff shocks, Leung noted. The VIX serves as a forward-looking indicator of market fear and uncertainty, with a higher VIX pointing to increased uncertainty and stress, and a falling VIX connoting otherwise. “That tells you markets are not paying up for protection despite elevated geopolitical headlines,” Leung said. Ed Yardeni, president of Yardeni Research, similarly noted that markets are “waiting to see what happens next. So the initial reaction is relatively muted.” 3. U.S. real yields and credit spreads If Venezuela was triggering a broader repricing of risk, it would show up in falling bond yields and rising inflation expectations — none of which is happening, according to market watchers. So far, real yields remain elevated, which partly reflects the U.S.’ heavy debt burden. Inflation expectations are also stable, suggesting no meaningful change in the growth or inflation outlook, Leung said. Investors are also watching credit markets, which often flag stress earlier than equities. “Credit markets tend to price stress earlier, sometimes better, than equities,” Leung said. “High yield and emerging market sovereign spreads are the key indicators to watch. Venezuelan bonds themselves are not informative, as they are already deeply distressed and largely irrelevant for global risk pricing.” 4. Other safe havens Gold has been the main beneficiary of developments in Venezuela, following a streak of record highs in 2025. Similarly, silver prices have advanced over 3% to $75.2733 per ounce. “This suggests a knee-jerk increase in the pricing of geopolitical risks,” said Steve Brice, global chief investment officer at Standard Chartered. The bank expects gold prices to hit $4,800 per ounce this year. “If anything, these developments might expedite this appreciation,” he added. @GC.1 YTD line Gold COMEX While gold tends to do well when other assets do badly, it performs best “when people lose faith in the way the world works,” said BullionVault’s Adrian Ash, director of research. “Trump’s return to the White House has ripped up the underlying structures, alliances and rules which Western business and capital thought they could rely on.” 5. Spillovers into other flashpoints The longer-term risk is not Venezuela itself, but whether the episode changes political behavior in other parts of the world. Yardeni noted that Venezuela adds to an already crowded list of flashpoints, including the Middle East, the Ukraine war, and China-Taiwan tensions. “So far, those risks haven’t stopped the global bull market in stocks,” he said, though they have helped fuel gains in precious metals. The longer-term risk is whether this sets a precedent that affects behaviour elsewhere, particularly around Taiwan, Leung said. “Markets will focus less on political rhetoric and more on whether this episode changes actions by other major powers.” There has been some chatter following the Venezuela intervention that a deal could exist between Beijing and Washington that would see Taiwan “traded” for Venezuela. A China-Taiwan military reunification is not imminent at this point in time, said Marko Papic, chief GeoMacro strategist at BCA Research. “The U.S. has recently both transferred a significant number of weapons to Taiwan and included it as a “red line” in its relations with China in the most recent National Security Strategy,” he said. For now, most investors see the developments in Venezuela as a tactical shock, rather than a regime shift for markets. “At this stage, the price action points to a temporary geopolitical risk premium rather than a structural shift,” added Fibonacci Asset Management’s Jung.
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