US Military Operation in Venezuela Strengthens Case for Diversification

The US military operation to capture Venezuelan President Nicolás Maduro on January 3 underscores the Trump administration’s increasingly interventionist foreign policy and pursuit of US interests abroad. Venezuela’s strategic importance is clear: it holds the world’s largest proven oil reserves, sits near key shipping routes, and remains central to US concerns about illicit drug exports. While regime change may have been the immediate objective, the US administration has also cited the need to secure energy resources and reassert US influence in the region. This action highlights the growing assertiveness of the Trump administration and further strengthens the case for investors to embrace diversification.

Thus far, the market reaction has been limited. The most notable moves have been equity price increases among defense and oil companies, the latter of which may benefit from increased access to Venezuela’s large oil reserves. Still, oil price movements have been modest, reflecting Venezuela’s neglected infrastructure and reduced output to just 1% of global supply. With oil prices declining by nearly 20% last year, markets were already signaling that oil supply was expected to be more than sufficient to meet global demand. Even if instability or new sanctions follow, the direct impact on global oil supply and prices should remain limited. Sunday’s OPEC+ meeting, where quotas were held steady amid oversupply concerns, reinforces this view. Conversely, in a best-case scenario, a rapid, peaceful leadership transition and lifted sanctions could allow Venezuela to double oil production within one to two years, according to Wood Mackenzie, though significantly more infrastructure investment would be required to reach historical peak levels.

The diesel market, however, may be more exposed to disruption. Venezuela’s heavy crude is essential for diesel production. With supply already tight and alternatives limited, further sanctions or blockades could quickly drive diesel prices higher, increasing transportation costs and goods prices. Nevertheless, there have not been substantial price increases in key diesel benchmarks in recent days.

Beyond immediate market moves, the operation reinforces a shifting geopolitical environment, where great power competition and direct intervention are increasingly shaping global affairs. With Delcy Rodríguez now serving as acting president and senior officials from Maduro’s administration still in control, it remains to be seen how collaborative the new leadership will be with the United States. It is also unclear how far the United States will go to secure greater influence and encourage a shift away from US adversaries such as China, Cuba, Iran, and Russia. This evolving landscape brings heightened uncertainty and the potential for further disruptive maneuvers, especially as President Trump, facing a possible loss of Congressional control as a result of the November US midterm elections, is likely to double down on foreign affairs to shape his legacy. As is typical for presidents in their final term, diminished domestic leverage often prompts a greater focus on international policy.

Political shocks reinforce the importance of broad, global portfolios that avoid overexposure to any single asset class or region. As highlighted in our 2026 Outlook, with equity valuations stretched, market concentration elevated, and economic signals mixed, many portfolios may be less resilient to adverse shocks—geopolitical or otherwise—depending on how they are positioned. Now is a timely opportunity for investors, especially those sensitive to drawdowns and not facing significant tax implications, to reduce outsized equity exposures and seek differentiated sources of return. Diversification remains the most effective way to build resilience and position portfolios for a wider range of outcomes.