(Bloomberg) — Oil fell and precious metals advanced after the US ousted Venezuela’s president, triggering a fresh flashpoint that may stoke geopolitical tensions and impact the flow of crude from the region.
Brent crude slid as much as 1.2% to $60 a barrel after the weekend capture of Nicolás Maduro, muddying the outlook for supply from the OPEC member. Silver climbed as much as 1%, while US equity-index futures and Australian shares both opened 0.1% higher as trading kicked off in Asia. The dollar was mixed against its major peers, while Treasury futures were little changed.
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Although Venezuela isn’t a top-20 crude producer, any persistent increase in oil prices and its inflationary impact on economies pose a risk for markets. Wall Street strategists are generally optimistic about stocks this year, but escalating tensions stand to test the resilience of global equities after their best annual return since 2017.
“The capture of Maduro can create a short-term risk-off sentiment in Asian markets, mainly through higher oil prices and a rise in geopolitical risk premium,” said Jung In Yun, chief executive officer at Fibonacci Asset Management Global in Singapore. “We don’t think the situation will escalate into a sustained oil shock, and this should be a short-lived sentiment drag.”
Early signals suggest that the global oil market will largely take the move in its stride.
Venezuela’s oil infrastructure wasn’t affected after a series of US attacks in Caracas and other states, according to people with knowledge of the matter. Key facilities such as Jose port, the Amuay refinery and oil areas in the Orinoco Belt are still operational, the people said.
The US attack on Venezuela will though likely trigger a short-term oil price gain and a shift to haven assets such as gold, according to Kim Doo-un, an analyst at Hana Securities in Seoul. The dollar is also likely to strengthen in the near term due to heightened uncertainties, Kim wrote in a note.
Investors will also be keeping an eye on US Treasury yields, which can weigh on stocks if they rise too quickly. The 10-year yield was up two basis points to 4.19% at the close on Friday, while the 30-year yield advanced three basis points to 4.87% after touching its highest level since September.
The question is whether events in Venezuela add to the appeal of US debt by fanning risk or diminish demand for them by increasing concerns over inflation or US fiscal policy.
Having attacked Venezuela and deposed its president, Nicolas Maduro, US President Donald Trump now says he has big plans for the country’s oil industry and its vast reserves.Source: Bloomberg
“From a market perspective, we would be careful not to over-trade” when the market opens on Monday, Marko Papic, chief strategist at BCA Research, wrote in a note. “A major use of land troops is highly unlikely. As such, fiscal outlays are not going to be affected and bond yields should not rise.”