Ursula von der Leyen this week called for European “stoicism” in the face of American imperialism. Markets, however, appear more sympathetic to nihilism.

Brent crude, the global oil benchmark, is currently trading at around $62.5 per barrel: just a couple of dollars higher than it was on the eve of the US attack on Venezuela last Saturday. US stocks and the dollar are up a measly few decimal points. And that’s basically it.

“Apart from a few directly affected assets, such as Venezuelan bonds and US oil companies, global markets have been almost completely unfazed by the increase in geopolitical risk,” Deutsche Bank wrote in a note this week.

Whence the calm? Partly, Donald Trump-induced insanity over the past year has inured many investors to the US president’s latest crazy venture. Markets, much like people, are susceptible to Trump fatigue syndrome.

The more pertinent reason, however, is Venezuela’s negligible global economic importance.

Years of corruption, mismanagement, and punishing US sanctions have virtually obliterated what was already a relatively small economy, with output shrinking by a whopping 70% over the past decade. (For comparison, the Soviet Union’s GDP fell by around a third during World War Two, when 27 million of its citizens died.)

Venezuela’s sales of oil – its main export – have also nosedived in recent years, falling from 3 million barrels per day at the start of this century to around 800,000 today: just 1% of the world’s total supply.

As Deutsche Bank noted, previous geopolitical shocks that have had a significant impact on global growth or inflation – including the Yom Kippur War in 1973, the Gulf War in 1990, and Russia’s full-scale invasion of Ukraine in 2022 – all did so by affecting the price of oil.

“If there isn’t a meaningful effect on the oil price, and there’s no alternative channel to affect global markets, then the typical pattern is a muted reaction for bond and equity markets, at least outside the country concerned,” the bank wrote.

Investors’ blasé reaction is, in other words, entirely rational. Nihilism is the appropriate response to economic negligibility.

Echoing this analysis, ING predicted this week that “even an extreme scenario of prolonged political chaos” in Caracas “would have little effect on global growth or on oil market supply”.

“The reason is simple: Venezuela no longer carries much weight in the global economy,” the bank noted, with characteristic Dutch bluntness.

Nuuking the economy

Similar lessons apply to the other major geopolitical developments this week, including Trump’s repeated threats to annex Greenland and the EU’s push to clinch trade deals with India and the Mercosur bloc of Latin American countries.

Despite its vast size – Greenland is physically larger than Germany, France, Spain, Poland, and the UK put together – the Arctic island remains an economic dwarf. At $3.3 billion, its GDP is roughly the size of Andorra’s (and, incidentally, is twenty times smaller than Venezuela’s).

The semi-autonomous Danish territory is also overwhelmingly dependent on government grants from Copenhagen, which funds a third of Nuuk’s total public expenditure. And despite being mineral-rich, Greenland’s harsh weather, lack of infrastructure, and general remoteness mean it will inevitably have to rely on Danish (or American) handouts for many more years.

In fact, one could plausibly argue that Europe would be economically (slightly) better off without Greenland, at least in the short term.

This is not to say, however, that a US invasion of Greenland wouldn’t have any harmful geopolitical or economic consequences.

Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics, noted that a US attack on the island would risk reigniting last year’s trade war between the EU and the US.

“Because we can’t respond militarily, we would have to respond economically,” Vistesen said, adding that his “base case” is that the current crisis will “ratchet up, and then it’s going to ratchet down”.

To be sure, a full-scale economic conflict between Brussels and Washington would likely inflict considerable damage on Europe’s already anaemic economy. After all, the US is the EU’s top trade and investment partner, as well as its main political and military ally.

But as events over the past year have shown, the pain inflicted by any trade war would likely still be manageable. Analysts estimate that Trump’s 15% blanket tariff on EU exports has, at most, shaved around half a percentage point off EU growth. Bad, but hardly devastating.

It is also worth recalling just how small, as a proportion of total GDP, the EU’s trade with the US actually is. The bloc’s €532.3 billion worth of goods exported annually across the Atlantic sounds enormous – until you remember that the EU has an €18 trillion economy.

Mercosur what?

The EU’s economic relations with Mercosur and India – and the benefits of trade agreements with each – are even less significant.

The Center for Social and Economic Research, a Warsaw-based think-tank, has estimated that the EU-Mercosur deal, greenlit by EU capitals yesterday, will boost the bloc’s GDP by a measly 0.1%. A recent study commissioned by the Dutch government predicted that the impact could be even closer to 0%.

The European Parliament’s research arm, meanwhile, estimates that the pact with India – which the European Commission is hoping to clinch later this month – will likely increase total trade by around €8 billion, or less than 0.05% of the EU’s total output. (Other analyses, however, suggest that the growth benefits might be slightly higher in the medium-to-long term.)

Given how politically fraught these deals have become, such tiny numbers might be surprising. Why, then, are the agreements – especially the one with Mercosur – so politically fraught?

One reason is that, despite their negligible impact, the deals will disproportionately affect elements of society (e.g. farmers) that are, to put it mildly, rather politically active.

Another is geopolitical. At a time of mounting tensions with the US, China and Russia, the EU is in desperate need of friends – and wants to prove to the world, and itself, that it still has some.

But the miniscule effects of these deals should also underscore an important truth: the overwhelming majority of EU trade is with itself. This, incidentally, is also why virtually all experts believe that integrating the EU’s single market is the bloc’s best path to economic prosperity.

Calls to reduce Europe’s internal economic fragmentation are, of course, hardly original. Indeed, it is a message that has been repeatedly emphasised in recent years by former Italian premiers Enrico Letta and Mario Draghi, among other EU luminaries.

Unlike nihilism, however, at least it’s an ethos.