What Venezuela means to You

The United States is snatching millions of barrels of crude oil from Venezuela. Will that benefit this South American economy? We believe it will.

Venezuela is already a huge producer of oil, but is unable to sell it due to trade sanctions imposed by the US, restricting the Venezuelan government’s cash inflow. For an economy that is so dependent on importing basic goods and food for its entire population, this is detrimental. Sanctions have historically forced Venezuela’s oil company (PDVSA) to sell oil at a steep discount on the black market.

So what is the solution? Venezuela will be turning over 30-50 million barrels of oil to the United States government, allowing it to sell the oil at a (higher) market price while controlling the proceeds. Global commodity trading companies such as Trafigura and Vitol, are expected to execute the sale of trapped Venezuelan oil on behalf of the US government.

President Trump claims this operation will “… ensure [oil proceeds] are used to benefit the people of Venezuela and the United States.” With this slice of hope, Venezuelan government bonds and corporate bonds, initially rallied only to fall after reality sank in. That’s because if the US’s promises are not upheld it could be catastrophic to Venezuela, leading to widespread food shortages. In addition it would imply Venezuela indefinitely handing over ~15% of its annual crude production to the US.

During times of war & conflict -- such as this one -- Defense (i.e. military) stocks tend to benefit. Unlike consumer-oriented companies, defense companies’ revenues are backed by government contracts and geopolitical goals. Given the increasingly fragile geopolitical environment we’ve seen over the past years, it’s sensible for governments to increase military readiness and ramp-up their surveillance and technology spending. All of this results in increased investor appetite for defense investments, making defense stocks a short to midterm winner. Following gains in 2025, global Defense ETFs have rallied sharply in 2026, driven by anticipated U.S. budget increases and heightened global geopolitical tensions.

On the other side of risk appetite for oil & defense investments is the need by investors to balance things out and mitigate exposure to those risky sectors with “safe haven assets”.

These investments are distinctively known for increasing (or at least maintaining their value) in times of above-average fear and economic instability. Examples of which are gold and US Treasury bonds, just to name a few. When the market feels bogged-down by uncertainty, large investors in particular shift riskier assets into safe havens. If securities that are considered “risky assets” (i.e. stocks and certain corporate bonds) experience a correction, an extended rise in gold, silver, bronze and even bitcoin (i.e. digital gold) prices could benefit investors’ portfolios.

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Mauro L.