Editor's note: At the beginning of 2026, U.S. President Donald Trump launched a military raid on Venezuela, marking the year's first geopolitical "black swan" event. How should we assess the impact of this event on global financial markets?
【Anchor】Hello everyone, welcome to DDN Business Insider. I am Yunfei Zhang. At the beginning of 2026, U.S. President Donald Trump launched a military raid on Venezuela, marking the year's first geopolitical "black swan" event. How should we assess the impact of this event on global financial markets? In this episode, we invite Professor Jing Chuan, visiting professor at Xi'an Jiaotong University and independent economist, along with Li Daxiao, former chief economist at a brokerage firm, and Liao Jiahao, head of investment strategy and asset allocation at Citibank, to provide their insights and analysis. Hello, everyone.
First, we see that although the situation in Venezuela has become a media focus, the global financial market's reaction has been relatively muted, including stock markets, crude oil, and gold prices. Mr. Liao, what do you think is the reason for this?
【Liao】Why are stock markets still stable? The main factors supporting the rise of the stock market still revolve around AI development, robust corporate earnings, and expectations of interest rate cuts. The Venezuelan event, in fact, has a very limited impact on these three aspects. After this event occurred, will it cause oil prices to surge and inflate costs for American companies? So far, we haven't seen that, as oil prices have been hovering around our forecast of approximately $60 to $58. Therefore, oil prices continue to trend downward steadily. We find that the impact of Venezuela on corporate earnings is very limited. Currently, there are no signs of escalation or regional pressure. So, this explains why the investment market feels that the risk is manageable.
【Anchor】Yes, the time since the event happened is not long. If we extend the timeline, what trends might major asset classes like gold, crude oil, and the dollar present as the situation evolves, Mr. Jing?
【Jing】We believe the baseline scenario is as follows: The U.S. will support a transitional government, and within the next six months, there will be a slight rebound in oil production. As for OPEC+'s potential production increase possibly being delayed, the entire crude oil market will likely maintain a weak oscillation pattern, with the central range around $65 to $70. Regarding the gold market, due to the continuous purchasing of gold by central banks and the ongoing damage to the dollar's credibility, the overall driving force is still in effect. Thus, this year we expect gold prices to challenge the key level of $5,000. In this context, corrections will still represent opportunities for allocation. In terms of crude oil, short-term risk premiums have appeared at $3 to $5, but long-term, the increase in production will certainly suppress oil prices. Therefore, Brent crude oil is very likely to fall in the second half of 2026, possibly even below $60. As for the dollar, if a so-called domino effect of sovereign risk occurs in Latin America, the dollar might experience a temporary strengthening. However, due to the expansion of the U.S. fiscal deficit and weaponized sanctions, the so-called sustained credit of the dollar will be weakened, meaning that overall, the dollar is expected to maintain a weak trend throughout the year.
【Anchor】Yes. Mr. Li, what are your thoughts?
【Li】With the increase in uncertain events and the escalation of geopolitical conflicts, we also need to observe that the dollar and the U.S. debt system are under strain, and this problem has not been resolved. Many people have begun to doubt the credibility of the dollar. This has led to an upward movement in precious metals. This process is not over, and we need to see how the U.S. addresses the debt issue to make judgments about the future of precious metals. However, we may still see high-level fluctuations after a significant upward movement. The weakness of the dollar should persist alongside interest rate cuts and ongoing doubts about the dollar's credibility.
【Anchor】Good. As we mentioned earlier, the global stock market has been very limited in its reaction to this event. In fact, in the early days following the event, the three major U.S. stock indices all rose collectively, creating a rare situation where both "risk assets" and "safe-haven assets" were rising together. How should we interpret this somewhat contradictory situation, Mr. Jing?
【Jing】First, we believe that currently, the combination of liquidity easing and the global capital investment cycle in AI will lead to an upward revision of profit expectations for tech stocks. Capital investors view geopolitical conflicts as short-term disturbances and will continue to chase the long-term growth of tech stocks. Additionally, in terms of the passive investment rebalancing state, we noted that at the end of last year, global pension funds and sovereign funds underwent some rebalancing, selling off U.S. debt and Japanese equities that had increased significantly, while buying into relatively undervalued emerging markets and crude oil. This leads to a balanced demand for both risk and safe-haven assets, keeping the capital market in a generally loose state.
【Anchor】Yes. What does Mr. Li think?
【Li】The situation where both "risk assets" and "safe-haven assets" rise together is indeed quite rare. This also reflects an unprecedented widening of divergence in people's opinions about the future. On one hand, there is enthusiasm for technological transformation and the positive expectations it brings. On the other hand, some are cautious about risks associated with high valuations. Additionally, abundant liquidity has allowed "risk assets" to rise significantly. A prudent approach would still be to focus on high-dividend-yielding assets. I believe that this may provide relative certainty amid future uncertainties.
【Anchor】Good. How should we evaluate the substantive impact of this event on global stock markets? Which sectors may encounter opportunities, and which ones should we be wary of?
【Li】On the positive side, energy, infrastructure, and service companies like Halliburton, Schlumberger, and Baker Hughes will receive contracts for the repair of oil wells in Venezuela. This will result in a trading premium for resource exports from Latin America, benefiting countries like Brazil for oil, Chile for copper, and Argentina for lithium. Additionally, companies in the military and security sectors, such as Raytheon, Lockheed Martin, and Northrop Grumman, may see upward adjustments in order expectations. These could become attractive targets for capital markets.
On the negative side, the occurrence of this event may have an impact on aviation and logistics. If oil price premiums are maintained, every $10 increase in fuel costs could reduce global airline profits by 8 to 10 percentage points, which would negatively affect the entire airline industry. Furthermore, in emerging markets like Turkey, South Africa, and India—countries that import oil—the current account will deteriorate, and currency depreciation pressures will affect consumer stocks, impacting the consumption market negatively. Additionally, ESG-sensitive funds may face governance controversies if U.S. companies enter the Venezuelan oil sector in large numbers, potentially leading some sovereign funds to reduce holdings.
【Anchor】Yes. The connection between this event and China is also a focus. China is Venezuela's largest creditor and its biggest oil trading partner, with a longstanding economic cooperation model of "oil for loans." What risks do you anticipate this event will bring to Chinese investments in Venezuela? Do you think these risks will gradually manifest in domestic energy companies and financial institutions, Mr. Jing?
【Jing】First, there are the existing debt claims. Chinese banks have about 70 billion RMB worth of oil-for-loan agreements with Venezuela. The collateral is based on contracts for future oil deliveries. If a new government re-signs contracts or shifts exports to the U.S., there will be a significant cash flow gap for repayments. The initial impact on companies will be in the energy sector, where companies like PetroChina and Sinopec may face risks of re-tendering for oil field service contracts. Second, in aviation, companies like COSCO Shipping Energy and China Merchants Industry are currently transporting Venezuelan crude oil; if these supplies shift to U.S. companies, the rates for Very Large Crude Carriers (VLCCs) will be under pressure in the short term. The third impact will be in banking, where institutions like China Development Bank and Export-Import Bank may need to recognize impairments, with provisions estimated to account for roughly 3% to 5% of their profits for the New Year in 2026. While this will have a limited impact on valuations, it will pressure dividend rates.
【Anchor】Given the ongoing geopolitical uncertainties, what adjustments do you recommend for ordinary investors regarding their asset allocation, Mr. Liao?
【Liao】We have always emphasized diversification in investments. From an investor's perspective, it's important not to be overly worried about geopolitical events, as they may not necessarily hinder investment, as we've seen over the past few years. In fact, if there's a market correction, buying the dip may prove to be more beneficial. The primary drivers of this year's investment market or stock market are profit growth, and we believe geopolitical impacts are relatively minor. For example, regarding the U.S.-China relationship, regardless of trade volumes or China's soybean imports, or the possibility of the leaders of the two countries meeting four times this year, there seems to be a direction of "having something to talk about." Therefore, the outlook for the investment market remains positive. Simply put, we believe investors could consider holding some gold to hedge against geopolitical risks, but there's no need to avoid investing or to set cash aside out of concern for uncertain risks that may occur at an unknown time. This is because cash assets are expected to continue yielding low returns this year, potentially offering little benefit to investors.
【Anchor】Good. Mr. Jing, what are your thoughts?
【Jing】We believe there are generally two aspects to consider. One is the overall framework, which essentially combines core investments with risk aggregation.
Firstly, for core investments, we look at global indices such as U.S. stocks, A-shares, and indices from developed countries outside the U.S. These indices serve as our core investments. Additionally, we consider gold ETFs, some upstream energy stocks, and dollar funds from Latin America. There is also the need for cash and short-term bonds, as in the context of geopolitical conflicts, it's important to have liquidity ready for potential escalation, maintaining a balance between offense and defense.
On the other hand, we should pay attention to some key risks and considerations. First, in energy investments, it's crucial to track the pace of Venezuela's oil return and OPEC+ meeting resolutions, as well as the U.S. SPR (Strategic Petroleum Reserve) release plans. If the market structure transitions from contango to backwardation, it indicates tightening in the spot market, which would prompt an increase in energy stock holdings.
For precious metals, we should focus on the total gold purchases by global central banks and the real interest rates of the dollar, as these factors will still affect gold and silver prices to some extent. Additionally, regarding cross-border investments, it's advisable to avoid holding assets from sanctioned countries through dollar channels. Instead, we should turn to diversified channels such as the Hong Kong Stock Connect, London GDRs, and cryptocurrencies to mitigate risk.
Lastly, we need to monitor exchange rate risks. In the case of China, if the RMB falls below 7.3, it would be wise to bolster holdings in high-dividend Hong Kong stocks, such as telecommunications and utilities. Conversely, if the RMB rises above 6.9, we should consider converting some dollar-denominated investments into local currency bonds to lock in currency exchange benefits.
【Anchor】OK, thank you to all the guests. That's all for this episode. Remember to follow us on YouTube or download our APP. I'm Yunfei Zhang, thanks for watching, and see you next time.
Anchor: Laura Cheung | Edited: Kelly Yang, Laura Cheung, Rachel Liu | Translate: Kato Ip | Proofread: Chris Liu
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