Global markets rose despite geopolitical unrest brought on by US military operations in Venezuela. Expectations of greater Venezuelan oil supplies and sustained momentum in AI and tech companies drove notable advances in key Asian and US markets.
All international and Asian markets, with the exception of the Indian stock market, began this week on a positive note despite escalating geopolitical tensions in the wake of US military strikes in Venezuela that resulted in the arrest of leader Nicolás Maduro and his spouse.
Important Asian markets, such as the Nikkei 225, KOSPI, and Shanghai Composite, increased by more than 1% approaching today's close, maintaining their strong gains from the previous trading session. All three of the major US averages ended the night with significant increases, with the Dow Jones reaching a new high.
Moving on to European markets, the pan-European Stoxx 600 ended Monday's session up 1%, and it gained an additional 1.6% today. The FTSE 100 and DAX, two other important averages, were also rising, gaining 0.60% and 0.14%, respectively.
On optimism for an oil supply, markets look past problems in Venezuela.
The worldwide rally implies that investors mostly disregarded the Venezuelan crisis, believing that this significant geopolitical event would not have detrimental economic effects.
As demonstrated in 2022 during the ongoing conflict between Russia and Ukraine, as well as in previous Middle East confrontations, geopolitical flare-ups typically have significant effects on markets by reducing risk appetite.
However, investors' perceptions of the US strikes on Venezuela over the weekend were influenced by the likelihood of increased Venezuelan crude supply, which may potentially lower inflation and lead to additional monetary easing.
In addition, the global markets remained optimistic due to the ongoing surge in AI and chip-related stocks.
The US presses major oil companies to make significant investments in Venezuela.
Venezuela presently contributes less than 1% of the world's oil production, while having one of the greatest oil reserves. The nation is struggling with hyperinflation and has a weak economy.
On Saturday, US President Donald Trump declared that Washington would assume command of the nation's enormous oil reserves.
Major US oil producers' shares saw a strong spike on Monday as a result of the declaration. Investors believe that businesses like Chevron, ConocoPhillips, and others could profit from enhanced US control over one of the greatest petroleum deposits in the world.
In the 1970s, Venezuela, a founding member of OPEC, produced up to 3.5 million barrels per day, which at the time accounted for more than 7% of the world's oil production. In the 2010s, production dropped below 2 million barrels per day; last year, it averaged about 1.1 million barrels per day, or just 1% of the world's total.
According to an analyst, US moves could eventually increase Venezuela's oil supplies.
More of Venezuela's oil could enter international markets if the US is successful in managing the country's oil sector, which could have a negative influence on oil prices. However, because state-owned oil company PDVSA has underinvested for years, this effect is probably only going to become apparent in the long run.
"The US actions in Venezuela, along with the possibility of lifting sanctions and investing in the oil industry, could be positive for global oil markets," stated Prashant Vasisht, Senior Vice President and Co-Group Head, Corporate Ratings, ICRA. Despite possessing 18% of the world's oil reserves, Venezuela today produces only 0.8% of the world's total.
"Investments in the oil industry and ramp-up of production could take years but may eventually lead to significantly higher supplies, thereby easing oil markets," Prashant Vasisht added.
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