Trump’s Venezuela ‘Armada’ Is Lifting Oil Prices. How Investors Can Play the Chaos.

Escalating U.S. military actions in Venezuela have led to a modest increase in oil prices. (Jesus Vargas/Getty Images)

Key Points

• Escalating U.S. military actions in Venezuela have led to a modest increase in oil prices, with Brent crude up 2.4% to $61.93.
• A potential regime change in Venezuela could significantly impact global oil supply, with production possibly cut by 50% initially.
• Chevron is uniquely positioned to benefit from Venezuela’s oil industry rebuilding, as it is the only U.S. oil company still operating there.

Escalating U.S. military action against Venezuela has lifted oil prices, as investors have begun pricing in the possibility that a regime change could eventually unlock one of the world’s largest oil reserves.

Just don’t expect a drawn-out rally. Until geopolitical tensions between the U.S. and Venezuela cool off, moves in oil will likely be brief, sharp, and sporadic as investors respond to the day’s news. And any hopes that a change in government will bring about a renaissance in the Venezuelan oil industry should be tempered with a dour dose of reality.

“For business, revival of Venezuela’s long-crumbling oil sector would require time and enormous investment even with favorable access terms,” wrote analysts at Oxford Analytica.

The U.S. has been ramping up efforts to oust Venezuelan President Nicolás Maduro since early September, a push that began when the military carried out its first strike against a vessel that departed from Venezuela, which administration officials said was carrying drugs. More strikes followed as the U.S. built up its naval presence around Venezuela.

But what began as efforts to combat the gang-driven drug trade has recently shifted more overtly toward targeting the Maduro administration. The recent sanctions aim to choke Maduro’s access to oil revenue, thereby increasing the cost of staying in power, wrote Oxford Analytica.

On Dec. 16, President Donald Trump announced a total blockade of all sanctioned oil tankers going in and out of Venezuela. In a Truth Social post last week, Trump said that Venezuela was “completely surrounded by the largest Armada ever assembled in the History of South America.” Over the weekend, Homeland Security Secretary Kristi Noem confirmed that the U.S. had intercepted an oil tanker that was last docked in Venezuela.

Rising tensions have led to a modest uptick in oil prices. Brent crude futures for February delivery were up 2.4% to $61.93 Monday. West Texas Intermediate crude futures gained 2.4% as well to $57.90.

The geopolitical risk alone of conflict in Venezuela is enough to establish a higher floor under oil prices, noted David Rosenberg, president of Rosenberg Research. That could prevent Brent prices from deepening their 2025 declines of about 20% in the new year.

More importantly, Trump’s escalation—coupled with increasing pressure from certain Republicans in favor of a full-fledged intervention—means that the probability of a regime change is “no longer negligible,” writes Natasha Kaneva, head of global commodities research at J.P. Morgan.

“Should a regime change occur, Venezuela would immediately represent one of the largest upside risks to the global oil supply outlook for 2026—2027 and beyond,” she wrote.

The transition itself would likely trigger “a short, sharp shock” to the country’s oil supply that could cut production by as much as 50%, Kaneva added. A post-Maduro scenario could result in operational disruptions, workforce dislocation, or precautionary shutdowns across state-owned Petróleos de Venezuela SA (PdVSA) facilities.

Venezuela has some of the world’s biggest oil reserves, but it accounts for a little under 1% of total world oil consumption, according to the Atlantic Council. The slight shortfall in supply could nonetheless drive up prices in the interim. Diesel markets, especially, would come under pressure given that Venezuela’s crude grades are highly suitable for diesel production.

If Venezuela achieves a stable political environment and is able to attract foreign investors again, the country’s production could recover quickly, Kaneva wrote. In a transition scenario, supply could rebound to about 1.2 million barrels a day within a few months, compared with the average of around 900,000 to 950,000 barrels a day the country is currently producing, she estimated. Production could get to 1.3 million to 1.4 million barrels a day in two to three years if former operators return to Venezuela.

But as Oxford Analytica points out, the so-called transition scenario is rife with “ifs.”

For one, Trump is still holding back from formally declaring war on Venezuela and seems hesitant to deploy boots on the ground. The sanctions will certainly ramp up the pressure on Maduro, but there is no guarantee they will lead to the desired political outcomes, Oxford Analytica noted. Maduro still controls the presidency and the armed forces, his ruling United Socialist Party of Venezuela appears cohesive, and there have been no popular antigovernment protests recently.

“A new, disastrous stalemate in the context of deepening adversity in Venezuela could set in if, as in the case at present, power brokers around Maduro calculate that their interests are best served by his continuing in power,” Oxford Analytica noted.

Even if the U.S. were able to oust Maduro, the resulting turmoil would hardly create the right conditions to improve the country’s ailing oil industry, Oxford Analytica noted. Opposition leader and recent Nobel Peace Prize winner María Corina Machado would have little chance of leading a smooth transition, they added, and may struggle to build bridges with both other opposition parties and regime loyalists.

The situation is a minefield for investors to navigate—but it could be worthwhile to do so.

Investors looking to limit their risk, but still want exposure to the volatility, should consider short-term call options on Brent crude. While options require more technical know-how, they allow for investing in oil with a set amount of money—effectively capping the downside to the price of the option itself, also called the premium.

For those preferring the ease of a standard ticker, the United States Brent Oil Fund tracks the daily price movements of Brent crude oil. It’s a good short-term vehicle to capture the daily swings resulting from the tension in Venezuela. That said, the way it handles futures contracts can make it lose value over time even if oil prices stay flat, meaning it also requires a hands-on approach.

Those playing the long game should consider investing in Chevron stock. As the only U.S. oil company that is still allowed to operate in Venezuela, Chevron is well positioned to play a leading role in rebuilding the country’s oil industry were Maduro to step down. Over time, the stock—which is up just 3.5% this year—would get a boost, too. Gains may be more muted if Maduro remains in power, but the risk that the company is forced to cease operations is low given that the ruling government sees Chevron as a key partner in tapping international markets.

If military action escalates further and signs point toward a successful regime transition, oil services companies that are paid to fix Venezuela’s crumbling oil infrastructure, such as SLB or Halliburton, would stand to benefit as well. Both have operated in Venezuela before, and may be prepared to ramp up quickly if rebuilding gets under way. The VanEck Oil Services exchange-traded fund is another option to buy into the oil servicing sector while spreading out risk among several companies.

Investing through geopolitical upheaval isn’t easy. But it can be done.

Write to Sabrina Escobar at sabrina.escobar@barrons.com