The US strike and the extraction of Nicolás Maduro materially raise the odds of political change in Venezuela, but they do not, by themselves, deliver regime change. After the fireworks, Washington is now shifting to a coercion-and-negotiation strategy, with Secretary of State Rubio signalling that the US will not put troops on the ground and will instead work with the Chavista acting leadership for “two-three weeks, two-three months.”
Crucially, the legal and institutional handover inside Caracas points to continuity of state control rather than an abrupt break. The Supreme Court’s order naming Vice President Delcy Rodríguez as acting president (while avoiding language that would force an immediate 30-day election clock) buys the regime time. At the same time, real coercive power still sits with the security state: Defense Minister Vladimir Padrino López and Interior Minister Diosdado Cabello remain the core “kingmakers,” and both are viewed as more radical than Rodríguez.
Markets have reacted as if a rapid transition is now the central case, particularly in distressed sovereign debt. We are more cautious. Even under favourable political outcomes, improvements in oil production and debt recovery are likely to take longer than early price action implies, while less favourable outcomes leave current pricing vulnerable.
In the near term, the most likely path is a managed continuity scenario in which Rodríguez serves as the regime’s acceptable face while Padrino and Cabello preserve the security apparatus and the internal balance of power. Washington is prepared to deal with this reality for now, having learned from past mistakes, e.g. Iraqi “debaathification”. Rubio’s public messaging suggests that US priorities are being framed around national interest and Western Hemisphere security, and that early engagement is more likely with a pragmatic Chavista interlocutor than with an opposition leadership largely outside the country.
Under this base case, we expect continued coercive pressure short of occupation. There is a naval blockade around Venezuela, but a new US troop deployment remains unlikely and the Trump administration will take a minimalist approach to Venezuela’s transition to avoid a messy entanglement and domestic backlash. This is a critical decision that reduces the probability of Iraq-style nation-building, but also reduces the probability of a rapid, comprehensive institutional reset that would be friendly to investors and straightforward for creditors.
Asset implications in the near term are mixed. Venezuelan bond prices can stay supported by optionality and momentum, but will remain highly headline- and signpost-driven. Oil is more likely to face short-term logistical and risk-premium turbulence than a clean supply comeback story.
For the medium term, our base case is a negotiated, imperfect stabilisation in which Chavismo survives, but with a different leadership configuration and greater US influence. The “Chavismo without Maduro” concept has already circulated in elite channels (including reports of backchannel proposals made in Q4 by the Rodríguez siblings to Qatari negotiators), and it is consistent with the incentive structure now visible: Rodríguez gains time and external room to maneuver; Padrino and Cabello preserve core interests; Washington gets a counterpart willing to make concessions on the issues it prioritizes, particularly distancing from Russia/China and constraining Cuban security influence.
In this scenario, elections are delayed, staged, or pushed into a timeline that preserves regime control. That matters for assets because legitimacy and durability are the preconditions for a normal debt restructuring process and for large-scale private reinvestment. The most plausible economic path is technocratic “patching” rather than a wholesale reform package: Rodríguez is credited with pragmatic workarounds under sanctions and a better rapport with local business, which supports the idea of incremental rather than transformational policy.
Oil production under this base case improves at the margin, but not dramatically. A Chavista regime with better US relations could raise production by roughly 700 kb/d over a year, while still emphasising that meaningful near-term gains are hard given the state of infrastructure and the complexity of Venezuelan crude. (Venezuela is often said to have more crude reserves than Saudi Arabia, but we would take this with a grain of salt because the figure largely reflects Chávez-era upward revisions to what counts as economically recoverable reserves.)
For sovereign and quasi-sovereign debt, the bonds have already rallied sharply (the benchmark 2027 is now around the low 40 cents after a big run over the last year). However, given the uncertainties at play, the range of estimates of fair values is unusually even larger than during other past debt restructuring episodes. It is hard to say the market has gone too far.
Having said that, creditors will have at the back of their minds a scenario of a political transition in which bondholders don’t benefit. In Iraq in 2005, a US-led rebuilding effort imposed punitive, very deep haircuts on legacy creditors after “protective orders” were issued that shielded Iraqi assets from creditors, leaving opportunistic buyers who bought after the 2003 invasion losing money. The market can become cautiously optimistic, but it may be cautious about it.
The upside tail-risk case is a genuine political transition that produces a government with sufficient legitimacy to negotiate with creditors, unlock multilateral support, and commit credibly to reforms. This requires not just Maduro’s absence, but the erosion of Chavista coercive cohesion and the emergence of a transition mechanism that brings the opposition inside the process in a way Washington and regional players recognise. Regime change is now likelier than it has been, but still less likely than the base case. An end to Chavismo is not guaranteed and hinges heavily on military unity and civil society dynamics. The real prize is attracting back 8 million Venezuelans abroad to the country for reconstruction.
From an assets perspective, this is the scenario in which debt and oil both have genuine convexity. Creditors typically need a legitimate counterpart and a reform anchor, often via an IMF program, before restructuring can proceed with a durable settlement.
The oil upside in this scenario is real but still not immediate. Returning to prior peaks is a multi-year, capital-intensive, legal-regime-dependent project.
If this upside case begins to materialise, the market impact would likely be most pronounced in defaulted sovereign and PDVSA-linked claims, with second-order upside in companies with recoverable legacy interests and arbitration claims. The key sensitivity in equity markets may be less about spot oil and more about the monetisation of legacy awards and interests, e.g. the ConocoPhillips and Citgo litigation process.
The most important downside is a hardliner or security-state consolidation that closes the political opening, triggers renewed repression, and invites continued US coercive action (further interceptions, seizures, episodic strikes) without generating the conditions for legitimacy or investment. Ultimately, Rodríguez’s hold is not secure, internal suspicion is high, and she must strengthen ties to the military leadership to avoid a coup; Venezuela has a history of military juntas.
In this downside, oil exports remain vulnerable to disruption and counterparties remain cautious, limiting both near-term barrels and medium-term capex.
There are worse scenarios, involving fragmentation: a “Libya-style” outcome where the centre fails to consolidate power, armed factions proliferate, and the transition becomes messy enough that Washington retreats into containment rather than reconstruction. Post-Gaddafi Libya is the key example here and is one the White House will want to avoid precisely because it is the scenario most likely to force either a humiliating step-back or an escalation that the administration wants to avoid.
For debt, the political pathway to a recognised sovereign counterparty is particularly uncertain in this scenario.
The fastest way to clarify whether we are in the base case or drifting into a risk case is to watch three things. The first is whether the security state stays unified behind Rodríguez in practice, not just in public statements, and whether Cabello and Padrino continue to tolerate her as the external-facing negotiator.
The second is whether the Supreme Court (or other institutions) moves toward language and actions that would force a near-term election timeline, versus preserving ambiguity and time for intra-regime bargaining.
The third is whether Washington begins to trade concrete relief (licenses, enforcement posture, or oil-sector access) for concrete concessions (prisoner releases, opposition operating space, distancing from extra-hemispheric patrons), consistent with Rubio’s own “weeks/months” horizon.
Venezuela can be read, at first glance, as a throwback to American “gunboat” diplomacy: a rapid use of force in the US “backyard” that invites comparisons to earlier interventions such as Panama (1989), Grenada (1983), the Dominican Republic (1965–66), or even the early-20th-century occupations of Haiti and Nicaragua. But it is equally plausible to see the episode less as a display of unchallenged strength than as an expression of US prioritisation and constraints. The logic is consistent with retrenchment: a US that no longer seeks open-ended global management, elevates the Western Hemisphere as a core priority (as in the December 2025 NSS document), and pushes other regions toward burden-sharing and narrower, interest-based engagement rather than permanent dominance.
More broadly, Venezuela fits a world that feels increasingly disordered, yet not random: a system moving from a short-lived post-Cold War unipolar moment toward multipolarity and a “spheres of influence” logic. In multipolar systems, rules exist but are negotiated among peers and enforced unevenly, and as power diffuses, the costs of acting as a global referee rise while the strategic necessity weakens. Nuclear weapons sharpen that arithmetic by making great-power miscalculation catastrophically costly, encouraging competition in grey zones (cyber, sabotage, coercive trade policy, proxies) rather than outright conquest. The credibility gap this creates, where nuclear-armed rivals care more about their near abroad than distant guarantors can credibly match, pushes the US toward retrenchment and regional prioritisation. On that view, Venezuela is not an anomaly but a potent example of how the 2020s and 2030s may be shaped: less by a single manager of the system and more by contested regions, hard limits on escalation, and the re-emergence of spheres of influence.
The case that the broader EM bull market is still alive in 2026 starts with the big, slow cycles that tend to govern multi-year EM runs. EM outperformance usually comes in long phases, and the current backdrop still looks more “early-to-mid cycle” than “late-cycle”: balance sheets are generally healthier than in past peaks, commodity dynamics are not flashing late-cycle excess, and the US dollar’s multi-year tailwinds look increasingly fragile as valuation and policy differentials compress. If the dollar shifts from headwind to neutral, or even a mild tailwind, EM currencies, financial conditions, and risk appetite can all improve at once, which is exactly the combination that tends to extend EM bull markets rather than end them.
For EM equities specifically, the story in 2026 is less about a one-off rebound and more about improving transmission from growth to shareholder returns. After years where market composition effects in EM indices (particularly in China) blunted EPS delivery, issuance pressure has eased and capital return discipline has improved, allowing revenue growth and margin recovery to show up more cleanly in earnings. Valuations still look meaningfully cheaper than DM in many markets, and the next leg doesn’t require heroic multiple expansion: if earnings growth reaccelerates as margins normalise and nominal growth stays decent, equities can compound from earnings plus dividends, with the added optionality of incremental rerating if global investors continue to rebuild underweights.
EM fixed income offers a complementary bull case because the starting point is still attractive. Many EM central banks are coming from high real policy rates and credible disinflation, leaving room for gradual easing through 2026—supportive for local duration while carry remains compelling. Positioning in local markets is still relatively light versus pre-2020 norms, so even modest flow improvement can matter, especially if FX is stable to firmer on a softer-dollar impulse. In hard-currency credit, spreads may be tighter than a year or two ago, but all-in yields can still compete well versus DM, and the post-pandemic default wave has largely washed through, keeping carry as the anchor and making selectivity (quality bias, idiosyncratic risk control) the right way to stay constructive.
