U.S. stocks show little reaction to Trump’s extraordinary Venezuela action. Why investors see a bull case

The stock market showed little reaction to President Donald Trump’s extraordinary action in Venezuela as investors bet the attack, as well as the capture of leader Nicolas Maduro, would not lead to a bigger geopolitical conflict.

S&P 500 futures and Nasdaq 100 futures were higher in premarket trading Monday, up 0.3% and 0.7%, respectively. The Dow Jones Industrial Average was last about flat.

Energy stocks helped lift the market, as traders expect the takeover of Venezuela, which has the world’s largest proven oil reserves, will benefit oil and gas companies. Chevron, which already has an established presence in the country, rallied more than 7%. Shares of Exxon Mobil climbed more than 4%.

Geopolitical shocks historically have little lasting impact on the stock market. And, what’s more, investors expect the attack will not escalate further given Trump’s prior criticisms of conflicts drawn out in Iran and Afghanistan. Additionally, any development of Venezuela’s oil infrastructure will be taken as a long-term story, with little immediate market impact.

“While volatility is expected as the Venezuelan headlines will dominate the landscape, the overall market seems relatively unfazed by events so far,” said Jay Woods, chief market strategist at Freedom Capital Markets. “A quick resolution with little escalation threat has calmed any investor jitters for now.”

The event has put other countries on high alert. One analyst noted Denmark is in “full crisis mode” after Trump set his sights on Greenland following the attack. Russia’s reaction to the ouster of Maduro has been cautious.

Still, others agreed the significant geopolitical event is unlikely to be a major market mover. Over the weekend, Evercore ISI’s Matthew Aks noted that Venezuela’s current oil exports are small and any efforts to develop the country’s infrastructure will play out over the longer term. He added that Trump’s threats should be taken more as a negotiating tactic.

“Trump’s statement about the U.S. running Venezuela is getting a lot of attention, but we do not expect any immediate large-scale U.S. military action,” Aks said. “Rather, we interpret it as a colorful metaphor and negotiating tactic intended to maintain pressure on the remnants of the Maduro regime to cede power voluntarily.”