US Military action in Venezuela doesn’t move economic needle

The US attack on Venezuela over the weekend dramatically increases uncertainty about the future of its political regime, but the impacts for global oil prices and geopolitical tensions appear limited. Therefore, we won’t change our baseline forecast for the US economy.

• The risks to global oil prices from a near-term collapse in Venezuelan production due to the ongoing naval blockade and sanctions, or from a recovery in output amid US-led investments, are small.
• With the rise of domestic shale production, the implications of changes in oil prices for the US economy are more mixed than in the past.
• While the operation highlights the risk that all options are on the table in international disputes, we don’t think it changes the calculus much for China and its desire to integrate Taiwan into the mainland, which is the key geopolitical risk to the US economy.
• Geopolitical events can affect the US economy through three channels: financial market conditions, the banking system, and trade. But none of them pose a significant threat, considering recent developments.