Venezuela, Iran and the Geopolitical Impact on Oil Prices
Author: Pulkit Sabharwal
January 15, 2026
If there was any doubt that geopolitics would continue to play an outsized role in financial markets this year, mass government protests in Iran and the United States’ shocking capture and deposition of Venezuela’s President Nicolás Maduro earlier this month have put paid to that. Yet, for all the investor angst and increased volatility these events have caused, trying to ascertain their potential impact on oil prices going forward seems murky at best.
Indeed, prices for West Texas Intermediate (WTI) have fallen only modestly in recent days, partly owing to the uncertain power dynamic left in the wake of Maduro’s ouster. While Venezuela’s interim leader, Delcy Rodríguez, is a Maduro loyalist, the U.S. administration continues to say it will “oversee” the country and control its oil revenues indefinitely. This includes a plan to sell up to 50 million barrels of Venezuelan oil that had been stuck in the country under U.S. blockade. But the bigger and more arduous task of fully monetizing Venezuela’s oil reserves—which are the world’s largest, estimated at 300 million barrels—could take many years, owing to crumbling infrastructure that needs to be fully restored following decades of underinvestment and mismanagement.
In the short term, then, even with U.S. oversight, Venezuela may be incapable of producing more oil than the current output of roughly 800,000 barrels a day. And if that’s the case, it’s very unlikely that oil prices will be dramatically affected—at least for now. Longer-term, however, the potential resurrection of Venezuela’s oil industry could be a net negative for prices, all else being equal, especially if it results in significantly more production, perhaps even as much as three million barrels per day, which is near what the country pumped out on average during its heyday in the 1990s.
Granted, such an outcome isn’t without nuance, particularly as it relates to investment opportunities. Given Venezuela produces heavy oil, for instance, any increase in supply could be particularly hard on heavy oil price differentials and, by extension, impact global heavy oil producers, including those operating in Canada’s oilsands. Moreover, while many U.S. oil companies may seem poised to benefit from the U.S. administration’s “control” of Venezuela’s oil revenues, there has been no firm commitment among the biggest U.S. oil firms to invest the money needed to bring the country’s stagnant oil output back to life.
Of course, Venezuela is not the only geopolitical hotspot that investors in oil need to consider these days. Recent protests in Iran, the magnitude and scale of which have caught global attention, only add to the uncertainty. Unlike Venezuela, Iran’s oil industry has seen a resurgence over the past five years, with output now at greater than three million barrels per day. Roughly half these barrels are exported, which means a disruption would present a significant upside risk to prices given the magnitude of supply in question and the low amount of spare capacity available around the world, including Organization of the Petroleum Exporting Countries (OPEC).
Ultimately, investors can expect more volatility because of the current geopolitical climate, but few clear-cut answers as to how oil markets will be influenced by it longer-term. As President Donald Trump said of how long the United States will oversee Venezuela, “only time will tell” when more clarity on that front is granted.
The views expressed in this blog are those of the author and do not necessarily represent the opinions of AGF, its subsidiaries or any of its affiliated companies, funds, or investment strategies.
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