Financial markets have been thrust into a reactive state as trading resumes after the festive break, following a significant geopolitical development over the weekend. The trigger was a military strike ordered by former US President Donald Trump against Venezuela, which resulted in the capture of the country's president, Nicolás Maduro, and his wife, Cilia Flores.
Safe Havens in Demand as Political Shockwaves Hit
This unexpected political event has prompted an immediate flight to safety among investors. Gold, the classic safe-haven asset, jumped by more than 2% in early Monday trading, reaching $4,420 per ounce. This move brings the precious metal closer to the record highs it achieved at the end of the previous year. Silver, often following gold's lead, posted even stronger gains, rising around 4% to $75.50 per ounce.
Ipek Ozkardeskaya, a senior analyst at Swissquote, observed that while markets are "barely flinching" on the surface, a risk premium is subtly returning to asset prices. "Unsurprisingly, safe-haven assets — led by gold — are enjoying a positive ride this morning," Ozkardeskaya explained. She noted that gold, which had traded above $4,500 in late December before a sharp decline, has now reclaimed ground above the $4,400 level.
Defence Sector Stocks Soar Across Asia
The market reaction was not confined to precious metals. Shares in major defence contractors experienced a sharp rally, particularly in the Asia-Pacific region. In Tokyo, shares of defence contractor IHI surged by 9%, while industrial giant Mitsubishi Heavy Industries saw an 8.4% gain. The positive sentiment spread to South Korea, where shares of defence powerhouse Hanwha Aerospace climbed 7%.
This surge highlights how geopolitical tensions can swiftly translate into investor confidence in the arms and security industry. Despite the focus on these specific sectors, Ozkardeskaya pointed out that broader risk assets showed no particular sign of stress or lack of appetite, with most Asia-Pacific stock markets rising on the day.
Economic Data Awaited as Markets Assess Fallout
As the trading day progresses, investors will be scrutinising upcoming economic data for further direction. Key releases scheduled for Monday include the Bank of England's money and credit report and mortgage approvals data at 9.30am GMT. Later, attention will shift to the United States for the ISM survey of manufacturing at 4pm GMT.
The events in Venezuela have forced a rapid reassessment of risk so early in the new year, demonstrating how quickly international political actions can disrupt financial market stability and drive capital into traditional shelters and related industrial sectors.
