How the Israel-Iran conflict impacts LatAm and other US policy news - 16 June 2025

Ongoing conflicts in less important regions of the world are once again impacting Latin America.

I write about US policy in Latin America every Monday. In today’s newsletter:

1. Israel, Iran, and Latin America (no paywall)

2. Mexico at the G7

3. Sargeant and Venezuela

4. The Citgo auction update

5. Bukele crackdown and investigation

6. Nicaragua travel warning

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Comments on how the Middle East conflict impacts Latin America and US policy in the region:

• Middle East tension almost always draws US attention away from the Western Hemisphere. That loss of attention will be the primary impact on Latin America of Israel’s offensive to take out Iran’s nuclear capabilities and military leadership. When Donald Trump attends the G7 meeting in Canada this week, the Iran question will hang over his meetings in a way that moves the agenda away from other issues, such as his bilateral conversations with Mexican President Claudia Sheinbaum.

• The sudden bump in oil prices caused by this conflict benefits oil producers. It reduces the effectiveness of recent US sanctions on Venezuela, including the removal of the Chevron license. The oil price bump also benefits Brazil, Guyana, Colombia, and Ecuador. If oil prices remain high, it could impact inflation and government budgets across the region, with Central America and the Caribbean facing particularly difficult economic impacts amid an already tough macro environment.

• If Israel takes Iranian oil off the market, it potentially frees up the dark fleet tankers to ship more Venezuelan oil and increases the potential buyers for sanctioned Venezuelan oil. However, Maduro had been in negotiations with Iran for other deals, and these attacks will limit Iran’s ability to cooperate with Venezuela and help it evade sanctions as it did in the past. So it’s a net wash for Venezuela.

• In past moments of Israel-Iran tensions, there was always a possibility of attacks on targets in Latin America, with the Hezbollah bombings in 1992 and 94 on everyone’s list of concerns. Early indicators suggest that threat is less likely in 2025 than in previous years. Iranian proxies appear weak, and Hezbollah is largely sitting out.

• Recent conflicts will have a second order effect on military hardware procurement in Latin America. Iran failed to upgrade its fighter jets and anti-aircraft systems in recent years despite considering several options made in China. Meanwhile, Pakistan’s military hardware from China performed quite well in its brief skirmish with India. See this Twitter commentary for more details.

• China is eager to sell more military capabilities in Latin America. These recent conflicts will have militaries concerned about readiness and open to buying systems that are relatively cheap (compared to their US and European counterparts), available, and now proven in battle. Add concerns about sanctions to this list of reasons countries may opt for Chinese military equipment. The US and Europe will withhold platforms and parts for repair if they view governments as misusing them, abusing human rights, or simply wanting to sanction governments for other political reasons. There is no way a Petro government wants its military to purchase US military equipment if it could be sanctioned in the future. While Chinese purchases will come with their own pressures, those aren’t visible right now for the region’s militaries.

Trump and Sheinbaum are set to meet in Canada this week on the sidelines of the G7 meeting.