But after hearing Petroleos de Venezuela's arguments, the judge ruled against Exxon, the world's largest nongovernment-controlled oil company by market value.
Lawyers for PDVSA said Exxon had not applied for leave to appeal against the ruling and that the judge awarded legal costs against Exxon and ordered the Texas-based company to pay compensation for any damages caused by the imposition of the freezing order.
Exxon declined to comment on whether it would appeal the ruling, but said it had no impact on the company's claim for compensation for the seized assets in arbitration.
"We think that it's important the court did not question the merits of (Exxon's) underlying claim, but rather concluded that an English court should not issue a prejudgment worldwide freezing order," Exxon spokesman Alan Jeffers said.
Exxon was ordered to make an interim payment of $765,300 (380,000 pounds) to cover legal costs within 21 days, although the final bill is expected to be much higher.
PDVSA lawyer George Pollock said damages the state oil company could claim included increases in the cost of corporate borrowing for its projects.
But he said the judge's decision apparently ruled out the possibility of Venezuela claiming compensation for higher sovereign borrowing costs, which would cost Exxon dearly.
Venezuela's government bond prices rallied on Tuesday after the ruling, and its debt spreads tightened almost half a percentage point. That helped reverse the declines the debt had suffered after the freeze was put in place.
The Latin American nation plans to issue up to $2 billion of debt next month.
In Caracas, Venezuela oil minister Rafael Ramirez said the ruling was a "100 percent victory" for the South American nation.
The asset freeze put even more pressure on already strained relations between the United States and Venezuela.
After the freeze became public, Chavez threatened to cut off oil supplies to the United States, which helped to push oil prices up to record highs above $100.
Exxon also said the ruling in the UK would not affect court orders in other nations where it had frozen assets.
Last month, a U.S. court confirmed its order freezing $300 million in Venezuelan assets in a U.S. bank, and Exxon also secured $12 billion asset freezes in the Netherlands and Dutch Antilles.
Venezuela's Ambassador to Britain, Samuel Moncada, said these would be challenged.
"This is the beginning of the end of the harassment campaign Exxon instigated against Venezuela ... We are planning to fight all of the way," he told reporters in the High Court in London.
James Halloran, analyst with National City Private Client Group, which owns 9.6 million Exxon shares, said he expected the company to continue to pressure Venezuela aggressively on the issue.
"My guess is that Exxon isn't going to take this and simply say 'OK, we're going to sit down and come to a middle ground.' They're still going to play hardball," Halloran said.
Exxon has applied for arbitration over compensation for the loss of the heavy oil project and George Kahale, another lawyer for PDVSA, said he expected the arbitration tribunal to start in New York late this year or in 2009.
The judge did not make the reasons for his ruling public but will release a more detailed version of the ruling later on Tuesday and give the full reasons for his decision on Thursday.