Lula was expected to run for president again in 2018 before being imprisoned, and was still featured heavily in ads for the campaign of the candidate of his Workers' Party, Fernando Haddad, who lost to Bolsonaro.
Lula was favourite to win last year's presidential election but was imprisoned after being implicated in a major corruption scandal. His 2017 conviction presently bars him from running for political office.
Brazil's currency and benchmark Bovespa stock index fell almost 2 per cent on Friday, deepening losses in late afternoon trading after the judge's ruling to release the former president. He was the founder of the Workers Party (PT).
"The thing that makes Lula most risky to Bolsonaro is that Lula understands the long game", said James Bosworth, founder of Hxagon, a political risk analysis firm, stressing that the politician had run four times before being first elected in 2003.
"The big question for markets is whether he can run in 2020, and that is very unlikely", D'Aragao said.
Lula will spend his first day of freedom visiting the metalworkers' union he once led near Sao Paulo, Brazil's biggest city. While he can otherwise engage in politics, his release from prison is pending appeals that may continue winding through the courts for years.
Supporters of jailed former President Luiz Inacio Lula da Silva, celebrate a Supreme Court decision that may free Da Silva, outside Brazil's Supreme Court, in Brasilia, Brazil, Thursday, Nov. 7, 2019. He maintains that he was framed by his political opponents.
The former president has said that when free, he would travel around Brazil rallying opposition.
A Brazilian judge ordered his release early Friday after the Supreme Court ruled that a person can be imprisoned only after all appeals to higher courts have been exhausted.
Da Silva denies any wrongdoing and has said the case against him was politically motivated.
"Lula is not electable, but that is not needed for him to take centre stage", said political analyst Alberto Almeida. The nation's Supreme Court docket resolved by six votes to five on Thursday that a particular person can exclusively be jailed in spite of everything appeals to superior courts have been exhausted. On Thursday, the top court voted 6-5 that the precedent was in fact unconstitutional.
The ex-president was serving his sentence in the Federal Police headquarters in Curitiba.
Moro, who was the Car Wash trial's judge who sentenced Lula before being appointed justice minister by President Jair Bolsonaro's government, warned before the court's decision that overturning the rule would be a big setback for the fight against corruption.
In Brazil, a case can be appealed three times - to the local court, the Superior Court of Justice (STJ) and the STF.