S&P Global: Expanding Middle East conflict risk region’s credit ratings

S&P Global Ratings has warned of the potential impact of the current conflict in the Middle East on sovereign credit ratings in the region if it expands.

The agency said in a report that the conflict’s impact on sovereign credit metrics is limited so far, adding: “We continue to assume that there will be no direct, prolonged conflict.”

The agency continued: “We assess the current level of regional tension as moderate, but with the potential for elements of high tension to emerge, we now anticipate several possible paths through which the conflict could have a more substantial credit impact on the rest of the region.”

The agency stated that its sovereign ratings in the region already take into account the emergence of temporary geopolitical pressures, but it sees several transmission channels for these pressures – including volatile energy prices, security of trade routes, tourism revenues, remittances, and the potential for capital outflows – that could affect countries in the region in different ways.