Fitch warns Israel-Iran conflict may weigh on ME sovereign credit profiles

Fitch Ratings has warned that a broader escalation of the ongoing Iran-Israel conflict could weigh on sovereign credit profiles across the Middle East if the violence escalates or spreads. Meanwhile, Fitch expects the hostilities to be short-lived.

Brent crude prices have climbed to around $75 per barrel from $65, with Fitch estimating a geopolitical risk premium of $5–$10. A major disruption to Iranian oil exports, though unlikely, could be offset by about 5.7 million barrels per day in spare capacity from OPEC+ producers.

Despite condemning Israel’s actions, Gulf Cooperation Council (GCC) states are seen as unlikely targets for Iranian retaliation and benefit from robust credit buffers. However, potential Houthi escalations could disrupt shipping through the Suez Canal and affect regional economies such as Egypt and Jordan, which depend heavily on transit fees and tourism.

Fitch views more extreme scenarios—such as Iranian strikes on US-linked targets in the Gulf or disruptions at the Strait of Hormuz—as unlikely, though such events could lead to sustained oil price surges and greater credit risks across the region.

Attribution: Amwal Al Ghad English

Subediting: M. S. Salama