S&P says, Middle East conflict fuels deep uncertainty in global markets and credit outlook
Crisis can accelerate long-term structural shifts, including greater focus on energy self-sufficiency, higher strategic reserves, and faster diversification into renewable and nuclear energy, while some countries may continue relying on coal as a transitional source -- S&P
War disruptions rattle emerging economies as energy, food prices face upward pressure; S&P warns of prolonged energy shock, inflation risks and strain on emerging market growth
The international credit rating agency S&P Global Ratings has warned that global markets are facing heightened uncertainty over the duration and scale of ongoing conflict in the Middle East, and its potential ripple effects on commodity prices, supply chains, economic performance, and credit conditions.
In its latest assessment, the agency said its baseline forecasts remain subject to significant uncertainty as developments continue to evolve. It noted that the impact of the conflict across emerging markets has so far been uneven, largely depending on each country’s exposure to Middle Eastern supply chains and its reliance on energy imports.
S&P explained that the initial supply shock is beginning to weaken previously supportive economic conditions and favorable financing environments seen in 2025. While its base case assumes the intensity of disruptions will peak, it expects lingering effects over several months due to port congestion, shipping insurance delays, and the time required to restore energy production.
The agency warned that a prolonged disruption could intensify the global energy shock, particularly affecting energy-importing emerging economies, where GDP growth could decline by 2 to 3 percent and inflation could rise by more than 5 percent in some cases.
It added that credit pressures are first emerging in energy-intensive sectors such as refining, petrochemicals, and aviation, before spreading to manufacturing, logistics, and agriculture.
In a more severe scenario, S&P cautioned that a sustained disruption to the Strait of Hormuz could trigger a broader global energy and financial crisis. The strait previously handled around 20 percent of global oil and gas flows, with more than 80 percent of those exports directed to Asia.
Under such conditions, Brent crude prices could average around $130 per barrel in 2026, after peaking near $200, before easing to about $100 in 2027. Global supply could contract by roughly 10 percent between May and December 2026.
S&P further noted that rising energy and food costs are expected to fuel inflation, erode real incomes, and weigh on growth through higher production costs, tighter monetary policy, rising debt burdens, and increased liquidity risks linked to capital outflows.
The agency also highlighted pressure on external balances, as higher energy import bills widen current account deficits, while governments may be forced to introduce subsidies or tax relief measures that could strain public finances.
Energy-importing countries are expected to be the most vulnerable, while exporters such as Malaysia and Brazil may be relatively less affected, though still exposed to indirect shocks.
S&P pointed out that energy and food account for more than 40 percent of consumer price baskets in several emerging markets, reinforcing the strong inflationary link between the two sectors due to agriculture’s dependence on energy inputs.
Looking ahead, the agency expects central banks in emerging markets to tighten monetary policy further by raising interest rates, particularly in economies facing currency pressure and capital outflows.
Finally, S&P said the crisis could accelerate long-term structural shifts, including greater focus on energy self-sufficiency, higher strategic reserves, and faster diversification into renewable and nuclear energy, while some countries may continue relying on coal as a transitional source.
