The Iran war is increasing energy import costs, imposing supply chain disruptions, and making it harder to access capital markets. Ratings agencies are warning that some emerging markets (EMs) are particularly vulnerable to increased risks.
Since the start of the war, the net balance of positive outlooks to negative outlooks and watches has gone from +3 to -1 at Fitch Ratings, with seven countries now rated positive to eight either negative or on watch.
Before the war, 2026 saw three EM sovereigns upgraded and one downgraded at the agency. In the last few months, however, Qatar and Ras Al Khaimah have been placed on a negative watch. At the same time, Turkey and the Dominican Republic have gone from stable to positive outlooks, Indonesia (BBB) has gained a positive outlook and Rwanda’s B+ rating outlook has gone from negative to stable.
Mirroring this, S&P Global Ratings has highlighted the uneven impact that the war has had on EMs so far, noting that the main factor increasing risk is exposure to supply chains and net energy export sizes. It believes that Egypt, Turkey and Asian net energy importers are the most exposed.
The agency’s base case assumes that the war’s intensity will peak over the next few weeks, and the Strait of Hormuz’s closure will ease. However, the disruption caused by these events will reverberate for months.
In a potential downside scenario, S&P Global warned of tighter financial conditions, risk aversion, weaker US dollar exchange rates and increased borrowing costs for EMs, alongside reduced global demand for nonenergy-related EM exports and goods shortages.
Increased inflation as a result of the war is expected to provoke more hawkish stances from many EM central banks, the agency predicted, and potentially higher interest rates.
From a corporates perspective, downside ratings pressure is highest for Malaysia and Thailand-based firms, S&P Global observed. Energy-intensive sectors will see first-order stress, whole commodity-linked sectors would bear the second string.
“The war is likely to compound existing pressures for entities with weaker liquidity and balance sheets,” it added.
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