Risk scenarios have widened substantially for global credit, Fitch says

The risk outlook for global credit has risen “substantially” since the start of the year, Fitch Ratings has said, with the US war on Iran posing a major risk to the ratings agency’s base-case forecasts and assumptions with a “clear adverse risk scenario involving a sustained global oil and gas supply shock”.

“Even if the conflict ends sustainably without re-escalating and the Strait of Hormuz fully reopens to traffic, the risk environment has already changed,” Fitch said.

“The war has raised Fitch’s 2026 base-case global oil and European gas price assumptions. Commodity prices and investments in the Gulf region could carry a long-term geopolitical risk premium, depending on the outcome of a diplomatic settlement.

“U.S.-European disagreements over the war could also undermine transatlantic relations and the stability of the NATO alliance.”

“Other significant risks to global credit beyond the war persist. Geopolitics heightened investor risk aversion in March, but other adverse catalysts could add pressure to funding and liquidity conditions. These include AI-related disruptions, higher sovereign bond yields, a stronger U.S. dollar and inflationary pressures driving shifts in rate expectations.”

Meanwhile, Fitch also said Sri Lanka’s ‘CCC+’ rating is constrained by elevated general government indebtedness and a high interest/revenue ratio even after the sovereign’s 2024 debt restructuring.

“Prolonged energy supply and price disruptions could pose downside risks to credit metrics, but the country is in a better position to manage pressures than in the 2022 energy shock,” Fitch said announcing its rating report update on Sri Lanka.