LONDON, March 12 - S&P Global said it would refrain from making immediate sovereign rating downgrades in response to the outbreak of war in the Middle East, even as its analysts warned on Thursday that rapidly rising oil and gas prices are pushing several already cash-strapped countries closer to distress.
In a webinar, the rating firm's senior sovereign analysts characterised the conflict - which has involved U.S. and Israeli strikes against Iran and Iranian strikes against Israel, U.S. bases and Gulf states - as having shifted from a low-risk to a moderate-risk scenario. They said that, for most Gulf economies, existing fiscal buffers remain sufficient to withstand the shock for some time, although they identified lower-rated Bahrain as the clear exception among those states.
The panel also noted potential pressures in Qatar's banking system if the conflict were to prompt significant deposit outflows, but stressed that there was currently no evidence of such strains. "Qatar's banking sector could also struggle if there were significant deposit outflows in reaction to the conflict, although there was no evidence of such strains at the moment," they said.
Roberto Sifon-Arevalo, S&P's head global sovereign analyst, emphasised a measured approach. "We don’t want to jump the gun and just say things are bad," he said, while warning that the longer the crisis persists, "the more difficult it is going to be."
The analysts pointed to Asia as the second-most exposed region because many Asian countries are major importers of Gulf oil and gas. They highlighted that India, Thailand and Indonesia have relatively lower reserves of oil, which could heighten vulnerability to energy price shocks. The region also includes already heavily indebted nations - Pakistan, Bangladesh and Sri Lanka - whose public finances would face added strain from rising energy costs.
"We are closely monitoring these (countries) to see how the credit stories evolve," Sifon-Arevalo added, underscoring the rating agency's focus on watching fiscal and financial indicators as the situation develops.
Context and near-term outlook
S&P's analysts left open the prospect that prolonged conflict and sustained energy price increases could eventually force more severe ratings actions, but for now the firm is avoiding immediate, blanket downgrades. Their assessment balances currently available fiscal buffers in many Gulf countries against the specific vulnerabilities of lower-rated states and exposed banking systems in the region and in Asia.