The ongoing military conflict between Israel and Iran has raised security and geopolitical risks across the Middle East, Fitch Ratings warned on June 17. The agency cautioned that if the violence escalates, it could negatively affect the credit profiles of several countries in the region.
Tensions have increased pressure on key sectors such as aviation, shipping, tourism, business, and banking. With both Tehran and Tel Aviv unwilling to back down from their aggressive positions, Fitch expects the conflict to stay limited to Israel and Iran and last only a few weeks. However, even in a contained scenario, the fallout is already being felt.
Brent crude oil prices have risen sharply, climbing from around $65 to approximately $75 per barrel. Fitch anticipates that the geopolitical risk premium will remain within a $5–$10 range per barrel. The agency noted that Israel has strong defense systems in place and that Iranian strikes so far have not had a significant economic effect.
Israel’s military actions have also weakened Iran’s ability to retaliate through regional proxies, particularly in Gaza and Lebanon. Although Iran produces about 3.3 million barrels of oil per day, Fitch believes that a total loss of Iranian exports could be offset by spare capacity from OPEC+ producers, which is estimated at 5.7 million barrels per day.
While several Gulf Cooperation Council (GCC) states have condemned Israel’s attacks, Fitch does not expect Iran to target GCC countries. The agency maintains that relations between Iran and GCC members remain stable. Additionally, strong credit buffers in countries like Saudi Arabia, the UAE, Qatar, and Kuwait could help them absorb any shocks resulting from increased security risks.
However, the situation could worsen if Houthi rebels in Yemen intensify their attacks in support of Iran. This could disrupt regional shipping routes, particularly through the Suez Canal, potentially reducing Egypt’s canal revenue.
Jordan’s tourism sector also faces renewed challenges, with European tourist numbers expected to decline due to the unrest, impacting economic growth and government revenue. While Fitch sees these risks as manageable for now, it warns that a broader regional conflict or disruption to shipping through the Strait of Hormuz could have serious long-term effects on Middle Eastern economies.
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