By Muhammad Mamman
Global credit agency Fitch Ratings has warned that a potential escalation of conflict between the United States and Iran could send shockwaves through emerging market economies, threatening growth, financial stability and energy supplies.
In a recent analysis, Fitch said heightened geopolitical tensions in the Middle East could trigger sharp rises in global oil prices, disrupt trade flows and increase financial volatility across developing economies that are already grappling with inflation and debt pressures.
The ratings agency noted that many emerging markets remain highly vulnerable to external shocks, particularly those dependent on imported energy. A surge in oil prices following a military confrontation or intensified sanctions could worsen inflation and strain government budgets in energy-importing nations.
“An escalation in hostilities involving Iran would likely push oil prices higher and tighten global financial conditions,” Fitch said, warning that such a scenario could weaken currencies, increase borrowing costs and reduce capital inflows into emerging economies.
Countries with large current-account deficits and high external debt could face the most severe impact. Higher energy costs could also widen trade imbalances and erode foreign reserves in several developing nations.
The warning comes amid renewed geopolitical tensions between Washington and Tehran over regional security issues and Iran’s nuclear programme. Any disruption to shipping routes in the Persian Gulf – a critical artery for global oil supply – could further amplify market instability.
Energy markets have historically reacted sharply to conflict in the region, with traders closely watching developments that might threaten supplies from one of the world’s most important oil-producing zones.
Fitch said prolonged instability could slow global economic growth and further complicate the policy decisions of central banks in emerging markets, many of which are still battling high inflation and fragile recoveries following recent global economic shocks.
Analysts say the situation highlights how geopolitical conflicts between major powers can quickly spill over into the financial systems and economic prospects of developing nations far beyond the immediate region of conflict.
