The Middle East conflict could lead to an energy-supply crunch that may derail activity in Asia-Pacific, says S&P Global Ratings in a new report.
The report, titled 'Asia-Pacific Sector Roundup Q2 2026: Energy-Supply Hit Is The Bigger Test', mentioned that spill overs could ripple across other sectors through higher inflation and weaker demand.
S&P Global Ratings Head of Credit Research Asia-Pacific Eunice Tan said that the Middle East conflict could rein in the positive momentum in the net rating outlook bias for rated Asia-Pacific issuers. "More credit stresses could mount as the energy-supply crunch deepens," she said.
The ratings agency said that net rating outlook bias for rated Asia-Pacific issuers had improved to -3% as of 20 March, 2026, from -4% at end-2025, with the gaming and chemicals sectors having the largest negative bias.
The report also mentioned that spill overs from the conflict are far-reaching. For example, margins can get squeezed by higher energy costs. Energy shortages could curb activity and drag growth sharply. All of this could lead to higher inflation and demand destruction for which governments may have to deploy stimulus to cushion economic and social fallout, delaying fiscal consolidation.
"A prolonged conflict could lead to more market volatility," said Ms Tan. "Tighter financing conditions could ensue. Refinancing could become challenging, especially for highly leveraged borrowers."
Meanwhile, tariff uncertainty persists. This, alongside the energy shock, will pose a dual hit for the region's manufacturers and economies.