According to Fitch Ratings, the global credit risk landscape has significantly worsened since the beginning of the year, primarily due to the ongoing conflict involving the United States and Iran. This situation poses a serious threat to the agency’s baseline projections and assumptions, particularly through a potential, prolonged disruption in global oil and gas supplies.
Fitch noted that even if the conflict concludes without further escalations and the Strait of Hormuz is reopened for navigation, the risk dynamics have already shifted. The agency has adjusted its projections for global oil and European gas prices for 2026 as a result of the war. Furthermore, it indicated that commodity prices and investments in the Gulf region may incur a long-term geopolitical risk premium, contingent on the results of any diplomatic resolutions.
Additionally, tensions between the U.S. and Europe regarding the conflict may negatively affect transatlantic relationships and the stability of NATO. Beyond the war, Fitch highlighted that other significant threats to global credit persist. Increased geopolitical tensions in March heightened investor risk aversion, but additional adverse factors could further strain funding and liquidity. These factors include disruptions linked to artificial intelligence, rising sovereign bond yields, a strengthening U.S. dollar, and inflationary pressures that could alter interest rate expectations.
In its assessment, Fitch also addressed Sri Lanka’s credit rating, currently pegged at ‘CCC+’, which is constrained by high levels of government debt and a substantial interest-to-revenue ratio, despite the planned debt restructuring for 2024. The agency warned that ongoing energy supply and price fluctuations could negatively impact credit metrics. However, it noted that Sri Lanka is better equipped to handle these challenges compared to the energy crisis of 2022.
Fitch emphasized that a consistent commitment to reforms is underpinning a strong economic recovery in Sri Lanka, characterized by low inflation, significant fiscal improvements, and enhanced external financial conditions.
