Fitch Ratings-London: A prolonged Iran conflict could affect multiple corporate sectors worldwide, primarily through higher hydrocarbon prices, supply-chain disruption, and indirectly through weaker demand due to falling consumer confidence and higher interest rates, as well as a delayed recovery from the cyclical troughs, Fitch Ratings says. However, revenue and margins in a few sectors are set to benefit from the disruption.
Fitch has analyzed a downside conflict scenario involving a three-month closure of the Strait of Hormuz, followed by a gradual reopening, with oil prices averaging USD100 per barrel in 2026, and some pressure on equity prices and spreads.
The Oil & Gas sector is the most immediately affected. Upstream and integrated producers across all regions could benefit from a prolonged period of higher hydrocarbon prices. For Gulf Cooperation Council (GCC) producers, volume constraints arising from limited transit alternatives following an effective closure of the Strait of Hormuz would offset this price benefit. We expect Asia-Pacific refiners to come under pressure due to their high reliance on Middle Eastern oil, resulting in greater supply-chain disruption and demand destruction. European refineries would pass on higher costs to customers.
The Chemicals sector would remain under strain due to high feedstock prices and further supply-chain disruption, exacerbated by demand destruction in several markets. The sector is currently in a downturn and is oversupplied, and the conflict is likely to delay its recovery. However, North American petrochemical producers rely primarily on domestically sourced natural gas and natural gas liquids, which provide a competitive advantage over European and Asian peers that mostly rely on oil-based naphtha.
Implications would be mixed across consumer goods sub-sectors. For agriculture and commodity processors, supply-chain disruptions could lead to more expensive and longer fertilizer supply logistics. Expectations of lower harvests could lead to further increases in soft commodity prices, which would be positive for producers. High fossil fuel prices create more demand for biofuels, supporting commodity processors that can shift capacity from food production to biofuels. However, more discretionary segments, including alcohol and certain consumer goods, could see reduced demand.
The airlines most under pressure are those with hubs in countries directly affected by aviation disruption, such as Qatar and the UAE, or those with limited or no fuel hedging in place, such as North American airlines. Sustained higher fuel prices would affect the profitability of most carriers as existing hedges roll off, particularly if passenger demand is also affected by rising inflation.
Increased fuel costs could affect European cruise operators due to their unhedged energy positions. Disrupted tourism flows to the Middle East are likely to be redirected to other destinations in Europe, softening the impact. The increased cost of living, coupled with rising inflation, would affect mid-market and economy lodging, with limited implications for the high-end segment.
The global automotive sector would primarily experience indirect effects, including supply-chain disruptions and lower demand, while the positive long-term impact on electric vehicle demand remains unclear.
Electricity prices are likely to remain volatile due to higher title transfer facility prices as significant LNG flows from the Middle East, which accounts for about 20% of global supply, are unable to transit the Strait of Hormuz. Gas-fired plants often set the electricity price in various countries, and higher gas prices could provide a potential upside for renewable energy producers.
A longer period of hostilities may reduce the attractiveness of the GCC as a destination for residential housing investment, pressuring the credit profiles of some homebuilders in the region. This could often be mitigated by very solid liquidity positions and strong margins among rated issuers. The long-term nature of GCC REITs’ contracts with office and retail tenants mitigates the threat to them.
We rate most government-related entities in the GCC on a top-down basis, reflecting the strong likelihood that the respective governments, particularly among higher-rated states, will support their key operating companies.
