### 📈 APAC Sovereigns Face Credit Risks Amid Prolonged Iran Conflict

Fitch Ratings warns of significant downside risks for Asia-Pacific sovereign credit profiles due to high reliance on imported energy and potential disruptions in the Strait of Hormuz. • Economic Impact: A shift to an adverse scenario—where oil averages USD 128/bbl in Q2 2026—would trigger negative terms-of-trade shocks, hurting growth and public finances across South and Southeast Asia. • Energy & Supply Chains: Beyond crude and LNG, disruptions threaten petrochemical feedstocks and fertilisers. Producers are already cutting operating rates, which could spike food prices and inflation. • Sector Vulnerabilities: Agriculture: Reduced fertiliser availability and high costs pose food security risks, particularly for frontier markets with limited fiscal buffers. Industrial/Manufacturing: Supply chain frictions are forcing some Asian petrochemical firms to declare force majeure. • Fiscal Strain: Median government debt/GDP is projected at 50% for 2026. Increased subsidies for fuel and electricity to dampen social tension would further delay fiscal consolidation. • Regional Exposure: Net importers like India and Pakistan face the sharpest deterioration in external balances. While Australia and Malaysia may see higher export receipts, the overall credit impact remains negative due to broader inflation-growth trade-offs.