These countries are particularly vulnerable to rising oil prices and potential supply disruptions, it noted in a recent article.

The Iran war poses a greater risk to Bangladesh, Pakistan and Sri Lanka, and to a lesser extent Laos, due to their high dependence on imported energy and limited reserves, S&P Global Ratings said.
These countries are particularly vulnerable to rising oil prices and potential supply disruptions.
All four governments are likely to see significant credit metric deteriorations, if the conflict is prolonged.

In our base case scenario, the war is unlikely to have a material impact on our sovereign ratings on these countries, but a more prolonged price and supply shock in global energy markets could cause more pronounced credit damage.

Pakistan, Sri Lanka, and Bangladesh are showing signs of economic recovery. The three countries have made progress, but sustained high energy prices and potential disruptions to trade and remittances could derail their fragile economies.

S&P Global Ratings believes the higher-income Asia-Pacific (APAC) economies are better placed to weather temporary disruptions to oil and gas supply from the Middle East.

Even where they are highly dependent on imported energy, they generally have more significant oil reserves to meet the shortfall in imports. They also have financial resources to acquire available supply in the spot oil and gas markets to secure needed energy, the rating agency noted.

Lower-income economies in the region do not enjoy such flexibility. The sovereign ratings on some may face pressure if the supply disruption persists longer than our assumptions. Bangladesh, Laos, Pakistan and Sri Lanka are among this group. These economies have one thing in common: a high dependence on imported energy products.

The Middle East war is likely to have a more severe impact on these economies, due to their fuel import bills, and generally weaker fiscal and external reserves to withstand supply shortages and high oil prices.

Among the four sovereigns, Laos is likely to fare better due to the dominance of hydropower in its energy mix.

Bangladesh, with government revenues at only around 9 per cent of gross domestic product, has fewer options to cap electricity and fuel prices through fiscal means.

All four governments are likely to see significant credit metric deteriorations, through inflation and currency channels, if the Middle East conflict is prolonged. However, the impact on the agency’s ratings on these sovereigns may be limited, as the generally low rating levels have already captured a significant share of the risks.

S&P Global Ratings’ base case for the Middle East war assumes that elevated hostilities will persist into early April, with the Strait of Hormuz facing material disruptions.

Fibre2Fashion News Desk (DS)

On July 27, 2025, in Turnberry, Scotland, US President Donald Trump and European Commission President Ursula von der Leyen reached a deal on tariff and trade issues, outlined in a joint statement published on August 25.

EU Parliament members have adopted their position on two proposals implementing the tariff aspects of the EU-US Turnberry trade deal.
The texts, if agreed with EU members, will eliminate most tariffs on US industrial goods and offer preferential market access for many US seafood and agricultural goods.
The members strengthened the proposed suspension clause, and introduced ‘sunrise’ and ‘sunset’ clauses.

The texts, if agreed with EU member states, will eliminate most tariffs on US industrial goods and provide preferential market access for a wide range of US seafood and agricultural goods, in line with the commitments made in summer 2025 between the EU and the United States.

The MEPs strengthened the proposed suspension clause, which would allow the tariff preferences with the US to be suspended under a number of conditions.

For instance, the Commission would be able to propose suspending all or some trade preferences if the US were to impose additional tariffs exceeding the agreed 15-per cent ceiling, or any new duties on EU goods, a release from the Parliament said.

The suspension clause could also be activated if the US undermines the objectives of the deal, discriminated against EU economic operators, threatened member states’ territorial integrity, foreign and defence policies, or engaged in economic coercion, it noted.

The MEPs have introduced a ‘sunrise clause’ that means the new tariffs would only become effective if the US respects its commitments. These conditions include the US lowering its tariffs on EU products with a steel and aluminium content below 50 per cent, to a tariff of maximum 15 per cent.

Furthermore, for EU products with a steel and aluminium content of above 50 per cent, unless the US reduces its tariffs to a maximum of 15 per cent, EU tariff preferences for US exports of steel, aluminium and their derivative products would cease to apply six months after the entry into application of the regulation.

The members also agreed on an expiry date for the main regulation on March 31, 2028. This could only be extended via a new legislative proposal, to be submitted following a thorough impact assessment of the effects of the regulation.

The European Commission would be tasked with monitoring the impact of the new rules and would be able to suspend the new tariffs temporarily, should US imports reach a level that could cause serious harm to EU industry.

Fibre2Fashion News Desk (DS)

The uncertainty has increased noticeably, with the ongoing conflict involving Iran weighing heavily on corporate confidence. The escalation has effectively stalled hopes of a near-term economic recovery, particularly as energy markets remain volatile, ifo said in a press release.

In the manufacturing sector, sentiment declined after showing improvement in recent months. The drop was driven largely by a significant deterioration in expectations, while firms also reported a less favourable view of their current business situation. Energy-intensive industries were particularly affected, underscoring the pressure from elevated input costs.

Germany’s business sentiment weakened in March, with the ifo business climate index falling to 86.4 from 88.4 amid rising uncertainty and the Iran conflict dampening recovery hopes.
Manufacturing saw a sharp drop in expectations, especially in energy-intensive sectors.
Trade sentiment also declined due to inflation concerns, although current conditions remained relatively stable across sectors.

The trade sector also registered a decline in sentiment, primarily due to a more pessimistic outlook. Concerns over rising inflation among German consumers have led to weaker expectations in both wholesale and retail segments, signalling subdued demand conditions ahead.

Despite the gloomier outlook, businesses in the trade sector reported a slightly improved assessment of their current situation. This suggests that while present activity remains relatively stable, confidence in future performance is deteriorating.

Fibre2Fashion News Desk (SG)