This report does not constitute a rating action. S&P Global Ratings'base case assumes disruption related to the Middle East war will continue through 2027, with periods of escalation and negotiation presenting significant uncertainty. For credit, the key variables are the duration, intensity and breadth of escalation, the persistence of its effects, and the efficacy of mitigation. These will determine the impact on corporates’ operating performance and liquidity, banks’ funding and asset quality, sovereign fiscal and external buffers, and wider economic activity. In our view, conflict escalation risk remains elevated given the wide differences between the positions of the key parties. Attacks on tankers around the Strait of Hormuz and Houthi strikes on Saudi Arabia underscore continued regional hostilities. Diplomacy
