Most GCC sovereigns (with the exception of Bahrain and Oman) have large fiscal buffers, supporting their resilience in case of any geopolitical tensions in the region, Fitch Ratings said in a recent report.
The potential for a broader escalation of conflict in the Middle East has increased with the death of senior Iranian general Qassem Soleimani, but remains contained as the US and Iran do not seem to have an interest in a full-scale confrontation, Fitch Ratings said. Significant geopolitical risks are already factored into ratings for sovereigns in the region that are most likely to be affected, it added.
"Geopolitical risk already weighs on the ratings for several sovereigns in the Middle East and was a major contributor to Fitch's downgrade of Saudi Arabia's ratings to 'A' from 'A+' in September 2019," Fitch added in the report.
We believe that both the US and Iran will look to avoid a full-scale military confrontation. Such an outcome would carry a huge cost for Iran, given that its economy is already struggling and that the US has overwhelming military superiority, Fitch noted.
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