Iran conflict unlikely to significantly affect Saudi banks’ ratings: Fitch

The regional conflict following attacks by Israel and the United States on Iran is unlikely to have a significant impact on the credit ratings of Saudi banks, Fitch Ratings said.

In a report, the agency said the resilience of Saudi banks reflects their strong capital positions and liquidity buffers. However, the conflict could make it more difficult for entities in Gulf countries to issue debt in international capital markets, potentially increasing reliance on higher-cost domestic funding.

This could raise financing costs or lead to a slight slowdown in loan growth compared with Fitch’s previous expectations.

Fitch added that banking systems in the Gulf Cooperation Council (GCC) face only limited immediate credit risks from the conflict.

The agency noted that Gulf banks’ ratings largely depend on expectations of sovereign support. It believes Gulf sovereign ratings generally have sufficient buffers to withstand a short-term regional conflict that does not escalate significantly, supported by substantial assets that help offset potential short-term disruptions to oil and gas revenues.

However, Fitch warned that lasting damage to critical energy infrastructure or prolonged hostilities could pose risks to these ratings. The long-term trajectory and stability of the Iranian government, and its implications for regional security, remain uncertain and could have either negative or positive effects on sovereign ratings.

Fitch also said GCC banks generally maintain strong financial metrics, ample liquidity, and solid capital buffers, which should limit risks to their credit ratings if the conflict lasts less than a month, as the agency currently expects.

The agency added that geopolitical risks have long been a key factor in assessing the creditworthiness of bond issuers in the Gulf, including banks.

Despite the unprecedented scale and regional scope of the current attacks, Fitch said one of the main factors to watch is the strength of operating conditions—particularly growth in non-oil sectors and overall business confidence in the region—as these remain critical for banks’ credit profiles.