Tensions between the US and Iran may have a ripple effect on developing nations' economies, according to Fitch.

On March 6, 2026, the southern Lebanese city of Tyre was targeted by an Israeli airstrike, marking a new escalation in the Middle East war that has rapidly spread throughout the region and beyond.

Fresh strikes also hit Iran and Lebanon on the same day, as Israel vowed to take its military campaign to the next level.

A report by global credit rating agency Fitch warned that merging market economies could face significant economic and financial challenges due to the ongoing conflict involving Iran.

The report, titled “Iran conflict raises new credit risks for emerging market sovereigns”, highlighted the potential consequences of sustained disruptions to energy supplies from the Gulf for countries that rely heavily on imports.

Fitch noted that remittances, exchange rates, and investor sentiment in affected emerging markets could come under pressure as a result of the conflict.

The agency stated that “More sustained disruption to energy flows than currently assumed in our baseline scenario could significantly damage global investor sentiment”, which could amplify fiscal pressures and balance-of-payment challenges for vulnerable governments.

If energy costs were to rise sharply or capital flows became volatile, the sovereign credit profiles of emerging markets might be affected, potentially increasing borrowing costs and straining public finances, according to Fitch.

Fitch’s warning highlights the interconnected nature of geopolitical risks and emerging market stability, emphasizing the sensitivity of these economies to external shocks in critical sectors such as energy.

The report predicted that a stronger US dollar and a weaker market for debt issuance, particularly for highly speculative-grade issuers, could result from the conflict.

Fitch also noted that “Higher energy prices could put upward pressure on inflation, affecting monetary policy decisions globally”, which could have far-reaching consequences for emerging markets.

According to Fitch, oil and gas imports are the most direct channel for contagion from the conflict, given their impact on global energy prices.

For larger economies, such as India, net fossil fuel imports are equivalent to 3 per cent or more of GDP, making them highly vulnerable to energy price shocks.

Fitch Ratings stated that “The Iran conflict could raise additional challenges for some emerging market sovereigns, through such channels as energy imports, remittances, fiscal subsidies, exchange rates, and access to international finance”.