January 06, 2020 09:46 PM
Mubasher: A Moody's analyst warned that the escalation of geopolitical tensions between the United States and Iran will lead to a major economic and financial shock.
The killing of the Iranian, "Qassem Soleimani" in a US raid last Friday, has fueled tensions between the United States and Iran, as threats between the two sides continue.
"The permanent conflict between Washington and Tehran will have wide-ranging impacts through a broad economic and financial shock that negatively affects operating and financing conditions," Alexander Bergessi, chief credit officer of the credit rating agency, said in a note to clients on Monday. American C.
"The conflict, if prolonged, is likely to have global repercussions, particularly through its impact on oil prices," Bergessi added.
The analyst said that the effects of the ongoing tensions will affect the wider economy - not just the oil and banking sectors - as other sectors such as tourism in the Middle East, for example, will be affected.
He also indicated that the dimension on risk would be negative for issuers of debt securities, especially those with large external financing needs and relatively smaller or insufficient reserves.
Bergessi stated that higher oil prices for Middle East crude producers "could mitigate some of the negative effects on credit, as long as demand remains high and countries can continue to export."
Oil prices rose to their highest levels since last April, and Brent traded above $ 70 after the escalation of geopolitical tensions, but benchmark crude resumed its gains to reach $ 68.83 a barrel by 6:15 pm GMT.