Fitch: On a potential US-Iran agreement, even if signed the medium-term outlook for the Gulf region remains uncertain
Fitch Ratings has indicated that while a potential US-Iran agreement could provide some short-term relief, the medium-term outlook for the Gulf region remains uncertain due to the deep economic and geopolitical scars left by the ongoing conflict. The agency has revised the global sovereigns sector outlook to "deteriorating," citing impact on trade, infrastructure, and regional stability.
The Strait of Hormuz, a critical global energy chokepoint, remains largely closed, with shipping throughput down by approximately 96% since March 2026. Even with a ceasefire, the return to normal operations is expected to be gradual, with crude tankers likely to recover first, followed by container and dry cargo shipments. This prolonged disruption has had a cascading effect on global supply chains and construction activity, with Fitch now forecasting global construction industry growth of 2.3% in 2026, down from a previous estimate of 2.7% [引用越界:6].
Iran’s economy is projected to contract by 7.2% in FY2026/27 under the "Extend to End" scenario, reflecting the compounding effects of sanctions, inflation, and infrastructure damage. While improved oil export earnings may help mitigate some losses, the post-war recovery is expected to be fragile, constrained by high inflation, political instability, and weakened regional trade ties.
In the Gulf, the conflict has prompted GCC states to bolster defense capabilities and diversify security partnerships. While the US remains a key security partner, Gulf countries may increasingly look to China and Russia for economic and strategic alternatives, particularly if US perceived as unable to manage the conflict effectively. This shift could complicate long-term US strategic interests in the region.
Fitch emphasizes that even if a diplomatic resolution is reached, the path to economic and political normalization will be protracted, with risks skewed to the downside due to potential for renewed escalation and the lingering effects of the conflict on regional dynamics.
