S&P: ME war top ratings risk driver

The escalating Middle East conflict, including disruptions near the Strait of Hormuz and to key suppliers like Qatar, remains a major driver of credit risk for Asia-Pacific corporates.

The S&P Global Ratings report “Corporate Top Trends Update 2026 Asia-Pacific: Energy Shock Will Test Credit Resilience” indicated higher oil and gas prices, supply-chain issues, elevated transport and insurance costs, and knock-on effects will hit refiners, petrochemicals, airlines, shipping, and utilities first, then spill into mining, logistics, transportation, retail, semiconductors and agriculture.

Structural vulnerabilities such as overcapacity in steel and chemicals and thin auto margins could amplify pressure.

In the Philippine context, the risks are real but materially mitigated in the short term, aligning closely with S&P’s assessment that the Philippines faces “limited risk” relative to regional peers.

The view stems from full fuel-cost pass-through mechanisms, diversified liquefied natural gas (LNG) sourcing, a coal-dominant power mix with switchable flexibility, readiness for government intervention, and corporate balance-sheet buffers.

Prolonged disruption beyond one month would test resilience more severely, but refinancing risk remains low, and most rated entities have cushions.

The Philippines imports about 98 percent of its crude oil from the Middle East, making it one of Asia’s most exposed nations to risks associated with the Hormuz chokepoint.

Asian refineries (Singapore, South Korea, China) that supply some 97 percent of refined products and 91 percent of LPG are themselves dependent on the Middle East, creating indirect spillovers.

LNG imports, which have been ramping up over the years, are not yet dominant but are sensitive to global price spikes.

Mostly insulated

S&P notes that peak heating season has passed and most Asia Pacific (APAC) countries (including the Philippines) can adjust their electricity mixes.

S&P’s verdict is that “The Philippines also sees limited risk due to full fuel cost passthrough and diversified LNG sourcing.”

Overall, Asia-Pacific utilities are “mostly insulated” against temporary shocks less than 1 month, thanks to reserves and buffers.

Sole domestic refiner Petron faces higher crude input costs. However, domestic pricing power and inventory builds allow pass-through to pump prices (with some lag).

Philippine carriers, Philippine Airlines and Cebu Pacific, have fuel-surcharge mechanisms, while shipping faces higher insurance and route premiums.

S&P said the key watchpoints are the duration of the Hormuz disruptions, the LNG price trajectory, the success of the coal ramp-up/RE acceleration, and any regulatory caps on power prices.

Government diversification efforts (alternative crude suppliers, new gas exploration) and corporate hedging or stockpiling further de-risk the near term.

In summary, corporates, especially utilities and refiners, enter this shock with stronger defenses than many regional peers, consistent with S&P’s regional 82 percent investment-grade cushion and low near-term refinancing risk.

Prolonged escalation remains the wildcard, according to the credit rater.