Coface has downgraded Saudi Arabia, the United Arab Emirates (UAE) and Qatar amid escalating geopolitical tensions in the Middle East, which it estimates could reduce global economic growth by 0.5 percentage points in 2026 and 2027. In its country and sector risk assessment released on 13 October, the trade credit insurer also reported three country downgrades and four upgrades, alongside 20 changes to sector assessments, including 12 downgrades and eight upgrades. Coface forecast global economic growth of 2.5% in 2026, down from 2.8% in 2025, before a slight recovery to 2.6% in 2027.
The deterioration in geopolitical conditions has pushed up energy, metal and agricultural commodity prices, increasing inflationary pressures and tightening global financial conditions. Oil prices exceeded $100 per barrel in September, while oil and natural gas prices rose by more than 50% and almost 100%, respectively, according to Coface. Wheat prices also increased by 40% year on year following strikes on Black Sea port terminals and summer heatwaves in Europe. The Federal Reserve and European Central Bank each raised interest rates by 25 basis points, while long-term interest rates climbed by more than 100 basis points across most major currency areas since late February.
Coface downgraded Saudi Arabia from A3 to A4, the UAE from A2 to A3, and Qatar from A3 to A4, citing their exposure to disruptions in energy infrastructure and export routes, as well as their dependence on the Strait of Hormuz. The insurer also downgraded the agri-food sector in six countries: France, Austria, Poland, the UAE, Saudi Arabia and Argentina. Extreme summer weather contributed to the European downgrades, while reliance on food imports drove concerns in the Gulf countries. Argentina's agricultural sector continued to face financial difficulties, business failures, elevated costs and tighter margins.
Despite mounting risks, the global economy has remained resilient, supported by household consumption and artificial intelligence-related investment in the US, as well as better-than-expected performance in Germany and Spain. In Asia, Vietnam and India are expected to benefit from infrastructure spending and AI-related technologies, while weaker domestic demand weighs on China and higher energy costs pressure Thailand and the Philippines. "The prolonged conflict in the Middle East is reviving the risk of another global inflation shock," said Coface Chief Economist Jean-Christophe Caffet, warning that higher energy, commodity and transport costs are forcing central banks to maintain restrictive monetary policies and creating a more challenging environment for vulnerable governments and businesses.