Credit risk considerations during times of geopolitical upheaval

Heightened geopolitical tensions in early 2026 triggered a material tail-risk event in global energy markets, with acute implications for GCC economies. Supply chain disruptions contributed to sharp oil price volatility, supply chain shocks, and tightened financial conditions. As central banks consider, banks face rising credit, market, and liquidity risks and sustained uncertainty and inflationary pressure.

The situation remains highly fluid, with ceasefire conditions fragile and intermittent hostilities continuing to affect critical energy transit routes.

Financial markets and banks may face pressure from heightened volatility, wider credit spreads, and a flight to safe assets. In the near term, institutions may face operational disruptions, cyber risks, and liquidity pressures, while medium-term risks may include persistent inflation, slower growth, and increased borrower stress, particularly in exposed sectors.

The analysis presented in this document is intended to illustrate potential macro-financial implications under evolving geopolitical conditions.

Key takeaways

• Elevated geopolitical uncertainty is contributing to higher credit risk, funding pressures, and market volatility
• Prolonged instability could pressure retail, corporate, and CRE portfolios through supply-chain disruption and asset devaluation
• Credit resilience increasingly depends on integrated scenario monitoring, liquidity preparedness, and operational resilience

Watch indicators

• Funding stability and liquidity pressures
• Borrower repayment stress and rising ECL costs
• Energy-price volatility, supply-chain disruption, and deterioration in collateral valuation

Immediate priorities

• Enhance scenario-based stress testing and portfolio monitoring
• Reassess IFRS 9 overlays and provisioning assumptions for vulnerable sectors
• Strengthen contingency funding and operational resilience planning

An integrated risk-management approach combining scenario analysis, credit modelling, liquidity risk management, and operational resilience testing can support long-term financial-sector resilience under sustained geopolitical uncertainty.