Asia credit to weather energy shock risks

Asian credit markets remain resilient despite the turmoil caused by the Middle East conflict, although risks tied to energy disruptions continue to cloud the outlook, according to JP Morgan.

In its second-quarter 2026 Asia Credit Outlook note, the bank said Asia credit markets had turned volatile after the Iran war disrupted what had been a strong start to the year.

The JP Morgan Asia Credit Index (JACI) posted a 0.5-percent loss in the first quarter as wider spreads and higher United States Treasury yields weighed on returns.

Since the conflict began in late February, the JACI had lost 1.8 percent in total return.

Still, Asia credit outperformed peers in the United States and other emerging markets, supported by stronger technical conditions and healthier starting fundamentals, the bank said.

JP Morgan warned that Asian economies remained highly vulnerable to energy supply disruptions because roughly half of the region’s crude imports and over one-third of gas imports pass through the Strait of Hormuz.

The bank said prolonged disruptions could trigger higher inflation, weaker currencies, pressure on trade balances and softer consumer spending across Asia.

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The more serious risk, however, would come from physical shortages that could force industrial shutdowns.

It noted that some countries were already showing signs of stress, including fuel rationing measures in India and a national emergency declaration in the Philippines.

For the Philippines, JP Morgan estimated that a $40-per-barrel increase in oil prices could raise inflation by 2 percentage points and shave 1.1 percentage points off economic growth.