Fitch downgrades 2026 global outlook to ‘deteriorating’

June 11, 2026 (MLN): Fitch Ratings has revised its 2026 global sovereign sector outlook to 'deteriorating' from 'neutral', citing the impact of the US-Iran war.

The agency said the conflict is expected to weaken global GDP growth, increase inflation and bond yields, and heighten geopolitical risks, although recent global economic resilience and stable financing conditions are partially offsetting pressures.

Fitch also changed five regional outlooks to 'deteriorating' to reflect spillover effects from the conflict. Greater China was the only region upgraded, moving to 'neutral' from 'deteriorating', supported by strong export performance and easing deflationary pressures.

The agency noted that crude oil inventories, domestic refining capacity, and diversified energy sources further shield Greater China from the energy shock.

The outlook for Asia-Pacific remains 'deteriorating', with strong AI-related exports providing support, but high energy intensity and reliance on oil and gas imports through the Strait of Hormuz posing risks.

Sovereign outlooks for Sub-Saharan Africa, the Middle East and North Africa, Western Europe, and North America were also revised to 'deteriorating', while Latin America remained 'neutral' and Eastern Europe stayed 'deteriorating'.

Most Latin American sovereigns appear well positioned owing to favourable macroeconomic starting conditions, policy buffers, and in some cases terms-of-trade benefits.

Fitch noted that most Gulf Cooperation Council sovereigns remain supported by strong balance sheets and diversified export channels, though the agency warned that the impact on the security and business environment will be lasting.

Geopolitical risks remain elevated in Eastern Europe, compounded by the ongoing Ukraine war, Russian hybrid activity, and tensions between the US and other NATO members.

The agency also highlighted rising energy prices as a drag on developed markets, increasing inflationary pressures and weakening fiscal positions.

Given weaker starting positions, fiscal support in Western Europe is expected to be less than what was deployed in 2022-2023.

In North America, the One Big Beautiful Bill Act is projected to lower US tax revenues, widening this year's general government deficit to 7.9% of GDP.

Fitch noted that sector outlooks are distinct from Rating Outlooks, where the net positive balance has moved to zero from +4 before the war.

Upgrades have outnumbered downgrades year-to-date by nine to two, though a longer war or lasting damage to energy facilities or regional security could trigger more negative rating actions.

Fitch added that a rapid resolution of the US-Iran conflict could return the global sector outlook to 'neutral'.

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