Global credit: From energy price shocks to supply risk

The Middle East conflict is turning an energy-price shock into a broader, potentially non-linear credit event as supply shortages spread through global value chains.

• In May, the disruption removed around 10 mb/d of crude and oil products from the market—about five times the Russian supply loss—while roughly 20% of global LNG supply via Qatar was compromised; alternative pipelines cannot fully replace these volumes.
• Global oil inventories are at more than decade-low levels and floating storage was close to exhaustion, so even a reopening of the Strait of Hormuz could require two to three months to normalise; LNG markets may remain tight for around three years, until new US and Australian capacity arrives by 2029.
• The shock can spread from energy into food, fertilisers, petrochemicals, utilities, autos, metals and semiconductors: the FAO estimates that a 10% rise in energy prices can increase food prices by 3–6%, while Gulf exports of fertilisers represent more than 30% of global supply in the affected categories.
• Europe faces particular refined-product risk, with around 70% of its jet-fuel imports exposed, while Asian utilities are more vulnerable to LNG disruption; Korea is especially exposed because of its gas-heavy power mix, reliance on Qatari LNG and weak cost pass-through.
• Credit effects depend on balance-sheet strength and operational resilience: 2026 global light-vehicle production forecasts have already been cut by around 2.4%, and Qatar supplies roughly one third of global helium, although chipmakers typically hold several months of inventory and have diversified sourcing.

Takeaway: A broad defensive move in global credit is not yet warranted, but investors should favour issuers with strong balance sheets, resilient supply chains, pricing power, regulated networks or energy-transition exposure, while monitoring whether the disruption evolves from margin pressure into rationing, covenant stress and liquidity events.