DACS: Asian credit risks amid US-Iran conflict
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Group Research - Econs, Chang Wei Liang12 May 2026
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This week’s featured insight is our DBS Aggregate Credit Spread (DACS) analysis, tracking corporate credit performance and offshore funding costs across industries for China, Hong Kong, Korea, India, and Indonesia.

The US-Iran ceasefire has largely held, even if there are sporadic attacks in the Strait of Hormuz, and negotiations on a deal to end the conflict appear bogged down. Still, tail risks of a military escalation and further long-term damage to energy production appear contained, which has resulted in a fall in oil prices from its peak in April. An interim stabilization in the Middle East, alongside prospects of a restoration in shipping along the Strait of Hormuz, has helped to lift global market sentiment.

In Asian credit markets, the energy and utilities sectors have seen the strongest recovery since end March and have fully reversed early losses following the start of conflict. Both sectors have seen credit spreads narrowing by an average of 27bps and 16bps respectively from their peak. With lesser tensions in the Middle East, the currently tight energy supply picture is worrying, but not necessarily a grave threat. Oil prices are still about 30% below their 2008 peak, and more so in real terms after adjusting for inflation. Higher costs of energy feedstock are thus manageable, even if there are margin pressures from a lack of pass-through to consumers and end-users. The availability of US supplies has provided much relief for global energy markets, with US oil and refined product exports soaring to a record 14.2m bpd in end April, marking a 28% increase from their Jan-Feb levels.



Chang Wei Liang

FX & Credit Strategist
[email protected]

 
 


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