Moody’s maintained Iraq’s CAA1 credit rating, warning that escalation of the conflict between Israel and Hamas, as well as action by Iran and the US, might have serious consequences for Iraq if the war escalates.
According to the agency, the current battle between Israel and Hamas is mostly centered in Gaza. However, its regional escalation, which is a “scenario with little possibility of being achieved,” will have economic consequences for Iraq.
Any escalation in Gulf tensions, according to the agency, would threaten to impede marine trade routes via the Strait of Hormuz, on which Iraq relies for the majority of its oil exports.
It kept Iraq’s rating at “CAA1” with a stable outlook, saying that the grade reflects the country’s financial and external dependence on hydrocarbons, which exposes it to oil price swings and the dangers of transitioning away from carbon.
However, the agency claims that even if this scenario plays out, Iraq’s minimal reliance on external funding and the buffer offered by the rebound in foreign exchange reserves highlight a number of mitigating factors.
Iraq, which is wealthy in oil, is suffering from infrastructure and road deterioration as a result of decades of conflicts and the growth of corruption.
Iraqi Prime Minister Muhammad Shiaa Al-Sudani admits that one of his government’s top goals is to repair the country’s aging transportation and road infrastructure, as well as the country’s ailing power sector.