Central banks are increasingly warning that prolonged conflict in the Middle East could pose serious risks to global financial stability.

The Bank of Japan highlighted that rising energy costs and supply chain disruptions could lead to higher corporate defaults and increased financial stress across global markets.

While direct exposure to the region remains limited for many institutions, indirect risks are growing through connections with global credit markets and non-bank financial entities.

From a business perspective, rising costs and uncertainty are already impacting corporate profitability, particularly in energy-intensive industries.

The warning underscores how interconnected global financial systems have become, with regional conflicts capable of triggering worldwide economic consequences.

Looking ahead, policymakers are expected to closely monitor developments and potentially adjust monetary policies to mitigate risks.

Source : Reuters.