Asia-Pacific's major dependence on oil and gas from the Middle East makes it highly vulnerable to downside risks from the continued Iran conflict, Fitch Ratings said in a recent release.

Most sovereigns in the region could face a negative terms-of-trade shock due to the conflict, with effects possibly cascading to inflation, growth, and public finance, Fitch said.

The region's sovereigns, particularly those in South and Southeast Asia, could observe negative rating pressure under an adverse three-month conflict situation where oil prices increase, the rating agency said.

Under this scenario, oil prices could increase to an average of $128/bbl in the second quarter and $100/bbl for the year as a whole, Fitch said.

The impact on the sovereigns will depend on their fiscal and external bases and regulatory bodies' responses, according to Fitch.

Major net fossil-fuel importers, including India, Korea, Pakistan, the Philippines, the Maldives, and Thailand, would see harsh erosion in external balances and real incomes under continued energy price increases and shipping disruptions.

Increased hydrocarbon export receipts could offset the impact for net energy exporters such as Australia and Malaysia.

However, no sovereign credit profile in the region will have an overall gain, especially with broader inflation-growth trade-offs and associated policy pressures, Fitch said.