ING Groep (ING) said companies face the risk of significantly higher funding costs as stress builds in the private credit market, driven by heavy exposure to the software sector and renewed inflation pressure linked to the Iran war.

ING strategists said redemption pressure in private credit funds is likely to persist, slowing new lending.

They warned that this could spill over into broader markets, triggering repricing in leveraged loans, high-yield, and investment-grade debt, the company said.

Funding costs for some riskier borrowers have already risen by as much as 400 basis points, it added.