Bond issuance volumes were solid in 1Q26 before the start of the Middle East conflict, though subsequent credit index widening slowed momentum, according to Debtwire data and several research reports.

The escalation of the conflict in the Middle East sparked a widening in credit spreads in early-March, with commodity prices surging higher and investors aiming to assess how supply chains could be impacted.

European shipping and energy sector credits could gain from respective higher freight rate rises and rising oil prices, though chemicals credits faced risks.

The price of Brent crude oil was indicated around USD 108 per barrel as of 2 April, after being as high as USD 119 per barrel on 9 March. Oil prices had initially risen from around the USD low-70s per barrel on 27 February following the outbreak of conflict in the Middle East and supply disruption risks.

Surging oil prices have led to concerns for the global economy, with high inflation risks likely to lead to higher interest rates and slower GDP growth.

Additionally, there was also pressure in 1Q26 in the high yield software sector, with names selling off on fears over the impact of AI. BofA analyst Tal Liani in a March research report noted that agentic AI will fundamentally rewrite cloud economics, with autonomous workflows generating 10 to 1000 times more tokens than a standard chart query.

The difficult macroeconomic backdrop meant that credit spreads widened significantly over the quarter. The iTraxx Crossover was indicated on 2 April at 326bps-mid, wider versus 244bps on 31 December 2025. The CDX-NAHY index was also marked on 2 April at 373bps-mid, compared to 316bps-mid as of the end of December.

JPMorgan euro high yield index total returns are 1.12% down year-to-date, while the US high yield index is up 0.01% as of 2 April, according to JPMorgan data. Euro high yield indices have a 6.66% yield to worst, with US high yield indices a 7.45% yield to worst.

The macroeconomic volatility still offers investment opportunities, according to a BNP Paribas April credit outlook. The research note stated that four weeks of conflict in the Middle East has still left US IG spreads unchanged with much less duration risk in the market versus 2022 following the outbreak of Russia’s full-scale invasion of Ukraine, with policy conditions starting from a better mid-cycle position. Geopolitical risks still leave tail-risks, but credit has shock absorbers and high yields present an opportunity for investment grade buyers.