Conflict in the Red Sea is having an impact on Bermuda, despite being 6,000 miles away in the Middle East.

In the past three years, local retailers have seen the cost of shipping directly from Asia sky rocket as cargo ships take longer routes around Africa to avoid attacks and pirating in the Strait of Hormuz, partially in Iran and partly in Oman.

Last November, a Bermuda-registered chemical tanker was attacked by Somali pirates.

According to Fitch Ratings Agency experts, the situation in the region could worsen dramatically if nuclear negotiations this week between Iran and the United States fail or are mishandled.

Talks on Friday will largely focus on Iran’s nuclear programme. A build-up of American troops in the Middle East has raised fears of a confrontation.

Speaking in a Fitch webinar on emerging markets, Ramona Moubarak, Fitch head of Middle East and North Africa country risk and global banking said diplomatic paths remained uncertain.

Ms Moubarak said if talks failed, the US could launch large scale strikes on the country, while Iran attacks US bases and assets nearby. Conflict could spread to include Saudi Arabia, the United Arab Emirates, Kuwait, Bahrain, Qatar and Oman.

Houthis — Iran-aligned Shia Muslim militants from Yemen, stopped attacking shipping in the Strait of Hormuz after the Gaza peace plan went into effect last October, after three years of activity.

Ms Moubarak said if talks broke down between Iran and the US, the Houthis could resume disruption in a region that 20 per cent of traded global oil passes through.

“That would very likely have implications for oil flows,” Ms Moubarak said.

She said the scale of the economic shock would depend on the intensity and duration of the strikes, and crucially on Iran’s retaliation.

However, the economist said a prolonged conflict or larger regional spillover would be the least desirable outcome for the US.

“So the probability of this outcome is our least likely outcome and we will only reach there in case of miscalculation or missteps that could amplify the current dynamics,” she said.

The economist added that oil prices would remain under pressure for as long as tensions between the US and Iran persisted.

“We have already seen prices rise by about $10 per barrel and, importantly, this increase reflects just the risk premium rather than an actual disruption to supply,” she said. “Even with headlines about potential talks between the US and Iran, prices have not fully normalised. The situation is fluid and highly uncertain.”

During the webinar, Fitch experts also talked more generally about the state of emerging markets in the world.

Regis Chatellier, the head of EM strategy at Fitch, said emerging markets were very strong in 2025 with sovereign denominated bonds returning nearly 13 per cent last year.

Sovereign denominated bonds are debt securities issued by a national government to raise funds for public spending, such as infrastructure, debt repayment, or financial stability.

Mr Chatellier said this was reflective of supportive market conditions.

“We had 35 emerging markets and frontier markets that were upgraded by at least one major rating agency last year, versus only 14 downgrades,” he said. “So it’s a very strong acknowledgement of the fundamentals.”