A US-based credit rating agency, S&P Global Ratings, has warned that escalating tensions between Pakistan and India have increased credit risks in the region.

In a statement released on Thursday, the agency said it expects any military engagement between the two nations to remain limited in scope.

However, it cautioned that any misjudgment could severely impact the credit outlook for both countries.

The warning comes amid rising hostilities following an attack in Indian Illegally Occupied Jammu and Kashmir (IIOJK) that killed 26 people. India blamed Pakistan for the incident, an allegation Islamabad strongly denied, calling for an independent investigation.

Tensions further escalated when, in the early hours of Wednesday, Pakistan’s military shot down five Indian Air Force jets—including three Rafale fighters—in response to missile attacks by India.

According to Director General of Inter-Services Public Relations (DG ISPR) Lt Gen Ahmed Sharif Chaudhry, at least 31 Pakistanis were killed and dozens injured as Indian missiles struck six locations inside Pakistan.

He stated that the Pakistan Army had shot down 12 Indian drones at various locations within the country.

Despite the heightened conflict, S&P Global does not expect any immediate impact on the credit ratings of either country.

The agency believes tensions will likely stay elevated in the coming weeks, with the possibility of further military actions. However, it expects a subsequent de-escalation to prevent any long-term damage to the sovereign credit profiles.

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