ING Groep NV has issued a stark warning about escalating funding costs for businesses, citing two critical pressures: the concentrated risks of private credit markets and geopolitical instability from the Iran war. The Dutch bank highlighted that private credit’s heavy focus on the software sector—a segment vulnerable to economic volatility—has intensified financing challenges. Meanwhile, renewed inflationary pressures from the conflict in the Middle East are forcing lenders to demand higher returns, creating a perfect storm for borrowers.

The bank’s analysis underscores how private credit’s reliance on high-risk, high-reward investments has left companies exposed. With interest rates already near historic highs, the Iran war has added a geopolitical layer of uncertainty, prompting lenders to reassess risk profiles. This dynamic could disproportionately impact tech firms, which dominate private credit portfolios, potentially triggering a liquidity crunch.

ING’s report also notes that deal values in private credit markets have surged, reflecting both demand for alternative financing and the sector’s growing instability. Business leaders are now grappling with tighter credit conditions, forcing them to either absorb higher costs or scale back expansion plans. The bank warned that delays in addressing these issues could ripple through broader financial systems.

Market implications are mounting as investors weigh the sustainability of current funding models. Analysts suggest the Iran war’s lingering effects on oil prices and global trade may prolong inflation, further complicating monetary policy. For now, companies must navigate a precarious balance between securing capital and managing escalating expenses in an increasingly volatile economic environment.