Sri Lanka, June 19 -- Sri Lanka's fragile economic recovery faces renewed external headwinds after Fitch Ratings downgraded its outlook on a growing number of emerging market sectors, warning that the ongoing Iran conflict is weakening growth prospects, fuelling inflation and increasing financial risks across developing economies.

Sri Lanka has already been forced to absorb the fallout from the Middle East crisis through higher fuel costs, rising inflation, currency pressures and tighter monetary policy.

Fitch this month shifted more emerging market sector outlooks to "deteriorating", reflecting the broader impact of the conflict on economic activity and financial stability. For the island nation, the risks are far from theoretical.

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