S&P lowers Israel's rating outlook to negative on war risks

S&P lowers Israel's rating outlook to negative on war risks
Amid growing concern that Israel's attack on Gaza could spark a wider regional conflict, Israel's credit outlook has been downgraded to negative.
2 min read
Israeli soldiers move into the border region with Lebanon, with many predicting that Hezbollah could open up a second front with Israel [Getty]

S&P Global Ratings said Tuesday it was lowering Israel's credit outlook from stable to negative, citing risks that the Israel's war on Gaza could broaden, with a more pronounced impact on the economy.

In a notice, the credit rating agency said: "The negative outlook reflects the risk that the Israel-Hamas war could spread more widely or affect Israel's credit metrics more negatively than we expect."

"We currently assume the conflict will remain centered in Gaza and last no more than three to six months," it added.

On October 7, Hamas launched a surprise attack on Israel from Gaza killing 1.400 people, following months of increasingly deadly Israeli raids in the occupied West Bank, as well as threats to the sovereignty of Al-Aqsa and within the wider context of the 17-year-long crippling Israel-imposed siege of Gaza.

More than 5,700 Palestinians, including over 2000 children, have been killed across the Gaza Strip in unprecedented Israeli bombardments, the territory's health ministry said.

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On Tuesday, S&P said it revised the outlook for its "AA-" long-term foreign and local currency ratings on Israel to negative.

S&P's decision comes less than a week after agency Moody's Investors Service put the Israeli government's A1 credit ratings on review for downgrade, pointing to the "unexpected and violent conflict between Israel and Hamas."

Fitch Ratings has also announced that it was placing Israel's A+ foreign- and local-currency issuer default ratings on negative watch over risks from the confli24.

This comes from security-related disruptions and reduced business activity, alongside the drafting of reservists and other factors like a confidence shock.

Added budgetary measures to help households and businesses, on top of a rise in defense spending, is also expected to raise the government deficit, said S&P.

Should the conflict widen "materially," S&P added that it could cut ratings on the country.