S&P upgrades Israel’s credit rating outlook after Gaza ceasefire

Global credit rating agency Standard & Poor’s upgrades Israel’s credit rating outlook to stable from negative, citing prospects of “military de-escalation” in Gaza and the wider region following the US-brokered ceasefire agreement with the Hamas terror group.

The rating agency says that the stable outlook reflects the “assumption that the scale of direct military confrontation will remain contained, even if tensions between Hamas and Israel persist and the broader regional security environment remains fragile.”

“This could soften pressure on Israel’s economy, labor market and public finances,” says S&P analyst Karen Vartapetov. “The path to a lasting peace agreement will remain long, however.”

S&P, which downgraded Israel’s credit rating twice last year, kept the country’s A/A-1 credit rating in place. Following the outbreak of war with Hamas, the rating agency in October 2023 lowered Israel’s credit outlook from stable to negative. A negative outlook puts a country at risk of credit rating downgrades. A lower rating raises credit costs for the government, businesses and households.

S&P says it “could raise the ratings if Israel’s growth and fiscal outcomes proved much stronger than we currently project.”

“Rating upside could also stem from a significant and lasting reduction in regional geopolitical and security risks,” says Vartapetov.