Moody’s says reviewing Israeli credit rating for possible downgrade due to war
Ratings agency warns ‘severity’ of the fighting sparked by deadly Hamas attack ‘raises the possibility of longer lasting and material credit impact’
WASHINGTON — The US ratings agency Moody’s has put the Israeli government’s A1 credit ratings on review for downgrade, citing the “unexpected and violent conflict between Israel and Hamas.”
The severity of the conflict, sparked by the deadly shock assault by Hamas on southern Israel on October 7, “raises the possibility of longer lasting and material credit impact,” Moody’s said in a statement Thursday.
Moody’s announced that it was putting a number of the Israeli government’s credit ratings on review for a downgrade, including its long-term foreign-currency and local-currency ratings, because of the war.
“Israel’s credit profile has proven resilient to terrorist attacks and military conflict in the past,” it said.
“However, the severity of the current military conflict raises the possibility of longer lasting and material credit impact,” it added.
The Hamas attack saw at least 1,500 terrorists burst across the border into Israel from the Gaza Strip by land, air and sea, killing some 1,400 people and seizing 200-250 hostages of all ages under the cover of a deluge of thousands of rockets fired at Israeli towns and cities. The vast majority of those killed as gunmen seized border communities were civilians — men, women, children and the elderly. Entire families were executed in their homes, and over 260 were slaughtered at an outdoor festival, many amid horrific acts of brutality by the terrorists, in what US President Joe Biden has highlighted as “the worst massacre of the Jewish people since the Holocaust.”
Israel responded to the attacks by unleashing a barrage of airstrikes on the Gaza Strip, which have killed at least 3,785 Palestinians, according to the Hamas-run health ministry. Israel says its offensive is aimed at destroying Hamas’s infrastructure, and has vowed to eliminate the entire terror group, which rules the Strip. It says it is targeting all areas where Hamas operates while seeking to minimize civilian casualties.
Moody’s statement Thursday came after Fitch Ratings announced on Tuesday that it was placing Israel’s A+ foreign- and local-currency issuer default ratings on “Ratings Watch Negative.”
In its announcement, Fitch cited “the heightened risk of a widening of Israel’s current conflict to include large-scale military confrontations with multiple actors, over a sustained period of time.”
“A prolonged conflict that durably and significantly impairs economic activity and policymaking would test that resilience,” said Moody’s. “Therefore, how this conflict affects credit risk across the public, financial and corporate sectors will depend on its scale and duration, which is far from clear at this time.”
“The conflict could have global macroeconomic consequences as well,” the report noted.
