WASHINGTON — S&P Global Ratings said Tuesday it was lowering Israel’s credit outlook from stable to negative, citing risks that the Israel-Hamas conflict 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 terrorists stormed across the border from Gaza into Israel in a multipronged assault, killing at least 1,400 people, mostly civilians, and seizing at least 220 hostages under the cover of massive rocket fire.
More than 5,700 Palestinians, also mostly civilians, have been killed across the Gaza Strip in strikes launched by Israel since the attack, the territory’s Hamas-run health ministry said. The figures put out by the terror group cannot be independently verified, and are believed to include its own terrorists and gunmen, killed in Israel and in Gaza, and the victims of a blast at a Gaza City hospital on October 17 caused by an Islamic Jihad missile misfire that Hamas has blamed on Israel.
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 conflict.
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.