S&P downgrades Israel’s credit rating due to increased geopolitical risk

Credit rating agency S&P Global on Thursday downgraded Israel’s long-term credit ratings from AA-minus to A-plus, after increasing confrontation with Iran over the weekend and amid already heightened geopolitical risks for Israel.

“We forecast that Israel’s government deficit will reach 8% of GDP in 2024, mainly due to higher defense spending,” S&P Global said in its statement.

The negative outlook reflects the risk that the war between Israel and Hamas and the confrontation with Hezbollah could escalate or impact the Israeli economy more than the agency currently expects.

“We currently see several potential military escalation risks, including a more substantial, direct and sustained military confrontation with Iran,” the statement said.

On Saturday, Iran’s Islamic Revolutionary Guards Corps said it had launched dozens of drones and missiles at Israel, an attack that could trigger a major escalation between the regional arch-enemies, with the US vowing to support Israel.

Earlier this month, Fitch removed Israel from “rating watch negative” and maintained its A-plus rating, but cited Israel’s war against Hamas in Gaza as a risk.

In February, Moody’s downgraded the country’s war risk rating. Israeli Finance Minister Bezalel Smotrich said this decision was not based on sound economic reasoning and amounted to a pessimistic “manifesto.” — Reuters