Israel’s Credit Rating Downgraded Amid Ongoing Conflict with Hamas

In a warning that its ongoing conflict with Hamas in Gaza could last “well into 2025” and weigh on economic activity, US credit rating agency Fitch has downgraded Israel’s credit rating from “A+” to “A”. The agency noted that the prolonged conflict could result in significant additional military spending, destruction of infrastructure, and more sustained damage to economic activity and investment, leading to a further deterioration of Israel’s credit metrics.

Israel’s public finances have already been hit, with the country projected to run a budget deficit this year, according to Fitch. The agency warned that the conflict continuing into next year would force Israel to continue its high spending on military and that there would be further disruption to tourism, construction, and production in border areas.

International mediators have invited Israel and Hamas to resume negotiations this week on a ceasefire and hostage release deal, which Israel has accepted. Hamas, however, has urged mediators to implement a truce plan earlier presented by US President Joe Biden instead of holding more talks.

The conflict has also led to a surge in tensions with Iran and its Lebanese ally Hezbollah, who have vowed revenge for the killing of Hamas’s political leader in Tehran and a Hezbollah commander in Beirut. The United States and European allies have called on Iran to “stand down” as fears mount of an imminent attack on Israel that could spark an all-out war in the Middle East.

The Gaza war began on October 7 with Hamas’s attack on southern Israel, resulting in the deaths of 1,198 people, mostly civilians, according to an AFP tally based on official Israeli figures. Militants also seized 251 people, with 111 still held captive in Gaza, including 39 the military says are dead.

Israel’s retaliatory military offensive in Gaza has killed at least 39,897 people, according to the territory’s health ministry, which does not provide a breakdown of civilian and militant deaths. The ongoing conflict has devastating consequences for the people of Gaza and Israel, and it remains to be seen whether a ceasefire can be reached to bring an end to the violence.