Israel’s long-term credit rating is downgraded by S&P, who mentioned the risk of military escalation with Iran. It is the second major US rating agency to do so.
There was an apparent drone attack on a major air base and nuclear site near the central city of Isfahan early Friday, believed to be part of an Israeli retaliation for Tehran’s unprecedented drone-and-missile attack on the country days ago.
S&The P rating downgrade occurred shortly before the strike in Iran, and nearly three months after Moody’s, another major U.S. credit institution, downgraded Israel due to its “ongoing military conflict with Hamas.”
S&P Global Ratings downgraded its long-term foreign and local currency sovereign credit ratings for Israel to ‘A+’ from ‘AA-‘ and its short-term sovereign credit ratings to ‘A-1’ from ‘A-1+’.
The long-term downgrade means that Israel’s credit rating has shifted from “very strong ability to meet financial obligations” to “strong ability to meet financial obligations, but somewhat sensitive to adverse economic conditions and changes in the circumstances,” said S.&P.
“In our view, the recent increase in confrontation with Iran increases already heightened geopolitical risks for Israel,” the credit rating agency said. “We expect that a broader regional conflict will be avoided, but the war between Israel and Hamas and the confrontation with Hezbollah appear likely to continue into 2024 – contrary to our previous assumption that military activities would not last longer than six months.”
S&P’s view on Israel’s long-term ratings is negative.
S&P typically issues sovereign ratings on scheduled dates, but breaks this practice when circumstances warrant. S&P’s will reissue a rating assessment for the country on the date originally scheduled, May 10.
No Iranian officials directly acknowledged the possibility of Israel attacking, and the Israeli military did not respond to a request for comment. However, tensions have been high since Saturday’s attack on Israel, amid the war against Hamas in the Gaza Strip and its own attacks on Iran in Syria.