S&P Lowers Israel Credit Rating to 'A+'... Geopolitical Risk

International credit rating agency S&P Global Ratings downgraded Israel's long-term sovereign credit rating citing geopolitical risks.

Israeli Prime Minister Benjamin Netanyahu
[Photo by Reuters]

According to Bloomberg News and others on the 18th (local time), S&P lowered Israel's sovereign credit rating from AA- to A+ by one notch and maintained a 'negative' outlook. This is the first time S&P has downgraded Israel's credit rating. The A+ rating is at the same level as China and Bermuda.

S&P explained, "The recent escalation of clashes with Iran has heightened Israel's already elevated geopolitical risks," adding, "We have a negative outlook reflecting risks that could have a greater impact on Israel's economic, fiscal, and external balance variables than we had anticipated."

While not considering a broader Middle East escalation as the base scenario, S&P expects conflicts with Palestinian armed groups Hamas and Hezbollah to continue throughout this year. S&P 500 forecasted that Israel's fiscal deficit will expand to about 8% of its gross domestic product (GDP) this year due to increased defense spending.

This is not the first time Israel's credit rating has been downgraded by major credit rating agencies following the Israel-Hamas war. In February, Moody's downgraded Israel's credit rating from A1 to A2 by one notch.

The report stated, "After the war with Hamas, all three major international credit rating agencies have issued warnings on Israel's credit rating," adding, "Tensions are escalating in the region. Iran is preparing for Israel's retaliation." Earlier, Iran accused Israel of being behind the bombing of its consulate in Syria earlier this month and carried out a retaliatory attack on the 13th. In response, Israeli Prime Minister Benjamin Netanyahu has emphasized his determination to counterattack Iran despite Western discouragement.

Meanwhile, on the same day, the U.S. Treasury Department announced sanctions targeting Iran's drone manufacturing as well as its steel and automotive industries in response to attacks on Israel. On the same day, Hossein Amir-Abdollahian, Iran's Foreign Minister, who visited New York to attend the United Nations Security Council (UNSC), reiterated his claim that he informed the U.S. just before Israel's retaliatory airstrikes.