Moody’s credit agency has downgraded Israel’s credit rating from A1 to A2 for the first time, with a “negative” outlook, due to the instability caused by the war against Hamas and concerns about a potential larger conflict against the Hezbollah militias in Lebanon. This is the first time in history that Israel’s credit rating has been adjusted downward.
The ongoing military conflict with Hamas and its far-reaching consequences were cited as the reason for the change. There are also concerns about the “risk of escalation” with Hezbollah militias on the country’s northern border. Prime Minister Benjamin Netanyahu responded to the assessment from Moody’s by downplaying the negative credit rating and attributing the decline to the current state of war with Hamas. He emphasized that Israel’s economy is strong and that this decline is not connected to its economic strength.
This lowered credit rating could result in increased interest rates or a weakened national currency, which could have significant impacts on Israel’s economy. The conflict with Hamas and fears of a larger conflict with Hezbollah have contributed to this historic downgrade. Despite Netanyahu’s response, which conveyed confidence in Israel’s ability to emerge successful from these challenges, it remains uncertain how this will affect Israel’s long-term financial stability.