S&P Global Ratings downgraded Israel's sovereign credit rating on Thursday, citing increased geopolitical risk stemming from the ongoing conflict with Hamas and tensions with Iran. The rating was lowered from AA- to A+ as a result of these factors.
In a statement, S&P analysts expressed concerns about the heightened confrontation with Iran, which has added to the already significant geopolitical risks facing Israel. While the analysts do not anticipate a broader regional conflict, they expect that the conflicts with Hamas and Hezbollah will persist throughout 2024, contrary to their previous assumption of shorter military engagements.
The outlook for Israel's credit rating is currently negative, indicating the possibility of further downgrades in the future. Credit ratings play a crucial role in guiding market perceptions of a borrower's creditworthiness. A lower credit rating typically results in lenders demanding higher interest rates in exchange for loans.
Despite the downgrade, Israel's credit rating remains within the investment-grade category, which signifies a relatively low risk of default. This distinction places Israel's creditworthiness above lower-rated securities commonly referred to as 'junk' ratings. The S&P rating adjustment underscores not only the financial implications but also the broader humanitarian impacts of the ongoing conflict.
