Moody’s downgrades Israel credit rating on high ‘geopolitical risk’

Smoke billows from the site of an Israeli airstrike that targeted a neighborhood in Beirut’s southern suburb early on Saturday, September 28, 2024. – The Israeli army said on September 28 that it killed the commander of Hezbollah’s missile unit in southern Lebanon in an air strike, along with his deputy and several other leaders of the Iran-backed movement. Israeli fighter jets killed “Muhammad Ali Ismail, the commander of Hezbollah’s missile unit in southern Lebanon, and his deputy,” the military said in a statement on Telegram that added, “other Hezbollah commanders and terrorists were eliminated.” – Moody’s downgraded Israel’s credit rating Friday, September r27, citing heightened geopolitical risks as its conflict with Hezbollah worsened and prospects for a ceasefire in Gaza receded. (Photo by Fadel ITANI / Agence France-Presse)

WASHINGTON, United States — Ratings agency Moody’s downgraded Israel’s credit rating Friday, citing heightened geopolitical risks as its conflict with Hezbollah worsened and prospects for a ceasefire in Gaza receded.

“The key driver for the downgrade is our view that geopolitical risk has intensified significantly further, to very high levels,” said Moody’s in a statement.

This came as it shifted Israel’s ratings down two notches from A2 to Baa1, marking its second downgrade this year.

Fitch and S&P Global Ratings have also lowered Israel’s ratings this year.

Moody’s noted that the risks had “material negative consequences for Israel’s creditworthiness in both the near and longer term.”

READ: Israel strikes Hezbollah bastion in Beirut

Israel shifted its focus from the war in Gaza to Lebanon this week, pounding Hezbollah strongholds around the country and killing hundreds of people.

A day after its Palestinian ally Hamas staged an unprecedented attack on Israel on October 7, Hezbollah started fighting Israeli troops along the Lebanon border.

“Longer term, we consider that Israel’s economy will be more durably weakened by the military conflict than expected earlier,” Moody’s said Friday.

READ: Moody’s affirms PH investment grade rating

It noted that the intensity of conflict between Israel and Hezbollah has “increased materially over recent weeks, with a further severe escalation a possibility.”

“At the same time, prospects for a ceasefire in Gaza have receded,” Moody’s added.

The agency also said “there is no visibility on an exit strategy from the military conflict that would restore a level of certainty and security, on which the economy and business investment ultimately rely.”