Moody's downgrades Israel's credit rating due to Gaza war

The US ratings agency Moody's downgraded Israel's credit rating Friday due to the impact of its ongoing conflict with Hamas in Gaza, lowering it by one notch from A1 to A2.

In a statement, Moody's said it had done so after assessing that "the ongoing military conflict with Hamas, its aftermath and wider consequences materially raise political risk for Israel as well as weaken its executive and legislative institutions and its fiscal strength, for the foreseeable future."

It was the first time Israel has been downgraded, Bloomberg reported.

Moody's also lowered its outlook for Israel's debt to "negative" due to "the risk of an escalation" with the far more powerful Lebanese militant group Hezbollah that operates along its northern border.

Hamas's unprecedented October 7 attack resulted in the deaths of about 1,160 people in Israel, mostly civilians, according to an AFP tally based on official Israeli figures.

In response, Israel launched air strikes and a ground offensive that have killed at least 27,947 people in Gaza, mostly women and children, according to the health ministry in the Hamas-run territory.

Following the attack, S&P Global Ratings lowered Israel's credit outlook from stable to negative on risks that the Israel-Hamas conflict could broaden.

Fitch -- which is the last of the big three US ratings agencies -- placed Israel on negative watch over risks from the conflict.

"The weakened security environment implies higher social risk and indicates weaker executive and legislative institutions than Moody's previously assessed," the ratings agency said Friday in the statement explaining its decision.

"At the same time, Israel's public finances are deteriorating and the previously projected downward trend in the public debt ratio has now reversed," it continued.

"Moody's expects that Israel's debt burden will be materially higher than projected before the conflict," it added.