US credit rating agency Fitch has downgraded Israel’s credit rating from “A+” to “A” on Monday, citing concerns that the ongoing conflict with Hamas in Gaza could extend “well into 2025” and negatively impact economic activity.
In its assessment, Fitch warned that the protracted conflict might lead to increased military spending, further destruction of infrastructure, and prolonged economic disruptions. This could significantly deteriorate Israel’s credit metrics and result in a substantial budget deficit for the country this year.
International mediators have proposed resuming ceasefire and hostage release negotiations, which Israel has agreed to. However, Hamas has called for the implementation of a truce plan previously presented by US President Joe Biden instead of further discussions.
The conflict’s escalation has also affected other regions, with Israel experiencing near-daily cross-border fire with Hezbollah in Lebanon, prompting evacuations from northern border areas. Iran and Hezbollah have vowed retaliation following the recent deaths of key figures, raising concerns about potential further escalation.
The Gaza conflict, which began with a Hamas attack on October 7, has resulted in significant casualties. According to official figures, the attack led to 1,198 deaths, mostly civilians, while the retaliatory Israeli military actions have caused the deaths of at least 39,897 people in Gaza, as reported by the territory’s health ministry.
