Fitch cuts Israel's credit rating to 'A' as Middle East tensions rise
geopolitical risks as the war in Gaza drags on, and kept the rating outlook negative, meaning a further downgrade is possible.
The ratings agency expects the Israeli government to permanently increase military spending by close to 1.5% of GDP versus pre-war levels, putting upward pressure on the country's budget deficit and debt levels.
«In our view, the conflict in Gaza could last well into 2025 and there are risks of it broadening to other fronts,» the ratings agency said in a statement.
Israel's war on Gaza, triggered by the Islamist group Hamas-led cross-border attack on Oct. 7, has cost thousands of lives and is in danger of expanding.
Earlier this year, Moody's and S&P Global also cut their credit rating for Israel, citing elevated geopolitical risks.
Fears that the conflict in Gaza could turn into a broader Middle East war have escalated after the killing of Hamas leader Ismail Haniyeh in Iran and top Hezbollah military commander Fuad Shukr in Beirut. Israel is braced for significant attacks from Iran and Hezbollah in Lebanon.
«The downgrade following the war and the geopolitical risks it creates is natural,» Israeli Finance Minister Bezalel Smotrich said on X.
Israel's shekel fell as much as 1.7% against the dollar on Monday and stocks ended over 1% lower in Tel Aviv as investors fret over a possible attack on Israel. The shekel opened 0.3% higher on Tuesday while the stock market is closed for a Jewish fast day.
Heightened tensions between Israel and Iran and its allies could imply significant
