S&P cuts Israel's credit rating amid Middle East conflict

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Ret. Air Force Brig. Gen. Rob Spalding and Marine raider Garrett Exner discuss tensions in the Middle East on The Evening Edit.

S&P Global Ratings on Thursday cut key short- and long-term credit ratings for Israel amid the country's ongoing conflict with Hamas and its recent confrontation with Iran.

S&P Global lowered the long-term foreign and local currency sovereign credit ratings to 'A+' from 'AA-' and the short-term ratings to 'A-1' from 'A-1+' – and also has a negative outlook on long-term ratings. This comes after Iran attacked Israel with missiles and drones that were largely repelled by Israel and a multinational coalition that included the U.S., and a retaliatory strike by Israel.

«The downgrade follows what we view as a further increase in already high geopolitical risks that Israel faces in the aftermath of the first direct attack by Iran in mid-April 2024,» the ratings agency wrote. It explained that ongoing hostilities with Hamas in Gaza, as well as threats from Iran and its Lebanon-based proxy Hezbollah have caused expectations about the duration of the conflict to continue this year.

«Under our baseline scenario, we still expect a wider regional conflict to be avoided, but the Israel-Hamas war and the confrontation with Hezbollah appear set to continue throughout 2024,» S&P Global Ratings wrote. «This is in contrast to our October 2023 expectation of military activity not lasting more than six months.»

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Israel's short- and long-term credit ratings were downgraded a notch each by S&P Global Ratings amid the conflict in the Middle East. (Photographer: Kobi Wolf/Bloomberg via Getty Images / Getty Images)

The baseline scenario projects