Standard & Poor’s downgraded Israel’s long-term credit rating from A+ to A, attributing this decision to increased security risks in light of the latest escalation in the conflict with Hezbollah. The agency also shifted its economic outlook for Israel to negative, reflecting the potential risk of a more direct war with Iran.
The agency mentioned that the likelihood of a prolonged conflict between Israel and Hezbollah intensifying presents security risks for Israel. Iran launched dozens of missiles at Israel on Tuesday in response to the assassination of the leaders of Hezbollah and Hamas, marking the second such attack in approximately six months. During this event, the Israeli military launched interception missiles over Jerusalem to counter projectiles coming from the east, visible by their glowing trails.
The Israeli military stated that Iran had fired about 180 rockets toward Israeli territory. The White House described the Iranian attack as “ineffective” and confirmed its repulsion. In its report, Standard & Poor’s pointed out that the downgrade reflects the repercussions on Israel’s economy and its general financial situation due to the worsening conflict with Hezbollah in Lebanon.
The agency also noted that we must now consider the possibility that military activities in Gaza and intensified fighting across Israel’s northern border could continue into 2025. It also expects an increase in Israel’s financial deficit in the short to medium term due to further increases in defense spending, according to the agency. Standard & Poor’s anticipates a delayed economic recovery in Israel, reducing its real growth forecasts to 0% in 2024 and 2.2% in 2025. Additionally, the agency predicted that the current escalation in fighting would support a continued increase in defense-related expenditures.
Recent developments in Lebanon highlight significant tensions and conflict due to the ongoing strife between Hezbollah and Israel. This situation has resulted in numerous casualties and displacement of civilians. Hezbollah’s actions are reportedly in support of the Palestinians, aligning with Iran’s regional interests, but they have compounded Lebanon’s severe economic crisis, further deteriorating conditions that have been challenging since before the conflict began. A potential cease-fire in Gaza could bring some calm to the Israel-Lebanon border, but the situation remains volatile with ongoing military actions and humanitarian issues.
