Washington (awp/afp) – Rating agency Moody’s on Friday downgraded Israel’s rating, for the second time this year, to Baa1, and gave it a negative outlook, signaling that it plans to degrade it again in the short term.
“The intensity of the conflict between Israel and Hezbollah has increased considerably in recent days,” Moody’s underlined, upgrading the rating from A2 to Baa1.
“The main driver of this downgrade is our view that geopolitical risk has further intensified significantly, reaching very high levels, with significant negative consequences for Israel’s creditworthiness in the short and long term,” the rating agency said in a press release.
The conflict has increased in scale in recent days, with Israeli strikes in Lebanon.
The worsening conflict “comes against the backdrop of Israel’s publicly stated goal of returning its evacuated residents to the north of the country. Achieving this goal will likely involve even more intense conflict,” Moody’s noted.
“At the same time, prospects for a ceasefire in Gaza have become more remote and we assess that domestic political risks have increased alongside geopolitical risks,” according to the agency.
Israel announced Friday that it had carried out an airstrike on Hezbollah’s “headquarters” in the southern suburbs of Beirut, the movement’s main stronghold, which left two dead and 76 injured, according to an initial report from the Lebanese Ministry of Health.
Moody’s had already downgraded Israel’s rating in February, by one notch, from A1 to A2. In April, the S&P agency also lowered it to A+, and Fitch followed in August, raising it to A.
These Israeli strikes in Lebanon come after nearly a year of exchanges of fire with Hezbollah, which opened a front against Israel at the start of the war in Gaza, triggered by the unprecedented attack launched on October 7, 2023 on the Israeli soil by its ally Hamas.
Hezbollah vowed to continue its attacks “until the end of the aggression in Gaza.”
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