International credit rating agencies Moody’s and Fitch have put the outlook for Israel’s long-term credit – at A1 – under review, in view of its possible downgrade due to the war with Hamas.

Moody’s announced its decision yesterday Thursday, in a statement, two days after a similar move by Fitch to downgrade Israel’s debt outlook to negative for short- and medium-term securities in the domestic currency and in foreign currencies.

A possible downgrade for Israel is, according to Fitch, “the high risk of the current conflict spreading,” in other words, the outbreak of “large-scale, multi-actor military conflicts over a prolonged period of time.”

The house refers to “Hezbollah”, “other armed organizations in the region” and “Iran”.

For Moody’s too, the review of the outlook is linked to the “unexpected” conflict between Israel and Hamas.

“The most important consequence is the human cost,” the house says in its statement, which touches on “the consequences of recent credit developments.”

Previously the outlook “was stable”, Moody’s recalled, which in its review will “assess whether the conflict is more likely to move towards resolution” or “if there is a possibility of major escalation over a prolonged period of time”.

His attention “will be focused on the likely duration and scope of the conflict” as well as the “consequences for Israeli institutions, especially for the effectiveness of the policy, for the fiscal and for the economy,” he explained. He pointed out that “the examination period may be longer than the usual three months”.

Moody’s mainly emphasized the unusual nature of the war, which was triggered by the October 7 attack by Hamas.

“Israel’s credit profile has proven resilient to terrorist attacks and military conflicts in the past. However, the gravity of the evolving conflict raises the possibility of a material and prolonged credit impact,” the house explained.

Although even “a short-term war can have an impact on creditworthiness,” the “longer and more severe the military conflict, the more its impact can be large on the effectiveness of policies, on the fiscal and economic “, he pointed out.

According to Fitch, Israel’s credit rating may not be downgraded if there is a “de-escalation of the conflict, limiting the risk of a material and prolonged impact on the economy and fiscal” of Israel.

On October 7, more than 1,400 people were killed in Israeli territory when the Palestinian Islamist movement Hamas launched an unprecedented attack on the Gaza Strip.

According to the Israeli military, around 1,500 Hamas fighters were killed in its counter-offensive to regain control of areas in the attacked zones.

In the Gaza Strip, more than 3,700 Palestinians, most of them civilians, have been killed in retaliatory shelling by the Israeli army, according to the latest tally by local authorities.