S&P upgrades Israel’s credit rating from negative to stable following Gaza ceasefire

S&P Global Ratings announced on Friday that it has upgraded Israel’s credit rating from a negative to “stable” outlook following last month’s Gaza ceasefire brokered by the United States.

"The US-brokered ceasefire agreement between Israel and Hamas could provide space for military de-escalation and reduce the probability of larger-scale tensions in Gaza and the wider region" S&P stated, assessing that such a development "could soften pressure on Israel’s economy, labor market, and public finances.”

"We revised our outlook to stable from negative and affirmed our 'A/A-1' sovereign ratings on Israel."

S&P issued a warning that Israel's credit rating could be downgraded again in the future "if Israel’s economic, balance-of-payments, or fiscal performance weakened markedly beyond our forecast."

However, it also added that Israel’s credit rating could potentially improve if economic growth and fiscal policies outperformed the projections made by the credit institute.

In October 2024, S&P announced it had downgraded Israel’s credit rating due to the “security risks for Israel” amid a multifront war with Iran and its terror proxies, Hamas and Hezbollah.

“We see an increasing likelihood that Israel’s conflict with Hezbollah, given the recent escalation of fighting, becomes more protracted and intensifies, posing security risks for Israel," S&P said at the time.

“The company believes that the fighting in Gaza and the escalation in fighting on the northern border, with the possibility of a ground operation in Lebanon, might continue into 2025 with a risk of a response against the State of Israel.”

Also during that time, competing credit rating institute Moody's also downgraded Israel’s credit rating, warning that “the significant escalation in geopolitical risk also points to diminished quality of Israel’s institutions and governance, which have not fully mitigated actions detrimental to the sovereign’s credit metrics.”

In November 2024, the Hezbollah terror group in Lebanon reluctantly agreed to a ceasefire with the Jewish state, reducing the pressure on Israel’s global credit rating.

Following Israel’s Operation Rising Lion military offensive against Iranian nuclear and ballistic missile assets in June, S&P issued a warning that a protracted war could undermine Israel’s credit rating.

“Developments in the Israel-Iran conflict are testing S&P Global Ratings’ previous assumptions by increasing downside risk, including due to the prospect of further escalation,” S&P analysts assessed.

An S&P official warned, “Israel says its stated aim of destroying Iran’s nuclear capability could take at least two weeks, possibly longer… this points to a more protracted campaign than the 2024 retaliatory strikes.”

However, the Trump administration brokered a ceasefire deal after 12 days of fighting between Israel and the Iranian regime.

The Israeli economy and exports have been under pressure following the Hamas Oct. 7 terror attack. The Manufacturers Association of Israel (MAI) recently unveiled a $1.25 billion plan to boost the nation's economy and assist the crucial export industry.

“We are confident that this postwar plan will secure Israel’s industrial production and exports for years to come,” said MAI President Ron Tomer.

“The export sector is Israel’s main growth engine,” Tomer continued. “Over the past two years, exports suffered a sharp decline and a retreat in international cooperation. Israel must take bold measures to compensate for losses, restore confidence in its brand, and secure stable trade partnerships. We believe this plan can double exports within five years and achieve all its goals. The government should adopt it without delay."