S&P warns on third cut for Israel's rating

The international ratings agency will drop Israel's rating from A to A minus in the event of a protracted war with Iran.

International ratings agency S&P has addressed the Israel-Iran war for the first time. In a special survey published today S&P's analysts write, "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."

In other words S&P is reminding investors that it had given Israel a negative outlook for its rating because of the potential emerging scenario of a direct and severe war between Israel and Iran. If the forecast comes true, Israel's rating at S&P will drop from A to A minus. This, after two rating downgrades that S&P has already made for the country in its announcements last year in April and October.

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The ratings agency warns that "the negative outlook on Israel's long-term credit rating reflects the risk that the escalation of the military conflict could significantly weaken the Israeli economy and its fiscal and balance of payments positions."

Among the risks the S&P lists in the event of a continued escalation: "Shocks to foreign and domestic investor confidence, capital flight, and volatility in financial markets and the exchange rate." It also warns of "direct physical damage to infrastructure and associated risks to growth and public finances."

S&P noted, "Israel says its stated aim of destroying Iran’s nuclear capability could take at least two weeks, possibly longer" - suggesting a more protracted campaign than the 2024 retaliatory strikes. The agency defined four possible pressure scenarios, with the most severe scenario involving "regional and non-regional allies, including Iran and its proxies, the US and Gulf allies."

Published by Globes, Israel business news - en.globes.co.il - on June 17, 2025.

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