Moody's downgrade restores economic tensions amid Gaza war

(MENAFN) Moody's credit rating agency's recent decision to downgrade Israel's credit rating has reignited economic apprehensions reminiscent of the initial weeks of the ongoing conflict in the Gaza Strip. On Friday, Moody's announced the downgrade of Israel's foreign and local currency issuer ratings from A1 to A2, alongside a similar reduction in the country's foreign and local currency senior secured ratings, all with a negative outlook. This downgrade, marking the first in over five decades, comes amidst Israel's continued military campaign in the Gaza Strip since October 7, prompting international scrutiny, including appearing before the International Court of Justice on allegations of "genocide." Additionally, tensions persist in the north with Hezbollah and recent attacks in the southern Red Sea against Israeli, American, and British vessels.

The decision by Moody's has sparked concerns within Israel's financial circles, particularly regarding the potential impact on the country's stock market. There's apprehension that forthcoming credit ratings from agencies like Fitch and Standard & Poor's may further dampen investor confidence, potentially reverting sectors of the Israeli stock market to the low levels observed in the initial stages of the Gaza conflict. Notably, in the trading session two days ago, the main index of the Tel Aviv Stock Exchange, known as "TASE 35," experienced a decline of 0.61 percent, falling to 1,820 points—10 points lower than the level observed just prior to the outbreak of the Gaza conflict—largely attributed to Moody's downgrade.

However, there was a reversal in sentiment during yesterday's trading session, as the TASE 35 index rebounded, rising by 1.24 percent to 1,843 points. This uptick followed Israel's announcement of the release of two prisoners in the city of Rafah, situated in the southern part of the Gaza Strip. The positive response in the stock market reflects investors' reaction to this development amid the ongoing conflict. Nonetheless, the downgrade by Moody's underscores the lingering economic uncertainties facing Israel as it navigates through the complexities of the conflict and its broader geopolitical ramifications.


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