(MENAFN) Fitch Ratings Agency has issued a cautionary statement, indicating that a further escalation of the ongoing conflict in Gaza could result in a downgrade of Israel's credit rating. In a report released on Friday, the agency highlighted the potential economic repercussions of prolonged hostilities, citing concerns about the adverse impact on Israel and other regional economies. However, Fitch noted that the rapid containment of the recent mutual bombings between Iran and Israel has mitigated some of these risks, thus reducing the immediate impact on global markets.
The agency emphasized that should the conflict in Gaza persist beyond the first half of 2024 and extend regionally, it could create unfavorable conditions for economic growth and pose challenges in managing public finances, particularly in neighboring Jordan. Fitch's analysis also considered the evolving dynamics in the region, including improved relations between Iran and Gulf Cooperation Council countries and diminished concerns about the closure of the Strait of Hormuz, largely due to pressure from China.
Despite ongoing geopolitical tensions, Fitch Ratings recently maintained Israel's sovereign credit rating at A+ earlier this April. Notably, the agency lifted the "negative watch" status of the rating, indicating a degree of stability despite the conflict in Gaza. However, it's worth noting that Fitch had placed Israel's sovereign debt rating on negative watch at the onset of the conflict in October, warning of a potential downgrade if the situation escalated significantly.
Overall, Fitch Ratings' assessment underscores the complex interplay between geopolitical events and economic stability in the region. While the containment of recent hostilities has provided some respite, continued conflict could pose challenges for Israel's economy and regional stability, warranting ongoing monitoring and assessment by financial institutions.
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