Fitch Upgrades Israel's Credit Rating Amid Gaza Conflict Worries

Fitch Ratings affirmed Israel's "A+" sovereign credit rating and lifted the country from "rating watch negative" despite concerns surrounding the conflict with the Palestinian Islamist group Hamas in Gaza. Initially, Fitch had placed Israel's sovereign debt rating on negative watch, cautioning that a significant escalation of the conflict could lead to a downgrade. However, while the risk of a downgrade similar to that issued by Moody's in February hasn't been entirely eliminated, Fitch's outlook for Israel remains negative. This reflects uncertainties regarding the fiscal trajectory and the duration and intensity of the conflict, including the potential for regional escalation.

Fitch states that while geopolitical risks linked to the Gaza conflict remain high and escalation possibilities persist, the removal of the credit watch negative outlook reflects a broadening of risks to the credit profile, with their impact potentially requiring a longer assessment period.