In a warning is the clearest so far from one of the most prominent International classification agenciesStandard & Poor’s announced that it may reduce Israel’s credit rating again from e, if the war continues with Iran and turned into a long -term conflict, according to the Israeli newspaper “Globes”.
This is the first direct intervention by the agency regarding the ongoing war, as the agency published a special report in which it considered that “developments in the conflict between Israel and Iran are testing the previous assumptions of Standard & Poor’s, by increasing negative risks, especially in light of the possibility of further escalation.”
The third possible reduction in less than two years
The Standard & Poor’s has already reduced the classification of Israel twice during the year 2024, in April and October, as a result of the exacerbation of internal security and political conditions.
Today, a third reduction shouted if the most negative scenarios in the conflict with Iran are fulfilled, which means Israel’s loss of market confidence and approaching levels of more dangerous classification.
The agency notes that “its negative view of Credit rating Long -term Israel reflects the danger that the escalation of the military conflict leads to a significant weakening of the Israeli economy, in the public financial conditions and the balance of payments.
Warnings from the escape of capital
In its report, the agency enumerated a set of risks in the event of continued escalation, including:
- The deterioration of the confidence of local and foreign investors.
- Capital escape out of the country.
- Sharp fluctuations in financial markets and exchange rate.
- Direct material damage to the infrastructure.
- Decline Growth And increase pressure on public finances.
The agency notes that “Israel itself says that the goal declared to destroy Iran’s nuclear capabilities may take at least two weeks, and perhaps more,” which opens the door for long -term military operations that exceed the limits of limited responses in the year 2024.
Possible scenarios
As part of its analysis, Standard & Poor’s 4 escalatory scenarios of the war, ranging from limited reprisals to an expanded regional war that includes Iran and its non -regional allies, along with the United States and its allies.
In the worse scenario, the agency expects regional and non -regional powers to get involved in the conflict, which may lead to “the rapidly and rapidly and widely collapsed market confidence, sharp economic shrinkage, and a significant increase in financial deficit levels,” as described the report.
A dangerous precedent to classify an advanced country
It is noteworthy in the Globes report that this possible reduction comes at a time when Israel still maintains its position as an economic advanced country, as the classification reduction represents a negative as a symbolic and very important market step, which may mean a high cost of borrowing, and reduce opportunities to attract new foreign investments in light of a tense geopolitical environment.
In this context, analysts told “Globes” that “any additional reduction will affect Israel’s ability to fund Budget In international markets, especially if it is accompanied by the high returns required for Israeli government bonds.
Between the military battle and the financial battle
The challenge is not limited to military operations only, but also extends to the economic and financial front, where the Israeli government finds itself in the face of the requirements for financing the war and compensating the damage, amid a decline in tax revenues and the increasing popular and economic pressure.
“Globes” concludes its report by emphasizing that “the war with Iran, if it continues for a long time, may not be limited to the security front, but will sharply be reflected on every major economic indicator, from growth and employment rates, to the financial balance and local currency.”