Israel could see its credit rating downgraded for the first time in history

(Patria) - The agency Fitch has officially warned that it could lower Israel's A+ credit rating if the conflict with the Palestinian Islamist group Hamas escalates.

The risk of involvement of other actors hostile to Israel has significantly increased, Fitch stated yesterday.

The agency published the report before the attack on a hospital in the Palestinian enclave of Gaza, which claimed hundreds of lives and caused a wave of protests in Arab countries, Iran, and Turkey.

A large-scale escalation could, in addition to loss of life, result in significantly higher military spending and destruction of infrastructure, which would considerably weaken Israel's creditworthiness, Fitch emphasized.

The current situation likely supports the current rating of Israeli government debt, they noted.

"Thanks to a combination of a dynamic Israeli economy that generates high added value, proven resilience to regional conflicts, readiness for military confrontations, solid fiscal and external metrics, and cash reserves, a relatively short conflict, largely confined to Gaza, is unlikely to affect Israel's rating," Fitch concluded.

The agency Moody's also warned last week that a prolonged conflict with Hamas could harm Israel's rating, Hina reports.

"The credit profile of the Israeli state has so far been resilient to terrorist attacks and military actions. However, a prolonged conflict that would permanently and significantly disrupt economic activity and political decisions would test that resilience," a group of analysts from this company stated in a note.

The rating review was scheduled for last Friday, but Moody's did not publish a report. None of the three leading rating agencies - S&P Global, Moody's, and Fitch - have ever downgraded Israel's rating before, Reuters notes.

Meanwhile, the costs of insuring against problems with servicing Israeli government debt have risen sharply, the British news agency notes, pointing to an 80 percent jump in the prices of financial derivatives based on credit default swaps (CDS).