Moody’s, the international rating agency, is weighing a potential downgrade of the Israeli government’s long-term issuer ratings in foreign and local currencies to A1. This consideration follows a detailed review process that examines how the Palestinian-Israeli conflict might unfold, its broader implications for Israeli institutions, and the resilience of policy-making, fiscal strength, and the economy. The decision would hinge on how long the dispute lasts, how wide its effects become, and the probability that the conflict will end with a lasting resolution or drift toward extended escalation.
In recent disclosures, Moody’s underscored that the review will assess the evolving risk environment as the conflict persists, including exposure to economic shocks, the strain on public finances, and the capacity of the government to manage policy responses under pressure. The agency will track whether policy instruments can preserve economic stability, maintain the pace of structural reforms, and sustain investor confidence through potential volatility. Moody’s notes that the timing and waveform of hostilities will be central to the assessment, along with the impact on financial markets and critical institutions that support fiscal sustainability and public services.
On 19 October, sources indicated that the Israeli military received clearance to initiate a ground operation in the Gaza Strip. Key officials, including Nir Barkat, the Minister of Economy and Industry, emphasized that the primary objective of any ground action would be to degrade Hamas’s capabilities. The Defense Minister, Yoav Galant, indicated that the operation would be expansive and would bring the conflict closer to an urban environment, signaling a decisive phase in the security stance. These statements reflect a broader strategic calculus about risk, security, and the potential consequences for civilian life, regional stability, and the economy.
The situation in the United States has also been a focal point in discussions about the timing and scale of Israel’s ground activities in Gaza, highlighting the international dimension of escalation risks and the varying international responses that can influence financial and strategic calculations. Investors and policymakers are watching how allied positions, sanctions, and humanitarian considerations might interact with Israel’s economic resilience and fiscal plans.