Gaza war extends toll on Israel’s economy

Combat operations are straining Israel’s economy, leading to shrinking of the GDP and downgrading of sovereign rating.

Last week, Fitch Ratings downgraded Israel’s credit score from A+ to A. Fitch cited the continued war in Gaza and heightened geopolitical risks as key drivers. The agency also kept Israel’s outlook as “negative”, meaning a further downgrade is possible.

After Hamas’s deadly attack on October 7, Israel’s stock market and currency nosedived. Both have since bounced back. But concerns about the country’s economy persist. Earlier this year, Moody’s and S&P also cut their credit ratings for Israel.

So far, Israel’s war on Gaza has killed more than 40,000 Palestinians and decimated the economy in the besieged Palestinian enclave.

There are signs of a blowback in Israel, too, where consumption, trade and investment have all been curtailed.

Separately, Fitch warned that heightened tensions between Israel and Iran could incur “significant additional military spending” for Israel.