The resilience of Israel’s debt issuers is at stake if a conflict stretches on, impairing economic activity and policymaking, according to Moody’s Investors Service.
(Bloomberg) — The resilience of Israel’s debt issuers is at stake if a conflict stretches on, impairing economic activity and policymaking, according to Moody’s Investors Service.
While the nation’s sovereign credit profile has held up in the face of terrorist attacks and military action in the past, that could be tested by a protracted period of war, analysts led by Atsi Sheth wrote in a Wednesday note.
“How this conflict affects credit risk across the public, financial and corporate sectors will depend on its scale and duration, which is far from clear at this time,” the analysts wrote. Still, “the conflict could have implications for the Israeli debt issuers we rate.”
For more on the Israel-Hamas war, click TOP IHW
The combined death toll has surpassed 2,000 since Hamas militants attacked Israel over the weekend. Israel has since formed a rare emergency government to see it through the conflict and started building up a base next to the Gaza Strip to accommodate tens of thousands of soldiers.
The cost to insure Israeli bonds against a potential default has spiked by 45 basis points this week to 104, the highest in almost a decade. In April, Moody’s lowered the outlook on the nation’s A1 rating to stable from positive, citing a “deterioration of Israel’s governance.”
Read: Israel’s First Rating Cut Is Priced In by Markets on Cost of War
Global growth and inflation trends could also see potential consequences in a scenario that sees military activity escalate in the region, especially if widespread sanctions or additional blockades emerge, according to Moody’s.
“Any further disruption in energy and financial markets is likely to dampen sentiment and test the resilience of global credit conditions,” the analysts wrote.
For more on the Israel-Hamas war, click here.
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.