Moody's Places Israel's Rating Under Review for Potential Downgrade

On Thursday, credit rating agency Moody's took the step of placing Israel's A1 rating under review for a potential downgrade, attributing this move to the ongoing military conflict with Hamas.

Moody's stated, "While a short-term conflict may have an impact on credit, the longer and more intense the military conflict, the greater its effect on the effectiveness of public policies, financial stability, and the economy."

The cost of insuring Israeli government debt using what is known as sovereign credit default swaps saw a significant spike. Investors use these swaps either as a hedging tool or for speculation, and in the past week, the cost of purchasing these swaps for Israel surged by 80%.

Never before has Israel's rating been downgraded by any of the three major rating agencies: Standard & Poor's Global, Moody's, and Fitch.

Earlier this week, Fitch placed Israel under negative review, warning that any major escalation in the conflict could lead to a downgrade in the rating.

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