Fitch places Israel's ratings on negative watch

By Ovunc Kutlu

ISTANBUL (AA) - In light of the current Mideast conflict, Fitch Ratings has placed Israel's long-term foreign- and local-currency issuer default ratings (IDR) of A+ on rating watch negative.

The move "reflects the heightened risk of a widening of Israel's current conflict to include large scale military confrontations with multiple actors, over a sustained period of time," it said Tuesday in a statement. "This could include Hezbollah, other regional militant groups and Iran."

The global rating agency said large-scale escalation, in addition to human loss, could result in significant additional military spending, destruction of infrastructure, sustained change in consumer and investment sentiment, and thus lead to a large deterioration of Israel's credit metrics.

Fitch warned that a major escalation could result in negative rating action.

"This could take the form of a wider and longer conflict, resulting in a sustained fiscal drain, both from higher spending and lower tax collection, as well as loss of human and material capital and severe economic disruption," it added.

The current conflict between Israel and Palestinian group Hamas cited by Fitch began on Oct. 7 and so far shows no signs of abating. Numerous international actors are calling for a cease-fire and resolution of the conflict, including many saying a fair two-state solution is the only thing that can bring lasting peace.