By Ovunc Kutlu
ISTANBUL (AA) - The expanding conflict in the Middle East poses risks to the ratings of countries in the region, according to a new report by S&P Global.
"The Israel-Hamas-Hezbollah conflict has caused significant human tragedy, but the impact on sovereign credit metrics has so far been limited to the two rated sovereigns involved: Israel and Lebanon," it said Wednesday.
"However, the recent further cycle of escalation means we now think it likely that the conflict will persist into 2025, with greater potential for developments that could weigh on regional sovereign credit ratings," it added.
The rating agency warned that it now foresees several potential pathways through which the conflict could have a more material credit impact on the rest of the region.
It said changing energy prices, trade route security, tourism revenue, remittances, and capital outflows could affect countries in the region in different ways.
"Our rating on Israel is now two notches lower than on Oct. 7, 2023, reflecting weaker fiscal and growth expectations through 2025, as well as significantly increased security risks," said the report, referring to the day Israel launched its continuing offensive on the Gaza Strip, which over the last 12 months has killed over 42,000 people.
"Although Lebanon remains in default, we believe its economic and recovery prospects have also been weakened," it added, referring to Israel’s stepped-up hostilities in Lebanon in recent weeks.