From negative to stable: S&P upgrades Israel’s credit rating outlook after Gaza ceasefire

Global credit rating agency Standard & Poor’s upgraded Israel’s credit rating outlook to stable from negative late Friday, citing prospects of “military de-escalation” in Gaza and the wider region following the US-brokered ceasefire agreement with the Hamas terror group.

The rating agency said that the stable outlook reflects the “assumption that the scale of direct military confrontation will remain contained, even if tensions between Hamas and Israel persist and the broader regional security environment remains fragile.”

“This could soften pressure on Israel’s economy, labor market and public finances,” said S&P analyst Karen Vartapetov. “The path to a lasting peace agreement will remain long, however.”

S&P, which downgraded Israel’s credit rating twice last year, kept the country’s A/A-1 credit rating in place. Following the outbreak of war with Hamas, the rating agency in October 2023 lowered Israel’s credit outlook from stable to negative. A negative outlook puts a country at risk of credit rating downgrades. A lower rating raises credit costs for the government, businesses and households.

S&P said it “could raise the ratings if Israel’s growth and fiscal outcomes proved much stronger than we currently project.”

“Rating upside could also stem from a significant and lasting reduction in regional geopolitical and security risks,” said Vartapetov.

Last month another agency, Moody’s said it would wait to ensure that the ceasefire held before making any changes to Israel’s ratings.

Speaking at the press conference this week announcing the 2026 state budget, Finance Ministry chief economist Shmuel Abramzon revised the country’s growth forecast for 2025 down to 2.8%, from 3.1% previously, which is still higher than the Bank of Israel’s projection of 2.5%. In 2026, the Finance Ministry expects the economy to grow at a faster pace of 5.1%.

The US-brokered ceasefire entered into effect on October 10, halting two years of war that began with the devastating Hamas-led attack on Israel on October 7, 2023.

The deal required Hamas to release the remaining 20 living hostages and return all bodies of the 28 deceased hostages accessible to it within the first 72 hours after the IDF’s withdrawal to the so-called Yellow Line inside Gaza.

While Hamas released the 20 living hostages within the first 72 hours, it has yet to hand over the bodies of five deceased hostages, saying that it cannot yet locate them due to the level of destruction in the Gaza Strip.

Israel has accused the terror group of lying, saying it is intentionally withholding some of the bodies.

In the second phase of the ceasefire, as detailed in Trump’s 20-point plan for peace, Hamas will be required to disarm and cede governance of Gaza to a technocratic committee overseen by an international transitional body.