S&P credit ratings agency
S&P credit ratings agencyBrendan McDermid/Reuters

The S&P credit ratings agency on Tuesday lowered Israel's credit outlook from “stable” to “negative”, citing the war between Israel and Hamas.

The agency said the war could spread more widely with a more pronounced impact on the economy and security situation in the country.

It added that if the military conflict expands substantially, a ratings downgrade is possible in the coming months.

"We currently assume the conflict will remain centered in Gaza and last no more than three to six months," S&P said.

It noted it could revise the outlook to "stable" if the conflict is resolved, resulting in a "reduction in regional and domestic security risks without a material longer-term toll on Israel's economy and public finances."

Last week, Moody's credit ratings agency placed Israel's A1 ratings on review for a possible downgrade.

"This review has been triggered by the unexpected and violent conflict between Israel and Hamas, in response to a large-scale, multipronged attack by Hamas," the agency said.

Moody’s added that, while Israel's credit profile has "proven resilient" to terror attacks and conflicts in the past, the severity of the current conflict "raises the possibility of longer lasting and material credit impact".

The decision by Moody’s came two days after the Fitch credit rating agency took a similar step.