Israel's sovereign credit rating is unlikely to see an upgrade as long as the conflict in Gaza persists, according to Maxim Rybnikov, Director at S&P Global Ratings.

Speaking at the Israel Democracy Institute's annual economic conference on Tuesday and quoted by Reuters, Rybnikov emphasized that the ongoing war significantly impacts the Israeli economy and its fiscal position.

S&P Global Ratings earlier this month affirmed Israel's long- and short-term foreign and local currency sovereign credit ratings at "A/A-1" but maintained a "negative" outlook. This outlook, Rybnikov explained, is heavily contingent on security risks and how the conflict unfolds.

"For the outlook side, it's all about security risks and how this is going to unfold," Rybnikov stated. He further warned that a broadening of the conflict, particularly involving Iran, would prompt a ratings downgrade, though this is not S&P's baseline scenario.

The prolonged nature of the conflict, which began in October 2023, is a significant concern. "We don't know ... the way forward and how the war is going to end, and for us, it certainly presents risks, especially in a scenario where there's a more significant escalation," Rybnikov said.

Despite the challenges, Rybnikov offered a potential path for a return to a "stable" outlook, indicating it could occur "in the event of a reduced likelihood of military escalation and an easing in broader security risks."

He concluded, "We still expect some stabilisation to happen over the medium term. What forms and how quickly it will take is still uncertain."