Moody's has upgraded Israel's credit outlook from negative to stable, citing the reduced geopolitical risks as ceasefires in Gaza and Lebanon continue to hold.
The major ratings agency affirmed Israel's sovereign credit rating at Baa1, the level it was lowered to in September 2024 amid the escalation of conflicts.
The outlook change signals that Israel faces a lower immediate risk of further downgrades, though it does not indicate an imminent upgrade to the rating itself. The stable outlook reflects Moody's view that exposure to geopolitical and security threats has eased considerably from previously very high levels.
This positive shift comes after prolonged military engagements, including conflicts involving Hamas in Gaza and Hezbollah in Lebanon, which had prompted the earlier downgrade due to concerns over weakened institutional governance, higher fiscal pressures from war-related spending, and overall elevated political risks.
In its latest assessment, Moody's acknowledged the resilience of Israel's economy despite the challenges of recent years. The holding of ceasefires has contributed to a more stable security environment, helping to alleviate some of the downward pressure on the country's credit profile.
While the geopolitical situation remains fragile - with potential for renewed tensions - the agency sees the current trajectory as supporting stability rather than further deterioration.
This development marks a notable improvement in perceptions of Israel's economic and fiscal outlook following a period of significant strain.