S&P Global Ratings on Friday affirmed Israel’s sovereign credit rating at A/A-1 with a stable outlook, assessing that despite ongoing security risks from conflicts involving Iran, Gaza and Lebanon, the country’s economy and external position remain strong enough to contain the macroeconomic fallout.

“The stable outlook reflects our view that military de-escalation, underpinned by the ceasefire agreements, will lower immediate security risk for Israel,” the U.S. credit rating agency wrote. “The outlook reflects our assumption that possible military hostilities will remain episodic and contained, even if tensions between Israel and Iran and its proxies persist and the broader regional security environment remains fragile.”

Key factors supporting the affirmation include Israel’s wealthy, innovation- and technology-driven economy, large net external asset position, deep local capital markets and credible, flexible monetary policy. Constraints include heightened geopolitical risk and persistently elevated defense and security spending, which continue to weigh on public finances.

After a sharp conflict-related hit to output in early 2026, S&P expects the economy to begin recovering in mid-2026, with real GDP growth approaching 6% in 2027, though still below its pre-war trend.

The report noted the “remarkable” resiliency of Israel’s economy: “The structure of the Israeli economy, which centers on high-tech services exports, with a high percentage of employees able to work from home, has cushioned the impact of security disruptions. Heightened security risks have so far had limited impact on residents’ behavior, with no evidence of bank deposit instability or conversion to foreign currencies.”

   | Read More JNS.org – Jewish News Syndicate