LONDON (Reuters) – It is too early to say whether a ceasefire agreement between Israel and Hezbollah in Lebanon has “significantly and lastingly” reduced the risks that prompted Moody’s (NYSE:) to downgrade Israel’s sovereign credit rating, the agency said on Thursday .
Israel agreed earlier this week to a ceasefire deal with Iran-backed Hezbollah, bringing relief as tensions appear to be easing more than a year after the war in Gaza began.
“It is too early to determine whether these risks will be significantly and sustainably reduced,” Moody’s said.
In September, the agency downgraded Israel’s credit rating to Baa1 from A2.
On Thursday, ratings agency Fitch said the ceasefire agreement could reduce pressures on Israel’s credit profile.
Israel’s bonds, which had been under pressure during the war, gained after a ceasefire agreement took effect on Wednesday, while Lebanon’s deeply distressed bonds also gained strength.
Moody’s maintained a negative outlook on Israel’s rating following its September downgrade, which occurred due to the escalation of the conflict in the region, and warned that further downgrades were possible due to uncertainty about the country’s security and long-term economic growth prospects.
It also said on Thursday that while geopolitical risks “appear to have partially diminished,” domestic political risks remained.
“In our opinion, the Israeli government is pursuing a policy that deepens the already high social tensions in the country,” he said, citing contentious judicial reforms and attempts to permanently exempt ultra-Orthodox Jews from military service.
