Moodys raises Israels credit outlook

International credit ratings agency Moody’s has upgraded Israel’s credit outlook from negative to stable. Moody’s is following in the footsteps of S&P, which also upgraded Israel’s credit outlook from negative to stable in November.

However, Israel’s credit rating remains unchanged at Baa1. Moody’s took a particularly tough line towards Israel during the war, lowering its rating more sharply than the other international ratings agencies. In September 2024, on the eve of Hezbollah leader Hassan Nasrallah’s assassination in Lebanon in 2024, Moody’s even decided, in an unusual move, to double downgrade Israel.

Since then, the shekel has strengthened dramatically, the risk premium has fallen, and the Tel Aviv Stock Exchange (TASE) has performed particularly strongly, outperforming most of the world’s leading stock exchanges.

The geopolitical security consideration has been decisive.

Moody’s reason for upgrading Israel’s credit outlook is first and foremost, the decrease in security risk. “We expect Israel’s geopolitical and security environment to remain fragile, with occasional flare-ups that could lead to ceasefire violations and even a return to military confrontations,” Moody’s said, adding that geopolitical conditions have improved to the point where the risk of further significant weakening in Israel’s sovereign credit profile has substantially decreased.

Moody’s also hints at why the forecast upgrade is relatively measured and the rating itself remains unchanged: “Looking ahead, geopolitical risks remain heightened and constitute a limitation on the rating.”

Moody’s highlights a number of signs in its decision that indicate the strength of the local economy. “The Israeli economy has proven its resilience during a brief but intense conflict with Iran over the past two years,” the international ratings agency said.

Moody’s also positively noted expected growth of 5% in the coming year and 3-3.5% in the following two years, which it describes as, “A robust level relative to other developed economies.” Moody’s also see Israel’s fiscal deficit continuing to decline and the debt-GDP ratio to remain unchanged at 68%.

Moody’s also notes the positive flow of Investments in the local tech sector.

What could lead to a rating upgrade?

Moody’s notes that a continued reduction in geopolitical risks, “As a result of increasing clarity about the sustainability of ceasefires and ongoing political solutions to the multiple causes of tensions,” will support a future rating upgrade.

S&P upgrades Israel’s rating outlook

Moody’s: Ceasefire credit positive but risks are high

Another factor that will support this is deficit reduction and fiscal tightening measures. On the other hand, if geopolitical tensions increase, Israel’s rating could be harmed again.

Moody’s also mentions internal political factors that could exert negative pressure on the rating. “Downward pressure on the rating could also build as a result of the weakening of Israel’s institutions, in particular if the judiciary turns out to be weaker than we have assessed so far, potentially as a result of institutional reforms.”

Published by Globes, Israel business news – en.globes.co.il – on February 1, 2026.

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