The agency attributed the downgrade to the repercussions of the war in Gaza, which increases political risks. It also indicated in its report a “negative outlook,” which may lead to another downgrade of the rating.

On Friday, Moody's, the credit rating agency, lowered Israel's credit rating for the first time in its history, in light of the continuation of the war on Gaza, while Israeli Prime Minister Benjamin Netanyahu said that the rating "will rise as soon as we win the war."

The reduction in Israel's credit rating came in line with the expectations of Israeli economic officials, who had said in statements to the media: "We are not optimistic, but we will try until the last minute to prevent the downgrading."

Moody's announced that it reduced Tel Aviv's credit rating to level A2 from level A1.

The agency also indicated in its report a “negative future outlook” that may lead to another downgrade of the rating, if the security, geopolitical and economic situation of Israel deteriorates soon, due to the war in Gaza, or due to the expansion of the confrontation in the north of the country with Hezbollah.

The agency attributed the reason for lowering the rating to the repercussions of the war in Gaza, which increases political risks.

The agency expected Israel's debt burden to rise above pre-war expectations.

Moody's stated that "the reason for lowering Israel's rating is the war with Hamas, and its repercussions that increase the political risks for Israel."

It stressed that "the escalation of the conflict with Hezbollah is still ongoing, raising the possibility of a significant negative impact on the Israeli economy."

Commenting on the unprecedented decision, Netanyahu said, "Israel's economy is strong, and the reduction has nothing to do with the economy. Rather, it is entirely due to the fact that we are in a state of war."

He added: “The rankings will rise again once we win the war, and we will win,” he said.

Economists believe that there is a fear that companies will withdraw their business from Israel, or reduce their business during the current year.

Moody's had published a report addressed to investors in Israel last July, against the backdrop of legislation to weaken the judiciary, in which it stated that "there is a real danger of continuing political and social tensions and they will negatively affect the Israeli economy." In parallel, investment banks Morgan Stanley and Citi warned that they expect "increasing uncertainty regarding Israel's economic outlook."

In the wake of the war on Gaza, the credit rating agency Standard & Poor's decided to change Israel's credit rating forecast from "stable" to "negative", against the backdrop of a change in perception of regional risks following the war.

Moody's and the credit rating company Fitch also announced a similar change to the nature of Israel's credit rating, a week after the outbreak of the war on Gaza.