Stock market, oil at +3% on the Middle Eastern crisis. S&P cuts Israel’s rating

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Oil prices recorded a surge of more than 3% on fears in the Middle East after unconfirmed rumors of explosions in Iran, Syria and Iraq, fueling new fears about the crisis in the Middle East: in Asian trading, West Texas Intermediate (WTI ) jumped by 3.66% to 85.76 dollars, while Brent rose by 3.44% to 90.11 dollars.

In light of the tensions in the region, S&P cut Israel’s rating by one level – from AA- to A+ – in light of the increased confrontation with Iran which “increases already high geopolitical risks”. In a decision adopted shortly before the new raid against Tehran, the agency explains that it believes “that a broader regional conflict will be avoided, but the war between Israel and Hamas and the confrontation with Hezbollah seem destined to continue throughout 2024”, unlike the previous hypothesis of a military activity lasting no more than six months. In this scenario, S&P expects Israel’s deficit to increase to 8% of GDP this year, mainly due to increased defense spending. But “higher deficits will persist in the medium term and we expect general government net debt to peak at 66% of GDP in 2026.” The outlook on long-term ratings is negative. The agency forecasts real growth of 0.5% in 2024, following +2% in 2023 in which Israel’s GDP contracted by 5.7% on a quarterly basis in the fourth quarter. “Given past resilience and, arguably, the Israeli economy’s increased ability to adapt to the impact of military conflicts, we expect a significant recovery in growth in the first quarter of 2024.”

Asian stock markets remain in tension due to the latest developments in the Middle East with Israel’s retaliatory attack against Iran, but are recovering ground thanks to oil prices which have dropped below 90 dollars: Tokyo badly (-2.53%) , which slipped to intraday lows since 8 February, Hong Kong (-1.11%) and Taiwan (-3.59%), mainly suffering the fall of the giant Tsmc (-6.34%) despite the quarterly data beyond expectations released Thursday. The Chinese stock markets of Shanghai (-0.28%) and Shenzhen (-0.85%) also reduced their losses.