Israel’s sovereign credit rating could be cut if the conflict in Gaza expands to other fronts, but if this does not happen it should be able to weather the economic fallout if it makes needed budget changes to offset higher spending, an S&P Global Ratings director said, according to Reuters.

S&P in October affirmed Israel’s ‘AA-’ rating but revised Israel’s outlook to “negative” from “stable”, citing risks that the fighting in Gaza could spread more widely with a more pronounced impact on the economy and security situation in the country.

“The negative outlook on the ratings implies that we currently see at least a one-in-three chance of a downgrade over the next one to two years,” said Maxim Rybnikov, director of EMEA Sovereign & Public Finance Ratings at S&P, told Reuters in e-mailed comments.

He said that if Israel’s security and geopolitical risks increase due to an escalation of the conflict — a direct confrontation with Hezbollah in Lebanon or Iran — that could lead to a downgrade.