The US ratings agency Moody’s has downgraded Israel’s credit rating Friday due to the impact of its ongoing conflict with Hamas in Gaza, lowering it by one notch from A1 to A2, AFP reports.

In a statement, Moody’s said it had done so after assessing that “the ongoing military conflict with Hamas, its aftermath and wider consequences materially raise political risk for Israel as well as weaken its executive and legislative institutions and its fiscal strength, for the foreseeable future.” It was the first time Israel has been downgraded, Bloomberg reported.

Moody’s also lowered its outlook for Israel’s debt to “negative” due to “the risk of an escalation” with the far more powerful Lebanese group Hezbollah that operates along its northern border.

“The weakened security environment implies higher social risk and indicates weaker executive and legislative institutions than Moody’s previously assessed,” Moody’s said on Friday in the statement explaining its decision.

“At the same time, Israel’s public finances are deteriorating and the previously projected downward trend in the public debt ratio has now reversed,” it continued.

“Moody’s expects that Israel’s debt burden will be materially higher than projected before the conflict,” it added.