“There is a significant risk that political and social tensions over the issue will continue, with negative consequences for Israel’s economy and security situation,” the credit ratings firm wrote in a report. The Israeli parliament passed a law on Monday stripping the Supreme Court of its power to block government decisions. The dramatic move set off angry protests, threats of strikes from workers and selling from investors. The Tel Aviv 35 Index has plunged by 5.2% over the past two days.
“Although domestic and geopolitical tensions have traditionally not had a major or lasting impact on Israel’s economy, a serious escalation of tensions with the Palestinians could endanger improved relations” between Israel and regional powers, Moody’s said. In response to the Moody’s report, Israeli Prime Minister Benjamin Netanyahu issued a statement defending the resilience of the country’s economy.