The credit rating agency’s decision applies to the issuer ratings assigned to Israel, including 'F1+' short-term foreign- and local-currency ratings and the 'A+' long-term foreign- and local-currency ratings.

The decision also affects the country’s 'A+' rating assigned to its long-term foreign currency senior unsecured bonds.

RWN means that Fitch could downgrade Israel’s sovereign credit rating.

Fitch Ratings ascribed its negative outlook to the possibility that the current conflict expands to include multiple actors, such as Hizbullah and Iran, over a long period, which could increase pressure on Israel’s budget.

“In our view, a major escalation could result in negative rating action. This could take the form of a wider and longer conflict, resulting in a sustained fiscal drain, both from higher spending and lower tax collection, as well as loss of human and material capital and severe economic disruption,” Fitch said.

Israel has never been downgraded by either Fitch or rival rating agencies, including Standard and Poor’s Global (S&P) and Moody's.

Meanwhile, Moody's warned last week that a prolonged conflict in Gaza could drag down the country's credit score.

Earlier this week, Modi Shafrir, the chief strategist at the Israeli Bank Hapoalim, said it expected the country’s economy to lose more than $8 billion owing to its war with Hamas.

The impact of the war on Israel’s GDP is anticipated to be felt in private consumption and tourism figures, he added.

Israeli military forces are still launching continuous attacks on the Gaza Strip. On Tuesday, air strikes on a Gaza hospital compound killed at least 600 people.

More than 3,000 people have been killed in Israeli air strikes across the Gaza Strip since the war broke out on 7 October.