U.S. credit rating agency Fitch on Monday night downgraded the Israeli government's credit ratings from A+ to A, with the outlook remaining unchanged at "negative."

Fitch said in a report that the downgrade reflects the impact of the conflict's continuation in Gaza, heightened geopolitical risks and military operations on multiple fronts.

It noted that Israel's public finances have been hit and projected a budget deficit of 7.8 percent of GDP in 2024 and debt to remain above 70 percent of GDP in the medium term.

The agency added that the conflict in Gaza could last well into 2025 and there are risks of it broadening to other fronts, which implies "continued high spending on immediate military needs and disruptions to production in the border areas and tourism and construction."

"In addition to human losses, it could result in significant additional military spending, destruction of infrastructure and more sustained damage to economic activity and investment, leading to a further deterioration of Israel's credit metrics," the report stressed.

According to the agency, recent tensions between Israel and regional powers highlighted "the high level of tensions in the region and the risk of escalation that could further damage Israel's credit profile."