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US credit rating agency Fitch downgraded Israel a notch on Monday, warning that its ongoing war on Gaza could last "well into 2025" and weigh on economic activity.

Fitch lowered Israel's rating from "A+" to "A".

"The conflict in Gaza could last well into 2025 and there are risks of it broadening to other fronts," Fitch said in a note.

"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."

Public finances have been hit, with Israel projected to run a budget deficit this year, according to Fitch.

International mediators have invited Israel and Hamas to resume negotiations this week on a ceasefire and hostage release deal.

Hamas meanwhile has urged the mediators to implement a truce plan presented by US President Joe Biden instead of holding more talks.

Fitch said that the conflict continuing into next year would force Israel to continue its high spending on military and that there would be further disruption to tourism, construction and production in border areas.

Israel has also exchanged near-daily cross-border fire with Hezbollah in Lebanon.

Iran and its Lebanese ally Hezbollah have vowed revenge for the killing of Hamas's political leader in Tehran, and of a Hezbollah commander in Beirut.

The United States and European allies called on Iran to "stand down" Monday, as fears mounted of an imminent attack on Israel that could spark an all-out war in the Middle East.