LONDON Israel's war with Hamas in Gaza will lead to a larger-than- expected budget deficit next year, investment bank JPMorgan said on Wednesday, adding that the cost of the conflict would also result in a significant jump in debt issuance.

The bank's analysts said they now expected the government's budget deficit to widen to around 4.5% of GDP in 2023 and 2024 versus their previous forecasts of a 4.5% deficit in 2023 but a lower 2.9% deficit in 2024.

They added that while the pressures would impact investor appetite for Israel's bonds, they did not expect demand to evaporate. The bar for the country's central bank to intervene in the bond market was also high, they said.

(Reporting by Marc Jones, editing by Karin Strohecker)