The ratings remain on CreditWatch with negative implications, where they were initially placed on February 21, the rating agency said in a statement.

At the same time, it lowered the ratings on the Central Bank of Bahrain and Bahrain Mumtalakat Holding Company, the sovereign wealth fund.

Those ratings also remain on CreditWatch with negative implications, it said.

“The lowering of Bahrain’s long-term sovereign rating reflects our view that its political and economic environments are fundamentally more challenging as a result of the events of the last three weeks,” said Standard & Poor’s credit analyst Mike Noone.

S&P said it believes that the arrival of troops and police from the rest of the GCC, and the Bahraini government’s declaration of martial law, could polarise both sides instead of stabilizing what is a highly-charged political situation.

“It is our opinion that the current strife will likely inflict damage to Bahrain as a tourist destination and, more importantly, as an offshore financial center in relation to other competing cities in the Gulf.”

It added that the ratings could be removed from CreditWatch and stabilize at current levels if there “is a reconciliation that in our view starts restoring the social contract and drawing a line under the damage done to Bahrain’s economic model.”

Credit rating firm Moody’s Investors Service warned earlier that Bahrain’s creditworthiness could be hurt by the unrest.

“We believe that there is a substantial risk that the medium-term credit fundamentals of Bahrain will be impaired by the present crisis, which seems unlikely to be resolved in the near future,” Moody’s analyst Tristan Cooper said.

Another credit agency, Fitch Ratings, also cut its ratings on Bahrain and its sovereign wealth fund by two notches because of concerns about the deteriorating political situation.

Bahrain’s stock exchange and a few bank branches reopened on Thursday, but business remained far from normal.