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GCC US dollar sukuk and bond yields have widened to five-year high spreads since the start of the Iran war, reflecting heightened risk perceptions, according to Fitch Ratings.
The move “exceeds recent geopolitical, tariff and sharia-related volatility, but remains below pandemic-era levels,” Fitch said.
Yields to maturity (YTM) on the S&P MENA Sukuk and Bond indices have risen sharply since the conflict began, with widening most pronounced among speculative-grade issues.
The Sukuk Index YTM rose by 69 basis points over the past month to 5.15% as of March 27, while the Bond Index climbed 64bp to 5.37%. The S&P GCC High Yield Sukuk Index saw a sharper increase, with YTM jumping 194bp to 7.76% over the same period.
Despite the sell-off, MENA sukuk continue to trade at tighter levels than comparable bonds, supported by sustained demand, particularly from Islamic banks.
Fitch said pricing and liquidity conditions will depend on the scope and duration of the war, with impacts varying by credit rating, country risk and sector. Longer-term effects will hinge on post-war market sentiment, activity levels and market access.
(Writing by Brinda Darasha; editing by Seban Scaria)
