Fitch Ratings-Dubai/Jakarta/Toronto:  New US dollar bond and sukuk issuances from Gulf Cooperation Council (GCC) issuers have fallen significantly since the start of the Iran war, after presenting strong credit fundamentals ahead of the outbreak, Fitch Ratings says. Many deals remain on hold due to the economic uncertainties and volatility. This will affect Emerging Markets (EM) debt issuance trends, as the GCC accounts for about 40% of all EM dollar issued so far in 2026 (excluding China). Historically, regional DCM issuances have typically rebounded swiftly once tensions eased following previous geopolitical conflicts in the Middle East. However, the ultimate effect will depend on the scope and duration of the Iran war. While some yield widening is visible in GCC bonds and sukuk since the war began, there have not been market wide selloffs.

About 84% of Fitch-rated sukuk in the GCC countries were rated investment grade (end-2024: 80%), with 63.2% in the ‘A’ category, 90% of issuers on Stable Outlooks, and no recorded defaults as of end-2025. Fitch rates around 70% of outstanding GCC dollar sukuk.

GCC issuances were strong at the start of 2026, with many entities aiming to benefit from favourable conditions ahead of the typical Ramadan slowdown. GCC debt capital market (DCM) outstanding reached USD1.2 trillion as of March 9, 2026, up 14% year on year, with 63% of issuance denominated in US dollars. Sukuk issuance rose to a record 41% share of GCC DCM volumes, with Saudi Arabia and the UAE making up the majority of GCC DCM outstanding, followed by Qatar, Bahrain, Kuwait and Oman. Sukuk in EMs rose to 16% of all dollar DCM issuance in 2025 (excluding China; 2024: 12%). Local-currency GCC sukuk and bonds continue to be issued, mainly by sovereigns.

Funding needs and diversification remain key priorities for GCC governments and issuers seeking broader liquidity channels. Many issuers plan funding well in advance, particularly for large maturities, which helps limit immediate refinancing pressure. Fitch’s annual average oil price assumptions (Brent) are USD70 per barrel for 2026 and USD63 for 2027.

Despite heightened geopolitical challenges in recent years, GCC issuer activity has rebounded quickly once tensions eased, with market access broadly maintained for many issuers. However, the duration and scale of the conflict in the Middle East have already surpassed the 2025 Twelve-Day War, testing new levels of market uncertainty.

Fitch analysed the yield-to-maturity (YTM) of the S&P MENA Sukuk and Bond Indices. YTM on the indices widened following the onset of war, on 28 February 2026. By 10 March, the YTM on the Sukuk Index had reached 4.78%, tighter than the bond benchmark, which stood at 5.01%. However, these levels are only moderately higher than those observed on 27 February, before the war began, when the Sukuk Index YTM was 4.46% (a 32bp increase), while the Bond Index YTM was 4.73% (a 28bp increase).

MENA sukuk continues to trade tighter than MENA bonds, reflecting sustained and broader demand, including from Islamic banks, with yield widening more pronounced among non-investment grade issuers. The YTM on the S&P Global High Yield Sukuk Index rose to 6.61% on 10 March 2026, up from 5.82% on 27 February (a 79bp increase). Similar periods of yield widening have occurred, particularly in times of heightened geopolitical or sharia-related uncertainty. However, the current YTM movement remains below the peak levels recorded in earlier episodes.

There has been a very strong correlation (0.99) between the YTM for sukuk and bond indices over the five years to 6 March 2026, according to Fitch.

Contact:
Bashar Al Natoor
Managing Director – Global Head of Islamic Finance
bashar.alnatoor@fitchratings.com
Fitch Ratings – Dubai Branch
Maze Tower, 18th Floor
Sheikh Zayed Road, P.O. Box 215584, Dubai, U.A.E.

Saif Shawqi, CFA, FRM
Director – Islamic Finance
saif.shawqi@fitchratings.com

Amjad Alkabra
Associate Director – Islamic Finance
amjad.alkabra@fitchratings.com

Media Relations: Peter Fitzpatrick, London, Email: peter.fitzpatrick@thefitchgroup.com
Matthew Pearson, London, Email: matthew.pearson@thefitchgroup.com

Additional information is available on www.fitchratings.com

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