New U.S. dollar bond and sukuk issuances from Gulf Cooperation Council issuers have slowed significantly since the start of the U.S.-Israel war against Iran, as market volatility and economic uncertainty prompt many borrowers to delay deals, Fitch Ratings said.
The rating agency said several planned issuances remain on hold despite strong credit fundamentals among Gulf issuers before the conflict began.
This slowdown could affect broader emerging market debt issuance trends because GCC issuers account for about 40% of all emerging market dollar issuance in 2026, excluding China, Fitch said.
Historically, debt capital market activity in the region has rebounded quickly after geopolitical tensions ease, though the ultimate impact will depend on the scope and duration of the Iran conflict.
While yields on GCC bonds and sukuk have widened since the war began, there has not been a market-wide selloff, according to Fitch.
Strong fundamentals before the conflict
Fitch said the region entered 2026 with strong credit metrics.
About 84% of Fitch-rated sukuk in GCC countries were investment grade as of the end of 2025, up from 80% a year earlier. Around 63.2% were rated in the ‘A’ category, while 90% of issuers carried stable outlooks, and no defaults had been recorded.
Fitch rates roughly 70% of outstanding GCC dollar sukuk, the agency said.
Issuance activity was also strong at the beginning of the year as borrowers sought to tap favorable market conditions ahead of the traditional slowdown during Ramadan.
Outstanding GCC debt capital market issuance reached $1.2 trillion as of March 9, up 14% year-on-year, with 63% denominated in U.S. dollars.
Sukuk accounted for a record 41% share of GCC debt capital market volumes, with Saudi Arabia and the United Arab Emirates representing the largest share of outstanding debt, followed by Qatar, Bahrain, Kuwait and Oman.
Across emerging markets, sukuk accounted for 16% of all dollar debt issuance in 2025, up from 12% in 2024, excluding China.
Yield movements and market trends
Fitch said funding diversification remains a priority for GCC governments and issuers seeking broader liquidity channels.
Many issuers also plan financing well in advance to manage large maturities, helping limit immediate refinancing pressures.
The agency maintained its oil price assumptions for Brent crude at $70 per barrel in 2026 and $63 in 2027.
Analysis of the S&P MENA Sukuk and Bond Indices showed yields widened following the outbreak of the war on Feb. 28.
By March 10, the yield to maturity on the S&P MENA Sukuk Index rose to 4.78%, compared with 4.46% before the conflict, a 32 basis-point increase.
The bond index yield rose to 5.01%, up from 4.73%, representing a 28 basis-point increase.
Sukuk continued to trade at tighter yields than conventional bonds, reflecting stronger demand, including from Islamic banks, Fitch said.
Yield widening was more pronounced among non-investment-grade issuers. The S&P Global High Yield Sukuk Index yield rose to 6.61% on March 10, from 5.82% on Feb. 27, a 79 basis-point increase.
Fitch said similar periods of yield widening have occurred during past episodes of geopolitical or sharia-related uncertainty, though current levels remain below peaks seen in earlier crises.
Over the past five years, yields on sukuk and bond indices have shown a strong correlation of 0.99, Fitch added.
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