Global sukuk issuance to slow in 2025's third quarter after record first half, Fitch predicts

Global sukuk issuance is expected to decelerate in the third quarter of 2025 due to seasonal summer trends in key markets, following a record-breaking first half of the year that saw total volumes surpass $1 trillion for the first time, according to Fitch Ratings.

“The sukuk market’s credit profile remained broadly robust, despite a period of geopolitical conflict in the Middle East, as 80% of Fitch-rated sukuk are investment grade and 87% of issuers have a stable outlook,” said Bashar Al Natoor, global head of Islamic finance at Fitch Ratings. “On the issuance side, after a brief pause, sukuk rebounded swiftly as tensions eased.”

Fitch forecasts a resurgence in issuance in the fourth quarter, driven by rising Islamic investor demand, funding diversification, refinancing requirements, budgetary needs, and government backing for Islamic finance expansion.

In parallel, regulatory developments are shaping the market’s framework. The Accounting and Auditing Organization for Islamic Financial Institutions is revising draft Shariah standard No. 62. In response, several regulators have already addressed sukuk asset registration requirements.

The UAE Central Bank’s Higher Sharia Authority (HSA) recently issued a resolution allowing the sale of rights over tangible assets without requiring registration, a move expected to preserve market stability. Ras Al Khaimah’s sukuk, rated ‘A+’, benefited from a registration exemption for real estate ijara assets, granted by decree under the HSA’s framework.

Sukuk penetration in emerging markets is rising steadily, now accounting for over 16.5% of all emerging market US dollar debt issued in the second quarter of 2025 (excluding China), up from 12% in 2024. Notable issuances this year included ADNOC Murban RSC Ltd’s record-setting ‘AA’ rated corporate sukuk, Egypt’s return to the sukuk market with a ‘B’ rated issuance, and Jordan’s debut dollar-denominated sovereign sukuk.

Banks in the Gulf Cooperation Council (GCC) region continue to play a central role as both issuers and investors in the sukuk market, supported by strong liquidity. Some UAE banks have also introduced fractional sukuk offerings to broaden retail investor access.

While a softer oil price outlook — $70 per barrel in 2025 and $65 in 2026 — is expected to stimulate further sukuk and bond issuance in the GCC, Fitch cautions that risks remain. These include potential changes to Shariah compliance requirements, geopolitical tensions, and unexpected oil price shocks.

The anticipated single rate cut by the U.S. Federal Reserve in the fourth quarter of 2025, projected to bring the rate to 4.25% and further down to 3.5% in 2026, may provide additional momentum to sukuk issuance in the final quarter.