Sukuk liquidity stabilizes but remains below pre-Iran war levels: Fitch

Liquidity in Islamic bonds, known as sukuk, has remained broadly stable since August 2026 but is still below levels recorded before the Iran conflict, according to Fitch Ratings.

The average liquidity score across Fitch-rated sukuk stood at 62 on November 2, unchanged from October 1, compared with 64 in August and 68 in January, before the conflict. The score was seven points above its March low of 55.

How much has sukuk liquidity recovered?

About 69% of Fitch-rated sukuk had liquidity scores above 50 as of November 2, compared with 64% in March and 81% in January. The median score stood at 61, recovering from 55 in March but remaining below the pre-conflict level of 68, according to Fitch's assessment.

The agency measures liquidity using Bloomberg's Liquidity Assessment (LQA) scores, which range from 1 to 100. Higher scores indicate lower estimated costs of selling securities, while lower scores reflect higher liquidation costs.

The model considers trading volume, transaction costs and the time required to sell securities. Fitch's analysis excludes sukuk with local ratings, with average scores calculated by instrument count.

Which sukuk remain the most liquid?

Investment-grade sukuk continued to outperform speculative-grade instruments, recording an average liquidity score of 67 on November 2, compared with 35 for non-investment-grade sukuk.

Investment-grade liquidity was slightly below the August score of 69 and remained lower than January's 72. However, it was above the March level of 64.

Non-investment-grade sukuk recorded a score of 35, down from 40 in August but above the March low of 33. The category's average stood at 48 before the conflict.

Sukuk carrying 'AAA' and 'F1sf' ratings recorded the highest liquidity scores, while those in the 'A' rating category showed the strongest improvement between October and November.

The figures indicate that higher-rated sukuk generally have lower estimated liquidation costs than lower-rated instruments.

How does liquidity differ across regions?

Sukuk issued in Association of Southeast Asian Nations (ASEAN) markets remained more liquid on average than those in the Gulf Cooperation Council (GCC), Fitch said.

Sukuk from Hong Kong, Malaysia, Indonesia and supranational issuers recorded some of the highest liquidity scores, ranging from 69 to 95.

Within the GCC, sukuk from Saudi Arabia, Qatar and Kuwait were among the most liquid, with an average score of approximately 57.

Fitch said liquidity in these markets was briefly affected by Houthi attacks in late October before recovering, although it remained below January levels.

Turkish and Egyptian sukuk recorded liquidity scores of around 50. Turkish sukuk liquidity slipped slightly below its March level, while Egyptian instruments remained above their March readings.

Fitch expects sukuk liquidity to remain sensitive to geopolitical tensions, elevated interest rates and the movement of capital from emerging markets into developed economies.

Which sectors and currencies performed best?

Asset-backed securities (ABS) were the most liquid sukuk sector and the only category recording liquidity above pre-conflict levels.

Supranational and sovereign sukuk followed, while instruments issued by real estate developers in the United Arab Emirates (UAE) had the lowest liquidity scores within Fitch's coverage.

The agency also found that investment-grade environmental, social and governance (ESG) sukuk in the GCC had liquidity levels similar to comparable non-ESG instruments.

By currency, Malaysian ringgit-denominated sukuk remained the most liquid, continuing to trade above pre-conflict liquidity levels.

Euro-denominated sukuk also performed strongly, with their average liquidity score rising to approximately 81.

Within GCC markets, local-currency sukuk were generally more liquid than conventional bonds denominated in local currencies.

By maturity, sukuk with less than one year remaining and those with maturities of 10 years or more recorded the highest liquidity scores.

How large is the global sukuk market covered by the data?

The global sukuk market covered by Bloomberg liquidity scores exceeded USD 950 billion in outstanding value, according to Fitch.

Approximately 84% of this broader market by outstanding value had liquidity scores above 50, while only 2.5% scored below 25.

The largest concentration of outstanding value was in the 85–90 liquidity-score range, accounting for 11.1% of the market, followed by the 55–60 range at 10.3%.

These figures cover the broader sukuk market with available Bloomberg liquidity scores and differ from the results for Fitch-rated instruments alone.

Fitch said it rates more than 70% of outstanding US dollar-denominated sukuk globally.

The agency expects liquidity conditions to remain sensitive to geopolitical developments and international financial-market trends, despite the recovery from March's lows.