A surge in bond and sukuk sales across the Gulf has abruptly slowed as escalating tensions with Iran inject fresh uncertainty into financial markets, prompting issuers to pause planned deals.
According to Fitch Ratings, debt offerings across the Gulf Cooperation Council (GCC) have dropped sharply since the conflict intensified, with several transactions now shelved as volatility ripples through global markets. The region has been a major engine for emerging market borrowing this year, accounting for close to 40% of all US-dollar denominated issuance from emerging economies in 2026, excluding China.
The slowdown comes after a remarkably strong start to the year. January alone saw GCC governments and companies raise roughly $30 billion, led by Saudi Arabia. The brisk pace continued through February and into early March, pushing the region’s total outstanding debt in capital markets to about $1.2 trillion by March 9 — a 14% jump compared with the same period a year earlier. Nearly two-thirds of that debt has been issued in US dollars.
Islamic finance instruments have also been gaining ground. Sukuk accounted for a record 41% share of the region’s debt capital market volumes during the period. Saudi Arabia and the United Arab Emirates dominate the market’s outstanding debt, followed by Qatar, Bahrain, Kuwait and Oman.
Credit quality across the sukuk landscape remains strong. Roughly 84% of Fitch-rated sukuk in the GCC carry investment-grade status, with most clustered in the ‘A’ rating band. The majority of issuers maintain stable outlooks, and the region recorded no sukuk defaults through the end of last year.
Still, the conflict has begun to ripple through pricing. Yields on both bonds and sukuk have edged higher since hostilities erupted, though the pressure has been felt more strongly by issuers with lower credit ratings. Even so, sukuk from the Middle East and North Africa have continued to trade more tightly than conventional bonds, suggesting demand for Sharia-compliant assets remains resilient.
Market participants are now closely watching how long the conflict lasts and how far it spreads. Analysts note that Gulf debt markets have historically bounced back quickly once regional tensions ease. For now, while yields have widened, the market has avoided the kind of broad sell-offs that often accompany geopolitical shocks.
The uncertainty, however, is already testing investor nerves. The current confrontation has stretched beyond the duration of last year’s brief regional flare-up, pushing the market into unfamiliar territory and leaving issuers waiting for calmer waters before returning to the borrowing table.
