Banks across the Gulf are increasingly expected to turn toward private placements and syndicated lending deals as prolonged tensions involving Iran continue to unsettle international debt markets, according to a new assessment by Fitch Ratings.
The ratings agency said public bond issuance has become more unpredictable amid market swings triggered by the regional conflict, prompting lenders to seek quieter and faster fundraising routes. Private placements alone have already crossed $4.3 billion in 2026, with senior debt making up the bulk of those transactions.
Spreads across Gulf bank debt widened sharply after the conflict erupted, though some of that pressure has since eased. Fitch noted that senior and Tier 2 instruments saw moderate spread increases, while additional Tier 1 (AT1) spreads moved in the opposite direction and tightened.
Saudi lenders are now expected to cut back more aggressively on dollar-denominated issuance as loan expansion cools across the kingdom. In contrast, banks in the UAE could remain active borrowers as they prepare to refinance roughly $4.4 billion in debt coming due this year.
Despite the turbulence, Gulf banks still managed to raise nearly $17.5 billion in dollar debt during the first four months of 2026, excluding certificates of deposit. That figure marked an increase of around 20 percent from the same period a year earlier, largely driven by strong issuance momentum before geopolitical risks intensified. Senior bonds dominated the fundraising mix, followed by CDs and capital-related instruments.
Investor appetite, however, has not disappeared.
Emirates NBD recently returned to the public dollar market with an AT1 bond sale — the first such GCC banking deal since the outbreak of the conflict. The transaction reportedly drew demand close to three times the amount offered and was priced without an additional risk premium, signalling that global investors are still willing to back strong regional issuers.
Meanwhile, Al Rajhi Bank secured $750 million through a privately placed Tier 2 sukuk after initially targeting $500 million, another indication that institutional demand for Gulf banking paper remains intact despite volatility.
Fitch also pointed to roughly $10 billion worth of AT1 securities reaching their first call dates in 2026, primarily from banks in the UAE and Kuwait. The agency sees limited risk that issuers will skip those calls, citing strong capital buffers and the reputational importance attached to honoring them.
Even if market conditions improve later in the year, Fitch believes total issuance volumes in 2026 are unlikely to match the record-breaking pace seen in 2025. Slower credit growth and persistently higher funding costs are expected to weigh on activity across the region’s banking sector.
