Sukuk market set for H2 recovery as GCC issuers return: Moody’s 

RIYADH: Global sukuk issuance is expected to recover gradually in the second half of 2026 as Gulf Cooperation Council issuers return to the market, with volumes likely to range between $140 billion and $150 billion, a new analysis said.  

Global sukuk issuance is expected to reach around $280 billion in 2026, broadly in line with last year’s level, despite conflict and geopolitical uncertainty in the Middle East weighing on activity in several key markets, Moody’s said in a report. 

Issuance in the first half of 2026 rose 2 percent to about $130 billion, from $127 billion a year earlier. A sharp increase in short-term issuance and stronger corporate activity offset declines in long-term issuance by sovereigns and financial institutions, according to the report.  

Fitch Ratings said in August that liquidity among most of its rated sukuk was edging closer to pre-war levels, although the recovery remained uneven across countries, currencies and sectors. As of Aug. 4, just over 75 percent of Fitch-rated sukuk had a liquidity score above 50, up from 64 percent on March 23 but below 81 percent in January. The median liquidity score rose to 64 from a trough of 55 on March 23, but remained below the pre-war level of 68. 

“We expect issuance in the GCC to recover gradually in the second half of 2026, provided the ceasefire broadly holds, and market conditions remain stable, as sovereign funding required for economic diversification plans and bank funding diversification needs remain significant. GCC issuance is therefore likely to remain an important contributor to full-year volumes,” said Moody’s. 

Underlying demand for sukuk remains firm, while long-term growth prospects are supported by sovereign financing needs, bank funding diversification and rising appetite for Shariah-compliant financial products. Geopolitical risks, however, continue to weigh on green and sustainable sukuk issuance. 

Domestic markets 

Moody’s said deepening domestic markets are supporting long-term sukuk growth, with the investor base expected to widen as sukuk gains traction beyond core Islamic markets. 

Local-currency markets, particularly in Malaysia and Saudi Arabia, are becoming an increasingly important source of supply, while government initiatives in key Islamic finance markets are supporting longer-term growth. 

Southeast Asia was the largest contributor to global sukuk issuance in the first half, with volumes rising 26 percent to $61.9 billion from $49.2 billion a year earlier. Malaysia accounted for $49.2 billion of issuance, up 39 percent from the first half of 2025. 

Green sukuk

Green and sustainable sukuk issuance fell 53 percent to $2.4 billion in the first half of 2026, from $5.1 billion a year earlier. 

Saudi Arabia accounted for $2.1 billion of issuance, while Indonesia contributed $300 million. There was no issuance from the UAE, compared with $1.7 billion in the first half of 2025. 

Moody’s said the decline largely reflected the concentration of green and sustainable sukuk issuance in GCC markets, particularly Saudi Arabia and the UAE, where conflict-related uncertainty and weaker international investor participation weighed on activity. 

GCC issuance 

GCC sukuk issuance declined 23 percent to $51.1 billion in the first half of 2026 from $66 billion a year earlier, reflecting conflict-related market volatility as well as issuer-specific factors including the timing of sovereign funding and liability-management operations. 

Saudi Arabia’s total issuance fell 18 percent to $34.2 billion from $41.3 billion. A 59 percent increase in corporate issuance to $8.8 billion partly offset lower sovereign and bank issuance. Sovereign issuance fell 29 percent to $18.4 billion, while bank issuance declined 30 percent to $6.9 billion. 

UAE issuance fell to $4.6 billion from $13.9 billion, reflecting lower financial institution, corporate and sovereign activity. Sovereign issuance declined to $1 billion from $3.9 billion, partly because Sharjah did not issue sukuk during the period.  

Oman’s issuance increased to about $1.2 billion from a low base, driven almost entirely by Energy Development Oman’s $850 million sukuk. Bahrain’s issuance declined to $2.9 billion from $3.8 billion, while Kuwait’s fell to $1 billion from $4.5 billion, largely because of lower issuance by financial institutions.  

Source – Arab News