By Key takeaways:
- GCC sukuk issuance fell 23 percent year on year to $51.1 billion in the first half of 2026, down from $66 billion, according to Moody’s.
- Saudi Arabia stayed the region’s biggest issuer despite an 18 percent decline, while the UAE’s issuance dropped a sharper 67 percent and Oman was the only market to grow.
- Moody’s expects a gradual second-half recovery, but only if the ceasefire in the region continues to hold.
GCC sukuk issuance falls to $51.1 billion in H1 2026
Gulf sukuk issuers had a rough first half. Combined GCC sukuk issuance fell 23 percent year on year to $51.1 billion in the first six months of 2026, down from $66 billion a year earlier, according to a Moody’s report cited by Arab News. The ratings agency blames the regional conflict for disrupting borrowing plans, as issuers pushed back sovereign funding and liability management operations rather than tap markets during periods of heightened uncertainty.
The decline was not evenly spread. Saudi Arabia remained by far the region’s largest sukuk market, but even there issuance fell 18 percent to $34.2 billion. Sovereign issuance dropped 29 percent to $18.4 billion and bank issuance fell 30 percent to $6.9 billion. Corporates were the exception, ramping issuance up 59 percent to $8.8 billion and cushioning some of the broader decline.
The UAE saw the steepest fall, Oman the only gain
The UAE had a harder first half than Saudi Arabia by nearly every measure. Issuance dropped 67 percent to $4.6 billion from $13.9 billion a year earlier, with sovereigns, banks and corporates all scaling back. Sovereign issuance alone fell to $1 billion from $3.9 billion, partly because Sharjah sat out the sukuk market entirely during the period, a notable absence given how active the emirate has been in debt markets in recent years.
Kuwait’s issuance also fell, to $1 billion from $4.5 billion, driven mainly by lower bank activity, while Bahrain slipped to $2.9 billion from $3.8 billion. Oman was the lone bright spot, with issuance rising to around $1.2 billion from a low base a year earlier. The gain was driven largely by a single deal, Energy Development Oman’s $850 million offering, which on its own accounted for the bulk of the sultanate’s activity.
The divergence between Saudi Arabia and the UAE is worth sitting with. Riyadh has continued to lean on debt markets partly to offset a budget deficit tied to war-related costs, a gap the kingdom’s own $3.25 billion sukuk sale earlier this month was designed to help close. The UAE, by contrast, has more fiscal room to simply wait out the uncertainty rather than issue into a choppy market, which helps explain why its pullback was so much sharper than Saudi Arabia’s.
Why green sukuk took a bigger hit
Green and sustainability-linked sukuk issuance fell by more than the broader market, a detail that stands out given how much attention Gulf governments have put into ESG-linked debt over the past few years. With issuers focused on managing near-term liquidity and timing amid the conflict, the longer lead times and additional reporting that typically come with green-labelled instruments appear to have made them an easier category to defer than conventional or standard sukuk.
What a H2 recovery would depend on
Moody’s expects a gradual pickup in the second half of 2026, but it is conditional. The agency’s baseline assumes the ceasefire in the region broadly holds and that market conditions stay stable enough for issuers to return to a more normal calendar. That is a meaningful “if” for a region that has already seen shipping insurance costs spike after tanker attacks in the Strait of Hormuz and LNG export capacity knocked offline by strikes on Qatari infrastructure this year.
Saudi Arabia’s return to international dollar markets earlier this month offers some evidence that appetite has not disappeared. The kingdom’s $3.25 billion dual-tranche sukuk drew more than $16.5 billion in orders, suggesting investors are still willing to commit capital when sovereigns come to market, even if issuers themselves have been more selective about timing. That gap between investor demand and issuer supply is likely to be the story of the second half: the money appears to be there, waiting for issuers to feel confident enough to ask for it.
For banks, arrangers and corporate treasurers across the Gulf, the practical read is that pipeline delays this year are more about caution than a lack of capital. Whether that caution lifts will depend less on economics and more on whether the ceasefire that has underpinned Moody’s forecast continues to hold through the rest of 2026.
It is also a reminder that Islamic finance in the Gulf is not one uniform market. Corporates, banks and sovereigns are moving on different timelines within the same region, and a headline decline of 23 percent obscures a Saudi corporate sector that actually issued more, not less, this year. Investors and issuers who treat the GCC sukuk market as a single block risk missing where the real opportunity, and the real caution, currently sits.
Sources: EnterpriseAM, Arab News.
Read more: GCC Sukuk Liquidity 2026: Why Islamic Bonds Are Beating Conventional Debt