MENA debt markets had a muted 1Q 2026

MENA bond issuance fell 12% y-o-y to USD 48.1 bn in 1Q 2026 as escalating geopolitical tensions cooled market activity, according to LSEG data. The number of issuances fell 11% y-o-y, with the GCC market effectively grinding to a halt in March as the regional conflict broke out. Issuances were already subdued because of Ramadan starting in mid-February, but sentiment and activity took a bigger hit throughout March, with USD-denominated sukuk and bond sales from the GCC broadly muted for most of the month.

A quarter of two halves: “Issuance dynamics were uneven over the quarter. January saw robust activity, while February was broadly in line with seasonal norms, despite coinciding partially with Ramadan,” said Bashar Al Natoor, Fitch Ratings’ global head of Islamic finance. The post-Ramadan rebound that markets typically see was undermined this year, making March activity “materially weaker,” Al Natoor said.

REMEMBER- A war premium brought a record-breaking start in GCC borrowing activity to a halt as regional markets began pricing at a war premium following the outbreak of the conflict with Iran, Fitch Ratings previously said. Regional debt markets had been on track to break the USD 1.25 tn mark this year, up from USD 1.1 tn in issuances last year, but a 20-30 bps rise in spreads made borrowing costs just high enough to make most issues uneconomical in the near term.

Saudi Arabia was in the lead before activity stalled: The Kingdom accounted for some 58% of total bond proceeds raised during the quarter, and was home to the two largest issuers by value, the data shows. Saudi Arabia raised USD 32.54 bn across 42 issuances, Kuwait Financial Center (Markaz) said in a report earlier this week. That activity includes a USD 11.42 bn four-tranche bond sale in early January, as well as Saudi Aramco raising USD 3.95 bn. Meanwhile, the UAE accounted for 27% of all activity during the quarter, with the Abu Dhabi government raising USD 2.99 bn.

The top 10 leaderboard tells the story: Nine of the quarter’s 10 largest MENA bond transactions closed in January, with just one issuance — Abu Dhabi’s February sale — making it into the top 10. Saudi issuers took seven of the top 10 spots, including the Saudi Electricity Company (USD 2.4 bn), Saudi Telecom (USD 2 bn), and Riyad Bank (USD 1 bn). The Kingdom of Bahrain (USD 1.3 bn), Kuwait Finance House (USD 1 bn), and Emirates NBD (USD 1 bn) rounded out the list. All 10 of the largest issuances were USD-denominated.

Corporate issuances took the lead, raising USD 32 bn during the quarter, while sovereigns and agencies raised USD 16 bn. Financial institutions accounted for 44% of total proceeds, according to the data. Meanwhile, Islamic bond issuances in the region fell 17% y-o-y to USD 14.6 bn, accounting for 30% of total bond proceeds — the lowest share in three years.

A recovery in issuance activity hinges on geopolitics and how the conflict develops from here. “The key challenge at present is the uncertainty surrounding the duration and trajectory of the conflict,” Al Natoor said. “Until there is greater clarity on whether tensions stabilize, escalate, or persist, visibility on the timing and strength of any recovery in issuance activity remains limited.”

That recovery hasn’t quite materialized yet: ADX-listed healthcare provider Burjeel Holdings put a planned USD 1.5 bn Islamic bond issuance on hold due to the war and weaker market conditions. “Spreads have changed,” CEO Shamsheer Vayalil said earlier this week.

MARKETS THIS MORNING-

Asia-Pacific markets are mixed in early trading this morning, as investors digest the tech selloff on Wall Street a day earlier, triggered by OpenAI missing its 1Q targets. Investors will be watching closely for the US Federal Reserve’s interest rate decision as the central bank concludes its two-day meeting later today.

THE CLOSING BELL-

The EGX30 fell 0.9% at yesterday’s close on turnover of EGP 8.9 bn (24.2% above the 90-day average). Local investors were the sole net buyers. The index is up 24.9% YTD.

In the green: Kima (+3.2%), Qalaa Holdings (+2.2%), and Heliopolis Housing (+1.4%).

In the red: Eastern Company (-3.4%), GB Corp (-2.3%), and Raya Holding (-2.2%).