GCC borrowers have effectively frozen new USD bond and sukuk sales as regional markets price at a war premium following the outbreak of the conflict with Iran, Fitch Ratings says. After a record-breaking start to 2026, the regional pipeline is now on hold despite the total outstanding debt market hitting a record USD 1.2 tn this month — a 14% y-o-y increase.

REMEMBER- The GCC had significant funding needs going into 2026, as Gulf governments and issuers look to diversify funding channels and refinance maturing debt. 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, according to Fitch Ratings’ GCC Debt Capital Markets MENA Monitor 2026 report (pdf).

Why it matters: The GCC now accounts for 40% of all emerging-market USD issuance (excluding China), making it the primary engine of EM debt. While yields widened 28-32 bps in the conflict’s first 10 days, CDS remained remarkably resilient, widening by only 13 bps for Abu Dhabi and 12 bps for Saudi Arabia, according to a Mashreq Capital note (pdf).

Real estate among the first to show signs of trouble: “While higher-quality sovereign and quasi-sovereign credits continue to trade in an orderly manner, weaker high-yield issuers, particularly in real estate, have seen a marked deterioration in market depth,” the bank subsidiary notes, citing bid-ask spreads that have widened to around 2 points versus the usual 0.5, indicating limited buyer appetite.

Sukuk continues to offer a volatility hedge: Heavy demand from Islamic banks is keeping sukuk spreads tighter than conventional bonds, giving regional issuers a pricing edge even as high-yield benchmarks — like the S&P High Yield Sukuk Index — see yields rise toward 6.61%.

Looking ahead, Mashreq Capital sees three potential scenarios: A diplomatic de-escalation could quickly unwind the war premium, tightening spreads and reopening the issuance window, according to the note. A more prolonged standoff would likely keep spreads elevated and push CDS ins. costs higher, effectively raising borrowing costs for regional issuers. In a worst-case scenario, markets could face a broader liquidity shock, forcing selloffs even in high-quality sovereign debt.

TASI

10,893

-0.5% (YTD: +3.8%)

MSCI Tadawul 30

1,477

-0.4% (YTD: +6.5%)

NomuC

22,370

+0.6% (YTD: -4.0%)

USD : SAR (SAMA)

USD 3.75 Sell

USD 3.75 Buy

Interest rates

4.25% repo

3.75% reverse repo

EGX30

46,791

-0.9% (YTD: +11.9%)

ADX

9,480

-1.6% (YTD: -5.1%)

DFM

5,426

-1.7% (YTD: -10.3%)

S&P 500

6,632

-0.6% (YTD: -3.1%)

FTSE 100

10,261

-0.4% (YTD: +3.3%)

Euro Stoxx 50

5,717

-0.6% (YTD: -1.3%)

Brent crude

USD 103.14

+2.7%

Natural gas (Nymex)

USD 3.13

-3.2%

Gold

USD 5,062

-1.3%

BTC

USD 70,747

-0.1% (YTD: -19.2%)

Sukuk/bond market index

917.09

-0.2% (YTD: -0.2%)

S&P MENA Bond & Sukuk

150.55

-0.4% (YTD: -0.9%)

VIX (Volatility Index)

27.19

-0.4% (YTD: +81.9%)

THE CLOSING BELL: TADAWUL-

The TASI fell 0.5% last Thursday on turnover of SAR 5 bn. The index is up 3.8% YTD.

In the green: Chemanol (+9.9%), Mouwasat (+8.1%), and Emaar EC (+5.9%).

In the red: Saleh AlRashed (-6.0%), Almoosa (-5.9%), and Arabian Mills (-5.0%).

THE CLOSING BELL: NOMU-

The NomuC rose 0.6% last Thursday on turnover of SAR 28.2 mn. The index is down 4% YTD.

In the green: Leaf (+9.6%), First Avenue (+9.1%), and Academy of Learning (+9.1%).

In the red: Paper Home (-9.8%), AME (-9.0%), and Pro Medex (-7.8%).

CORPORATE ACTIONS-

Riyad Bank received CMA approval for an SAR 10 bn capital hike to SAR 40 bn via a bonus share issuance, according to a Tadawul disclosure. The capital increase will be funded with SAR 5 bn from the statutory reserve and SAR 5 bn from retained earnings, with shareholders receiving one bonus share for every three shares held. The raised capital is aimed at strengthening the bank’s capital base.

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