GCC sukuk issuance falls 23% in 1H, but Moody’s sees 2H recovery on the horizon

Gulf sukuk issuers have some lost ground to make up in 2H: GCC issuance fell 23% y-o-y to USD 51.1 bn in 1H 2026, down from USD 66 bn, as the regional conflict disrupted borrowing plans and issuers adjusted the timing of sovereign funding and liability management operations, according to a Moody’s report cited by Arab News. The ratings agency expects a gradual recovery in 2H, provided the ceasefire broadly holds and market conditions remain stable.

Saudi Arabia remained the region’s biggest issuer, but sovereigns and banks pulled back: Saudi Arabia’s sukuk issuance fell 18% to USD 34.2 bn, with sovereign issuance down 29% to USD 18.4 bn and bank issuance falling 30% to USD 6.9 bn. Corporates bucked the trend, ramping up issuance 59% to USD 8.8 bn and partly cushioning the decline elsewhere.

The UAE had a steeper fall, with issuance dropping 67% to USD 4.6 bn from USD 13.9 bn a year earlier as sovereigns, banks, and corporates all scaled back activity. Sovereign issuance alone fell to USD 1 bn from USD 3.9 bn, partly because Sharjah did not tap the sukuk market during the period. Kuwait’s issuance also fell to USD 1 bn from USD 4.5 bn, largely on lower bank activity, while Bahrain slipped to USD 2.9 bn from USD 3.8 bn.

Oman bucked the trend, with issuance rising to around USD 1.2 bn from a low base, driven largely by Energy Development Oman’s USD 850 mn offering.

BACKGROUND- The Gulf’s borrowing window effectively slammed shut in March. We reported at the time that new USD bond and sukuk sales had largely frozen after the conflict with Iran broke out. We reported in August that USD sukuk issuance was down 48% in 1H, according to Fitch, which pointed to sukuk’s more complex structuring and longer time-to-market relative to conventional bonds as borrowers rushed to secure funding during limited issuance windows.

Saudi Arabia is already testing the reopening: Saudi returned to international debt markets earlier this month with a USD 3.25 bn, two-tranche sukuk issuance that drew more than USD 16.5 bn in orders, despite signaling in May that it had largely completed its borrowing for the year. The Kingdom had reserved the option to return to international markets when conditions became favorable.

Liquidity is recovering too — but it isn’t back to pre-war levels: More than 75% of Fitch-rated sukuk had a liquidity score above 50 as of 4 August, up from 64% in March but still below January’s 81%. The median score rose to 64 from a March trough of 55, against a pre-war level of 68. The improvement points to a gradual recovery in secondary-market trading conditions, even as new issuance remains uneven.

Globally, the Gulf’s retreat was offset elsewhere: Sukuk issuance rose 2% y-o-y to around USD 130 bn in 1H, supported by a sharp increase in short-term issuance and stronger corporate activity. Southeast Asia led the market, with issuance jumping 26% to USD 61.9 bn. Malaysia alone accounted for USD 49.2 bn, up 39%, as local-currency markets became an increasingly important source of supply.

Green sukuk took a much bigger hit: Global green and sustainable sukuk issuance dipped 53% to USD 2.4 bn in 1H from USD 5.1 bn a year earlier. Saudi Arabia accounted for USD 2.1 bn and Indonesia for another USD 300 mn, while the UAE recorded no issuance after contributing USD 1.7 bn in 1H 2025. Moody’s attributed the decline largely to the market’s concentration in Saudi Arabia and the UAE, where conflict-related uncertainty and weaker international investor participation weighed on activity.

The outlook: Moody’s expects global sukuk issuance of USD 140-150 bn in 2H, bringing the full-year total to around USD 280 bn — broadly in line with 2025. Sovereign financing needs tied to economic diversification, banks’ efforts to broaden their funding sources, and growing demand for shariah-compliant products are expected to support issuance.

MARKETS THIS MORNING-

Asian markets opened higher earlier today, with South Korea’s Kospi gaining around 1.6% and Japan’s Nikkei rising 1.4%. The gains tracked broad surges across Wall Street equities, with Nasdaq rising to a record high lifted by boosts from AI heavyweights.

THE CLOSING BELL-

The DFM rose 0.1% yesterday on turnover of AED 529 mn. The index is down 1.4% YTD.

In the green: Agility The Public Warehousing Company (+7.8%), International Financial Advisors Holding Company (+4.6%), and National General Ins. Company (+4.0%).

In the red: Al Mazaya Holding Company (-5.0%), Dubai Islamic Ins. and Reinsurance Co. (-4.9%), and Al Salam Sudan (-4.8%).

Over on the ADX, the index fell 1.6% on turnover of AED 831.5 mn. Meanwhile, Nasdaq Dubai was up 0.2%.

Corporate actions

Al Khazna’s shareholders approved a capital raise of up to AED 3 bn that would bring in Abu Dhabi National Company for Building Materials (Bildco) as a strategic partner — and voted to turn the insurer into a holding company, according to an ADX disclosure (pdf). The General Assembly, held 18 September, signed off on the Bildco partnership, a rename from Al Khazna Ins. to Al Khazna Al Alamiya Holding, and amendments to the company's objectives that let it hold stakes in other joint-stock and limited-liability companies and extend loans, guarantees, and financing to subsidiaries.

The board met the same day and installed new leadership to match — Khazna Ins. Chairman Rasheed Ali Rasheed Alomaira as chairman, Asmaa Abdullah Alhosani as vice chairman, and Khaled Ali Rasheed Al Amira as managing director — according to another ADX filing (pdf).

Why it matters: Al Khazna hasn’t been able to legally underwrite ins. in the UAE since the CBUAE pulled its license last year over compliance failures. The move also gives Bildco a holding-company platform, the latest stop in a shopping spree that’s already picked up a tourist-camp operator, a Dubai food trader, and a stake in an engineering consultancy.

What’s next: Bildco's actual stake size, share count, and issue price still hinge on a formal valuation and regulatory approvals — after which the proposal goes back to the General Assembly for final sign-off. Also, watch this space: With Al Khazna now structured to hold stakes and finance subsidiaries, this looks less like a one-off capital injection and more like Bildco building itself a listed acquisition vehicle.

REMEMBER- We first flagged the Bildco tie-up in August.