Record sukuk issuance lifts Islamic finance as GCC governments lean on the market

Global Islamic finance assets rose 9% y-o-y to USD 6.5 tn in 2025, with sukuk issuance hitting a record USD 291.4 bn as GCC governments leaned on the market under prolonged lower oil prices, according to the Islamic Corporation for the Development of the Private Sector (ICD) and LSEG’s Islamic Finance Development Report (pdf). Issuance value rose 14.5% y-o-y in 2025, while outstanding sukuk rose 11% to exceed USD 1.1 tn — growth the report attributes primarily to the GCC as fiscal pressures rose across the region amid rising global economic uncertainty.

Saudi Arabia became the world’s largest sukuk market by outstanding value for the first time in 2025, holding USD 1.47 tn in total Islamic finance assets. It also ranked second in the Islamic Finance Development Indicator (IFDI) 2026, behind Malaysia.

The Iran conflict is testing the industry, albeit unevenly. GCC Islamic banks’ capital and liquidity positions support their long-term growth prospects, while geopolitical uncertainty and slower economic activity weigh on operating conditions, according to Moody’s Ratings (pdf).

Islamic funds were the fastest-growing major segment, with assets under management up 22% y-o-y to USD 375 bn on strong equity performance and wider adoption in both established and emerging markets, LSEG said. Iran led the segment with USD 103 bn in assets, followed by the UK (USD 67 bn), the UAE (USD 51 bn), and Malaysia (USD 44 bn), with Saudi Arabia ranking fifth with USD 34 bn.

Islamic banking remained the industry’s largest segment, with assets reaching USD 4.6 tn, accounting for 71% of global Islamic finance assets. The LSEG’s report points to the sector growing 8% y-o-y, supported by expansion in the GCC, Southeast Asia, Turkey, and Pakistan. Takaful assets rose 9% y-o-y to USD 146 bn, supported by demand for shariah-compliant protection products, wider use of digital distribution channels, and bancatakaful partnerships.

The outlook: LSEG expects Islamic finance assets to exceed USD 10.5 tn by 2030, assuming average annual growth of around 9% on Islamic banking expansion, growing sukuk issuance, broader adoption in emerging markets, and increasing demand for sustainable and digital financial products.

MARKETS THIS MORNING-

Asian markets were in the red earlier today. Japan’s Nikkei was down 0.5%, while South Korea’s Kospi was down 1.3%, shedding almost 19% so far in October. MSCI’s broadest index of Asia-Pacific shares outside Japan eased 0.1%.

THE CLOSING BELL-

The DFM fell 1.4% on Friday on turnover of AED 705.5 mn. The index is down 5.2% YTD.

In the green: Dubai Residential REIT (+2.4%), Mashreqbank (+1.4%), and Air Arabia (+1.0%).

In the red: Watania International Holding (-5.0%), Etihad Energy Holding (-4.9%), and Dubai Islamic Ins. and Reinsurance Co. (-4.9%).

Over on the ADX, the index fell 1.2% on turnover of AED 1.1 bn. Meanwhile, Nasdaq Dubai was down 1.7%.