Debt issuance in the Gulf Cooperation Council (GCC) has dropped sharply since the start of the Iran conflict, with several planned deals postponed amid rising economic uncertainty and market volatility, according to Fitch Ratings.
The ratings agency said the slowdown could also influence broader emerging market debt trends, noting that the GCC has accounted for nearly 40% of all U.S. dollar-denominated emerging market issuance so far in 2026, excluding China.
The region had begun the year with strong momentum. In January alone, issuers raised about $30 billion, led by Saudi Arabia. Activity remained robust through February and early March, with total outstanding GCC debt capital market (DCM) issuance reaching $1.2 trillion by March 9, representing a 14% increase year on year. About 63% of these issuances were denominated in U.S. dollars.
Fitch also noted that sukuk accounted for a record 41% share of GCC DCM volumes during the same period. Saudi Arabia and the UAE held the largest share of outstanding DCM in the region, followed by Qatar, Bahrain, Kuwait and Oman.
Approximately 84% of Fitch-rated sukuk in the GCC carried investment-grade ratings, with 63.2% falling within the ‘A’ category. Around 90% of issuers maintained stable outlooks and no defaults were recorded as of the end of 2025.
As the conflict moves into its third week, Bashar Al Natoor, managing director and global head of Islamic finance at Fitch Ratings, said the future direction of GCC debt capital markets will largely depend on how the conflict evolves.
He noted that yields on both bonds and sukuk have widened since the war began, although the increase has been more pronounced among non-investment-grade issuers. Meanwhile, sukuk in the Middle East and North Africa region have continued to trade more tightly than conventional bonds, reflecting sustained and broad investor demand.
Fitch added that historically, debt issuance in the region has tended to rebound quickly once geopolitical tensions subside. While some yield widening has been observed in GCC bonds and sukuk since the conflict began, the agency said there has been no broad market sell-off.
Despite increased geopolitical risks in recent years, GCC issuers have generally been able to return to the market once tensions eased, maintaining access to funding.
However, Fitch cautioned that the current Middle East conflict has already lasted longer and expanded beyond the scale of the 2025 Twelve-Day War, creating new levels of uncertainty for financial markets.
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