Dubai/Toronto/Jakarta: The global sukuk issuance trajectory will depend on whether the US–Iran ceasefire holds and evolves into regional stability, Fitch Ratings says.

Volatilities and rising yields led sukuk issuance to fall by 36% in 1H26 year on year (yoy) in the GCC, Malaysia, Indonesia, Turkiye and Pakistan, to USD125 billion, while bonds fell by 0.8% (including multilaterals). Global sukuk outstanding rose by 11% to USD1.1 trillion. Sukuk is sizeable in emerging markets, at 9% of US dollar debt issued in 1H26 (ex. China). GCC investment-grade sukuk had lower yields than bonds.

Increased stability could support a more favourable funding environment. Conversely, renewed escalations could weigh on growth. Market dynamics are likely to become clearer following the summer holidays in key sukuk markets. Issuers’ funding plans and investors’ allocation strategies will determine the trajectory.

“We expect global sukuk issuance in 2026 to remain below 2025 levels, with recovery dependent on whether recent geopolitical easing translates into more durable regional stability,” Bashar Al Natoor, Global Head of Islamic Finance at Fitch Ratings, said. “Credit fundamentals are resilient, with no sukuk defaults since 2021 and just over 80% of Fitch-rated sukuk being investment grade, although the share of issuers with Stable Outlooks fell to 80% in 1H26.”

Market activity resumed sporadically for both investment-grade and speculative-grade sukuk issuers after a pause in March and April. However, volatilities and rising yields led sukuk issuance to fall by 36% in 1H26 year on year (yoy) in the GCC, Malaysia, Indonesia, Turkiye and Pakistan, to USD125 billion, while bonds fell by 0.8% (including multilaterals). Global sukuk outstanding rose by 11% to USD1.1 trillion. Sukuk is sizeable in emerging markets, at 9% of US dollar debt issued in 1H26 (ex. China). GCC investment-grade sukuk had lower yields than bonds.

With Saudi Arabia’s funding plan complete, we do not anticipate new public external US dollar sovereign sukuk issuance over 2H26. Indonesia’s near-term issuance should remain resilient due to ongoing funding needs. We expect consolidated UAE government debt to rise to 25% of GDP in 2026, with sukuk a key funding source. The Malaysian government aims to reduce federal government debt to 60% of GDP or below by 2030, tempering sukuk. Banks and corporates would remain opportunistic issuers.