New US dollar bond and sukuk issuances from Gulf Cooperation Council ( GCC ) markets have fallen significantly since the start of the Iran war, after presenting strong credit fundamentals ahead of the outbreak, a new report says.

Many deals remain on hold due to the economic uncertainties and volatility. This will affect debt issuance trends in emerging markets ( EM ) as the GCC accounts for about 40% of all EM dollar issued so far in 2026 ( excluding China ), according to Fitch Ratings.

 “Historically, regional debt capital market ( DCM ) issuances have typically rebounded swiftly once tensions eased following previous geopolitical conflicts in the Middle East. However, the ultimate effect will depend on the scope and duration of the Iran war,” says Bashar Al Natoor, managing director, global head of Islamic finance, at Fitch.

“While some yield widening is visible in GCC bonds and sukuk since the war began, there have not been market-wide sell-offs,” Al Natoor stresses. About 84% of Fitch-rated sukuk in the GCC countries were rated investment-grade ( compared with 80% at the end of 2024 ), with 63.2% in the “A” category, 90% of the issuers on “stable outlooks”, and no recorded defaults as of end-2025. Fitch rates around 70% of outstanding GCC dollar sukuk.

Market uncertainty tests new levels

GCC issuances were strong at the start of 2026, with many entities aiming to benefit from favourable conditions ahead of the typical Ramadan slowdown. GCC DCM outstanding reached US$1.2 trillion as of March 9, 2026, up 14% year on year, with 63% of the issuance denominated in US dollars, according to Fitch.

Sukuk issuance rose to a record 41% share of GCC DCM volumes, with Saudi Arabia and the United Arab Emirates making up the majority of GCC DCM outstanding, followed by Qatar, Bahrain, Kuwait and Oman.

Sukuk in emerging markets rose to 16% of all dollar DCM issuance in 2025 ( excluding China; 2024: 12% ). Meanwhile, local-currency GCC sukuk and bonds continue to be issued, mainly by sovereigns. Fitch notes that funding needs and diversification remain key priorities for GCC governments and issuers seeking broader liquidity channels. Many issuers plan funding well in advance, particularly for large maturities, which helps limit immediate refinancing pressure.

Despite heightened geopolitical challenges in recent years, GCC issuer activity has rebounded quickly once tensions eased, with market access broadly maintained for many issuers. “However, the duration and scale of the conflict in the Middle East have already surpassed the 2025 Twelve-Day War, testing new levels of market uncertainty,” Fitch says.

The rating agency’s annual average oil price assumptions ( Brent ) are US$70 per barrel for 2026 and US$63 for 2027.

Sustained demand for MENA sukuk

Yield-to-maturity ( YTM ) of the S&P MENA Sukuk and Bond Indices widened following the onset of the war on February 28. By March 10, the YTM on the Sukuk Index had reached 4.78%, tighter than the bond benchmark, which stood at 5.01%.

However, Fitch highlights that these levels are only moderately higher than those observed on February 27, before the war began, when the Sukuk Index YTM was 4.46% ( a 32bp increase ), while the Bond Index YTM was 4.73% ( up 28bp ). MENA sukuk continues to trade tighter than MENA bonds, reflecting sustained and broader demand, including from Islamic banks, with yield widening more pronounced among non-investment grade issuers, the rating agency notes.

 The YTM on the S&P Global High Yield Sukuk Index rose to 6.61% on March 10, up from 5.82% on February 27 ( a 79bp increase ). Similar periods of yield widening have occurred, particularly in times of heightened geopolitical or Shariah-related uncertainty. However, Fitch stresses that the current YTM movement remains below the peak levels recorded in earlier episodes. There has been a very strong correlation ( 0.99 ) between the YTM for sukuk and bond indices over the five years to March 6 2026, it adds.