Fitch: Resilience in the Gulf Sukuk Market Despite Geopolitical Volatility

Al Arabiya – Bishar Al-Natour, Global Head of Islamic Finance at Fitch Ratings, said that the sukuk market in the UAE and Gulf countries has shown notable resilience despite the geopolitical fluctuations the region has experienced since March last year, adding that the continued talk of issuance growth reflects the market’s strength and its ability to absorb shocks.

In an interview with Al Arabiya Business, Al-Natour explained that more than 80 percent of the sukuk ratings followed by Fitch in the UAE fall within the investment-grade category, and more than 80 percent of them carry a stable outlook, reflecting the stability of issuers’ creditworthiness.

He noted that issuances saw strong activity in January and February before declining sharply during the peak of geopolitical tensions, particularly dollar-denominated issuances, but later returned to the market at a better pace, with issuers continuing to attract investors.

He added that expectations for US interest rates directly affect Gulf sukuk markets, given the region’s currencies are pegged to the dollar, pointing out that declining yields and risk margins have contributed to improved pricing conditions.

Al-Natour emphasized that foreign investors still represent a significant share of subscriptions, with investments from the region accounting for about 40 to 50 percent of some issuances, while the remainder comes from Asia, Europe, and America.

He said that changes in the outlook on ratings do not necessarily mean a downgrade in credit ratings, noting that the proportion of ratings with a negative outlook did not rise significantly despite the peak of the crisis.

In a recent report, Fitch projected that the UAE’s debt instruments market will experience moderate growth in the second half of 2026 and next year, driven by plans to diversify funding sources, financing needs across various sectors, and regulatory reforms.