Global sukuk issuance is set to recover in the second half of 2026, bolstered by a return of Gulf Cooperation Council (GCC) issuers to the market, according to a recent Moody’s report. The international credit rating agency anticipates total sukuk issuance for the year will reach approximately $280 billion, remaining broadly on par with 2025 levels despite ongoing geopolitical tensions in the Middle East.
In the first half of 2026, global sukuk issuance increased modestly by 2 percent year on year to about $130 billion, up from $127 billion in the same period last year. This growth was driven primarily by a surge in short-term sukuk issuance and stronger corporate sector activity, which offset declines in long-term issuance by sovereign and financial sector entities.
Moody’s highlighted that the revival in GCC sukuk issuance hinges on continued stability in the region, particularly the maintenance of the ceasefire. The agency noted that sovereign funding remains a key driver for sukuk issuance in the Gulf as governments pursue economic diversification plans, while regional banks seek to diversify their funding sources. These dynamics suggest that GCC issuers will continue to play a significant role in full-year sukuk volumes.
Domestically, the deepening of sukuk markets within GCC countries is supporting long-term growth, and the investor base is expected to broaden beyond traditional Islamic finance markets as sukuk gain wider acceptance. Southeast Asia emerged as the largest contributor to global sukuk issuance in the first half of 2026, with volumes rising by 26 percent to $61.9 billion. Malaysia led the surge, accounting for $49.2 billion—an increase of 39 percent over the same period in 2025.
On the environmental front, issuance of green and sustainable sukuk declined sharply by 53 percent to $2.4 billion in the first half of 2026, compared with $5.1 billion a year earlier. Saudi Arabia was the main contributor with $2.1 billion, followed by Indonesia at $300 million, while the United Arab Emirates recorded no green sukuk issuance during this period, a notable drop from $1.7 billion in the first half of 2025. Moody’s attributed this contraction primarily to the concentration of green sukuk issuance within GCC markets, particularly Saudi Arabia and the UAE, where conflict-related uncertainties and reduced foreign investor participation dampened activity.
Overall, sukuk issuance from GCC countries contracted by 23 percent to $61.1 billion in the first half of 2026, down from $66 billion a year prior. This decline reflects the combined effects of regional market volatility linked to ongoing conflicts and issuer-specific factors, including the timing of sovereign funding requirements and liability management operations. Nonetheless, Moody’s remains cautiously optimistic about a gradual market recovery in the latter half of the year, contingent on geopolitical stability and favorable market conditions.