GCC sukuk liquidity slips amid Iran war

March 25, 2026 (MLN): Global sukuk and debt capital markets (DCM) in the Gulf Cooperation Council (GCC) region are experiencing varying liquidity pressures as the ongoing Iran war continues to influence investor sentiment, according to Fitch Ratings.

The agency notes that the short-term impact on market liquidity will largely depend on the intensity and duration of the conflict, while longer-term effects will become clearer once stability returns and investor confidence is restored.

Fitch evaluates market liquidity using Bloomberg’s Liquidity Assessment (LQA) scores, which range from 1 to 100.

Higher scores indicate stronger liquidity and lower liquidation costs, while lower scores point to higher costs and weaker liquidity.

The LQA model captures daily security-level liquidity by analyzing volume, transaction costs, and time sensitivity.

Investment-grade sukuk have maintained relatively higher liquidity compared to speculative-grade sukuk, despite declines since the onset of the war.

LQA scores have fallen across most GCC DCMs, as well as among sukuk issuers in Turkiye, Egypt, and Indonesia. In contrast, many Malaysian, Omani, and supranational sukuk have remained relatively resilient.

Sukuk rated ‘BB’ and ‘B’ have recorded the lowest liquidity scores, experiencing the steepest declines globally.

On the other hand, high-rated categories such as ‘F1sf’, ‘AAA’, ‘AA’, ‘A’, and ‘BBB’ continue to exhibit stronger liquidity, although most faced moderate reductions.

By sector, corporates, infrastructure, and project-finance sukuk showed the sharpest declines, while asset-backed, sovereign, and supranational sukuk retained higher liquidity levels, with asset-backed sukuk even posting gains.

Fitch compared liquidity between 52 sukuk and bonds from the same issuers. Findings revealed similar liquidity in 50% of cases, with sukuk lagging behind bonds in 31% and exceeding bond liquidity in 19% of cases.

In the GCC, US dollar-denominated sukuk and bonds have exhibited broadly similar liquidity trends. The average LQA score for GCC USD sukuk declined to 45 on 23 March from 56 at the end of 2025, while GCC USD bonds fell to 48 from 53 in the same period.

As of 23 March, 64% of Fitch-rated sukuk had LQA scores above 50, down from 82% in January 2025 (excluding local ratings and unrated sukuk).

Investment-grade sukuk averaged a liquidity score of 65, compared to 33 for speculative-grade issues.

Historical patterns suggest that GCC DCMs typically rebound quickly after regional geopolitical tensions ease, but the magnitude of the current war will influence recovery speed.

Fitch emphasizes that credit ratings focus solely on creditworthiness and do not account for market risks such as liquidity or interest rate fluctuations.

Healthy liquidity, active trading, and diverse investor participation can enhance financing conditions for issuers and support credit quality when fundamentals are strong.

Currently, no Fitch-rated GCC sukuk has defaulted, and around 84% are rated investment-grade, though a few remain on Rating Watch Negative.

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