Global Sukuk market faces Iran driven uncertainty

April 7, 2026 (MLN): The ongoing conflict in Iran is creating short-term uncertainties in the global sukuk market, with potential impacts on issuance, pricing, and liquidity largely dependent on the war’s scale and duration, according to Fitch Ratings.

The rating agency emphasized that the effect will vary across countries, sectors, credit ratings, and issuer fundamentals, while long-term consequences will hinge on post-conflict sentiment.

Historical trends suggest sukuk issuance typically rebounds once geopolitical tensions ease.

Bashar Al Natoor, Global Head of Islamic Finance, noted that global sukuk issuance slowed notably in dollar-denominated instruments during March, following robust activity in the first two months of 2026.

Local-currency sukuk issuance continues, and the pipeline for new dollar sukuk remains active. Islamic syndicated financing is also gaining traction.

Overall credit fundamentals in the sukuk market remain resilient, with over 80% of issuers still investment-grade and most maintaining Stable Outlooks.

However, the rise in Rating Watch Negative actions highlights evolving regional risks.

Global sukuk issuance fell 35.5% quarter-on-quarter to $71 billion in the first quarter of 2026. Dollar sukuk issuance in core markets surpassed $20bn, marking a 9% increase year-on-year but a 9% decline quarter-on-quarter.

The global sukuk outstanding exceeded $1.1tr, with a significant concentration in the Gulf Cooperation Council (GCC), ASEAN, and Turkiye. In emerging markets, sukuk represented 13% of all dollar debt issuance during 1Q26, excluding China.

Fitch revised Indonesia’s sovereign rating outlook to Negative from Stable, while the number of sukuk issuers on Rating Watch Negative increased across the GCC.

Despite these pressures, the record of zero sovereign sukuk defaults remains intact, with the Maldives (‘CC’ rated) successfully repaying its sukuk obligations.

The outbreak of conflict has pushed yields on many GCC US dollar sukuk and bonds to five-year highs, showing heightened risk perceptions.

Speculative-grade sukuk saw sharper yield increases, whereas investment-grade sukuk retained better liquidity with more moderate declines.

While current spreads remain below Covid-19 pandemic peaks, market participants are closely monitoring developments in the region.

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