Sukuk liquidity nears pre-war levels despite ongoing tensions

August 14, 2026 (MLN): Liquidity across most Fitch-rated sukuk has climbed close to pre-war levels even as geopolitical tensions persist, Fitch Ratings said.

The rating agency noted that while sukuk liquidity has yet to fully recover to the levels seen in January, average liquidity in August marked the strongest reading since the conflict began, with the improvement uneven across ratings tiers, countries, sectors, and currencies, and shaped by each market's sensitivity to geopolitical risk.

Fitch said liquidity is likely to stay constrained for as long as regional tensions continue, adding that investment-grade sukuk consistently command higher liquidity scores than their non-investment-grade counterparts.

Score Distribution and Ratings Gap

As of 4 August, just over 75% of Fitch-rated sukuk carried a liquidity score above 50, up sharply from 64% on 23 March but still short of the 81% recorded in January.

The median liquidity score stood at 64, recovering from a low of 55 in March yet still trailing the pre-war reading of 68.

Investment-grade sukuk averaged a liquidity score of 69 as of 4 August, against 64 in March and 72 in January well ahead of the 40 posted by non-investment-grade paper, which had stood at 33 in March and 48 in January.

Sukuk rated in the 'A' category posted the sharpest liquidity gains between July and August.

Country and Currency Trends

Hong Kong, Malaysia, Indonesia, and Egypt, along with supranational issuers, registered the highest liquidity scores among Fitch-rated sukuk.

Egypt, Oman, Malaysia, and Ireland had already moved past their pre-war liquidity readings by August, with Egypt outperforming its pre-war score by 11 points.

By currency, Malaysian ringgit-denominated sukuk posted the highest liquidity score in August and were the only currency segment to exceed pre-war levels, a reflection of the depth of Malaysia's domestic investor base.

Euro-denominated sukuk also showed strong liquidity, while dollar-denominated issues have improved more slowly, edging toward pre-war levels in some instances.

GCC Market Comparison

Within the outstanding GCC US dollar market as of 12 August, liquidity conditions were mixed.

Sukuk and bonds denominated in dollars both averaged liquidity scores of roughly 50, though sukuk maintained a broader edge across all currencies, averaging 57 against 53 for bonds.

Stripping out dollar-denominated paper widened that gap further, with sukuk liquidity rising to 68 versus 57 for bonds.

On an all-currency basis, sukuk outperformed bonds in Oman, Bahrain, and Saudi Arabia, while Qatar and the UAE showed identical scores for both instruments. Kuwait was the exception, where bonds proved more liquid than sukuk.

Sector Performance

Asset-backed securities were the only sector segment to have already surpassed pre-war liquidity levels, Fitch said.

Financial institutions posted the second-strongest recovery, trailed by sovereigns, supranationals, infrastructure and project finance, and corporates and others, while international public finance lagged furthest behind.

The agency measures liquidity through Bloomberg's Liquidity Assessment (LQA) scores, which rank securities from 1 to 100 based on estimated liquidation cost  a score of 100 reflects the cheapest exit within an asset class, while 1 reflects the costliest.

The model draws on daily, security-specific data linking trading volume, cost, and time.

Fitch's review excludes sukuk carrying only local ratings or lacking an LQA score altogether.

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