Sukuk market holds firm in 1H26 despite geopolitical turmoil

July 31, 2026 (MLN): Sukuk maintained broadly stable credit fundamentals during the first half of 2026 despite geopolitical tensions and macroeconomic volatility, according to Fitch Ratings.

The share of investment-grade sukuk among all Fitch-rated sukuk increased to 82.6% in 1H26 from 79.9% in 1H25, mainly driven by ratings in the ‘A’ and ‘BBB’ categories.

No US dollar sukuk were downgraded after the Iran war began, while the sukuk market recorded no defaults since 2021.

“Most sukuk issuers were still on Stable Outlook, but the proportion of issuers on Rating Watch Negative (RWN) and Negative Outlook is rising,” said Bashar Al Natoor, Global Head of Islamic Finance at Fitch Ratings.

He noted that near-term refinancing risks remain limited, supported by the moderate volume of sukuk maturities due in the second half of 2026, while fixed-rate issuance continues to account for the majority of volumes.

According to Fitch, the outlook for the global sukuk market will depend on the development of the US–Iran conflict, with renewed escalation potentially weighing on growth.

During 1H26, Fitch revised Indonesia’s Outlook to Negative and placed entities from Qatar, Ras Al Khaimah and several UAE corporates on RWN amid the war. The agency also revised the Outlook on Arab Petroleum Investments Corporation to Negative.

Meanwhile, Fitch upgraded several sukuk ratings from South Africa and Oman.

More than 95% of rated sukuk rank as senior unsecured, while the remainder comprise subordinated and senior secured instruments. Medium-term sukuk with maturities of three to 10 years remained dominant, accounting for 83% of rated volumes, followed by long-term sukuk with tenors exceeding 10 years at 11%.

Fitch rates more than 72% of outstanding global US dollar sukuk. Rated sukuk outstanding reached over $238 billion at the end of 1H26, representing a 12% year-on-year increase but a 1% quarter-on-quarter decline, attributed to the war and higher maturities.

The ratings agency rated more than 310 outstanding sukuk and over 100 sukuk programmes and special-purpose vehicles. It also assigned ratings to more than 25 sukuk in 2Q26, with a combined value exceeding $10 billion.

Issuance remained diversified during the quarter and included the first sukuk from a Turkish real estate investment trust.

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