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Gulf drives global sukuk boom as issuance set to hit up to $280b in 2026: S&P Global
Foreign currency-denominated sukuk exceeded $100 billion in 2025, nearly double the volume recorded in 2021, reflecting rising international investor appetite
- PUBLISHED: Tue 27 Jan 2026, 8:57 PM UPDATED: Wed 28 Jan 2026, 1:32 AM
Sukuk issuance is gaining renewed momentum globally, with the GCC countries emerging as the dominant force behind market expansion, driven by strong economic activity, rising financing needs and increasingly supportive market conditions.
According to S&P Global Ratings, total global sukuk issuance climbed to $264.8 billion in 2025, up from $234.9 billion in 2024, marking a year-on-year increase of 12.7 per cent and underscoring the growing importance of Islamic finance in global capital markets.
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The increase was fuelled by robust issuance activity in core Islamic finance markets, particularly Saudi Arabia, the UAE and Bahrain, alongside Malaysia and Türkiye. Foreign currency-denominated sukuk exceeded $100 billion in 2025, nearly double the volume recorded in 2021, reflecting rising international investor appetite and the increasing globalisation of sukuk markets. S&P noted that GCC countries and Malaysia together accounted for the bulk of issuance, highlighting the region’s central role in shaping the trajectory of the Islamic finance industry.
Saudi Arabia was the second-largest contributor to global issuance growth in 2025, raising $72.5 billion in sukuk, including $38 billion in foreign currency, representing a 35 per cent increase from 2024. Saudi banks alone issued more than $15 billion, with nearly $12 billion in foreign currency sukuk, as lenders sought to fund large-scale Vision 2030 infrastructure and development projects. While local currency issuance declined slightly due to reduced government and private-sector issuance, the Kingdom’s pivot toward foreign currency markets reflected strong overseas demand and competitive pricing conditions.
The UAE also played a significant role in driving market growth, recording $22.1 billion in sukuk issuance during 2025, of which $19 billion was foreign currency-denominated. UAE banks and corporates tapped the market to finance expanding business activity amid a supportive macroeconomic environment. Real estate developers, particularly in Dubai, were among the most active issuers, raising funds to support land acquisitions and new project launches as demand for residential and commercial property remained strong. While local currency issuance in the UAE declined due to lower federal issuance, foreign currency sukuk volumes more than compensated, reinforcing the country’s position as a regional funding hub.
Across the GCC, issuance momentum was partly driven by lower oil prices, which increased fiscal funding needs in some oil-dependent economies despite expected production increases. S&P estimates its average Brent crude price assumption of $60 per barrel for 2026 could add further revenue-side pressure, prompting governments and corporates to turn to sukuk markets to meet nominal financing requirements.
S&P expects sukuk issuance to continue expanding in 2026, barring major capital market volatility or a sharp escalation in geopolitical risks. The ratings agency forecasts total global issuance to reach between $270 billion and $280 billion, with foreign currency issuance in the range of $100 billion to $110 billion. The outlook is supported by strong economic performance in key GCC markets, particularly Saudi Arabia and the UAE, as well as improving global financing conditions. S&P also expects a 50 basis points interest rate cut by the US Federal Reserve in the second half of 2026, which would further enhance the attractiveness of sukuk issuance by lowering borrowing costs.
Despite the positive outlook, the sukuk market remains highly concentrated, with GCC countries — led by Saudi Arabia and the UAE — accounting for around 45 per cent of total global issuance in 2025. While this structure is unlikely to change significantly in the near term, S&P observed growing interest from non-traditional issuers. Egypt, for example, issued $2.5 billion in sukuk during 2025, and additional sovereign and corporate issuers are expected to enter the market in 2026 to diversify funding sources and secure more competitive pricing compared to conventional bonds.
Sustainable sukuk is also emerging as a fast-growing segment. Total sustainable sukuk issuance reached $21.5 billion in 2025, up 38 per cent from $15.6 billion in 2024, according to Refinitiv data cited by S&P. Saudi issuers accounted for more than 40 per cent of this volume, followed by the UAE and Malaysia, reflecting rising demand for climate-aligned and ESG-linked financing across the Gulf. Banks, including the Islamic Development Bank, were the largest contributors, using sukuk instruments to strengthen capital buffers and support sustainability-linked investments.
S&P expects sustainable sukuk issuance to accelerate further as GCC countries intensify climate transition efforts and regulators introduce stronger incentives for green and sustainable financing. While potential risks remain — including geopolitical tensions and shifts in global investor sentiment — the underlying fundamentals point to sustained expansion.
Analysts said the Gulf region is set to remain the global engine of sukuk growth with Saudi Arabia and the UAE anchoring issuance volumes as investor demand continue to deepen.
