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S&P cuts Middle East sustainable bond forecast to $15-20 billion for 2026
UAE and Saudi Arabia continue to dominate issuance, accounting for 98% of value, even as nonfinancial corporate issuance drops more than 80% in the first half of the year
- PUBLISHED: Mon 3 Aug 2026, 3:43 PM
S&P Global Ratings has lowered its forecast for Middle East sustainable bond issuance to $15-20 billion for 2026, down from an earlier projection of $20-25 billion, citing geopolitical volatility and tighter market conditions than previously anticipated.
The revised outlook follows first-half 2026 issuance of $7 billion, compared with $10 billion in the same period last year. While issuance volumes remained flat year-on-year, values fell 24 per cent – a smaller decline than the more than 40 per cent drop in total bond issuance over the same period, according to S&P Capital IQ data cited in the report.
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“We have slightly lowered our forecast for Middle East sustainable bond issuance due to geopolitical volatility,” the ratings agency said in its midyear sustainability insights report.
The year began strongly, with about $5 billion of sustainable bonds issued in the first quarter of 2026, including $4 billion in January alone.
The ceasefire between the US and Iran in April 2026, followed by a memorandum of understanding in June, opened a window for issuers who had been preparing to access the market before the conflict broke out in late February 2026, adding an extra $2 billion of issuance in the second quarter.
S&P’s base case anticipates a gradual but incomplete recovery in energy flows during the second half of the year, tempered by uncertainty over US-Iran peace negotiations, operational bottlenecks, logistical constraints and periodic localised clashes. The agency expects shipping and insurance markets to remain risk-averse until a final agreement is reached. It also now expects the US Federal Reserve to hold interest rates steady, having previously forecast monetary easing.
UAE, Saudi Arabia dominate
The UAE and Saudi Arabia continue to lead the regional market, together accounting for about 98 per cent of issuance by value and 73 per cent by volume. Qatar's rising issuance has offset a decline from Türkiye.
Banks have driven most of the activity, issuing 80 per cent by value and 87 per cent by volume. Sustainable bond issuance by nonfinancial corporations, meanwhile, declined by more than 80 per cent in the first half of 2026, as issuers turned to bank lending or private placements to refinance maturing debt instead.
Sustainable sukuk issuance, including banks' Tier 1 sukuk, totalled $2.1 billion in the first half of 2026, down from $5.1 billion in the same period last year, according to Environmental Finance Data as of July 22, 2026. S&P attributed the decline to reduced hydrocarbon output and slower non-oil economic activity, alongside a broader shift by GCC issuers toward the conventional private placement market for its liquidity, simplicity and speed of execution.
Sukuk’s contribution to overall sustainable issuance fell to about 30 per cent in the first half of 2026, from 50 per cent in the same period of 2025. S&P said it expects sustainable sukuk issuance to persist in GCC countries in 2026 and beyond.
Despite near-term headwinds, S&P maintained a positive medium-term outlook for the market, pointing to three demand drivers: national energy-transition strategies including renewable-energy targets; growth in new bond types such as transition and blue bonds; and continued interest in sustainable sukuk.
The agency also flagged that growing demand for energy-intensive AI infrastructure, particularly in regions exposed to water stress and heatwaves, could boost sustainable finance issuance in support of national sustainability targets.
An estimated $45-$50 billion of sustainable bonds are due to mature between 2027 and 2030, which S&P said could spur a wave of refinancing activity if issuers opt to roll over that debt with sustainable instruments.
