Global sukuk issuance continued to strengthen during the first half of 2026, with S&P Global Ratings maintaining its full-year issuance forecast of between US$270 billion and US$280 billion despite persistent geopolitical uncertainty and tighter global financing conditions. The ratings agency expects local currency markets to remain the primary driver of sukuk issuance throughout the year, supported by strong domestic demand across key Islamic finance markets.
According to S&P Global Ratings, local currency sukuk issuance recorded significant growth, particularly in Malaysia, Qatar, Saudi Arabia, and Türkiye, while foreign currency-denominated issuance remained under pressure due to elevated borrowing costs and cautious investor sentiment. The agency noted that domestic capital markets continue to provide issuers with a more stable source of funding amid global economic uncertainty.
An improvement in market sentiment followed the April 2026 ceasefire between the United States and Iran and the memorandum of understanding signed in June, allowing several issuers that had delayed fundraising during the regional conflict to return to international debt markets. However, S&P stated that the recovery in foreign currency sukuk issuance was not sufficient to restore issuance volumes to the levels seen in 2025.
During the first six months of 2026, local currency-denominated sukuk issuance increased by US$18.6 billion year-on-year to reach US$87.6 billion, while foreign currency issuance declined by US$1.9 billion to US$41.4 billion. The decline would have been more pronounced without a significant increase in Malaysian foreign currency issuance, led by the International Islamic Liquidity Management Corporation (IILM), which helped offset weaker issuance across Gulf Cooperation Council (GCC) markets.
S&P Global Ratings attributed weaker issuance in several GCC countries to slower economic activity, lower hydrocarbon production, and softer non-oil sector growth. In Saudi Arabia, changes in fiscal financing strategies, slower bank lending, and reduced financing for large-scale development projects contributed to lower foreign currency issuance. At the same time, governments in Saudi Arabia and Qatar continued to rely more heavily on domestic funding markets, boosting local currency sukuk issuance.
The agency also revised its monetary policy outlook, stating that it now expects the US Federal Reserve to keep interest rates unchanged rather than begin easing during 2026. As a result, elevated financing costs are expected to continue limiting foreign currency sukuk issuance, while geopolitical tensions and uncertainty in global shipping and insurance markets may further influence international debt market activity.
S&P Global Ratings said it continues to monitor the proposed revisions to AAOIFI’s Shariah Standard 62 but does not expect the changes to materially affect sukuk issuance volumes during 2026. The agency noted that uncertainty remains regarding the final amendments, particularly concerning asset ownership transfer requirements and their potential implications for future sukuk structures.
Looking ahead, S&P Global Ratings maintained a positive medium-term outlook for the sukuk market, supported by growing demand for sustainable and ESG-linked sukuk, continued regulatory reforms, and rapid technological innovation. The agency believes that developments such as blockchain-based issuance platforms, tokenization, fintech solutions, central bank digital currencies, and improved digital market infrastructure will contribute to greater efficiency and broader investor participation in the global sukuk market.
Despite ongoing geopolitical and economic challenges, S&P Global Ratings expects the global sukuk market to remain resilient. The agency believes that expanding domestic capital markets, increasing demand for Shariah-compliant financing, and continued innovation across the Islamic finance industry will support the market’s long-term growth and strengthen its role in the global capital markets.