RIYADH: Despite the uncertainty surrounding the future of the Islamic finance sector, significant local-currency borrowing in Saudi Arabia drove a 13.1% increase in Sukuk issuance across Gulf Cooperation Council nations in the first four months of 2026.
According to S&P worldwide Ratings’ most recent study, “Islamic Finance 2026-2027: Navigating Rough Waters,” worldwide sukuk issuance increased by 20% during that time due to activities in Malaysia, Turkey, and Indonesia.
With Saudi Arabia continuing to spearhead sukuk activity through local-currency issuance, the data demonstrate the increasing significance of Gulf capital markets in the global Islamic finance sector. However, according to S&P, the prolonged conflict in the Middle East and geopolitical concerns are impeding economic growth prospects in important Gulf countries and are predicted to hinder the expansion of the Islamic finance sector in 2026.
According to Mohamed Damak, head of Islamic finance at S&P Global Ratings, “we expect the growth of the global Islamic finance industry to slow in 2026, to about 5 percent to 10 percent, as a result of the Middle East war, following expansion of 10.2 percent in 2025.”
According to S&P, the conflict has had a substantial impact on economic growth forecasts in several key Islamic finance nations, limiting prospects for banking system growth and influencing debt capital market activity.
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