S&P Global Ratings cut its forecast for Middle East sustainable bond issuance in 2026, citing geopolitical volatility and tighter market conditions that have weighed on capital-market activity.
The ratings agency now expects sustainable bond issuance across the region to reach $15-$20B this year, down from its previous forecast of $20-$25B.
Issuance Breakdown
Issuance totalled around $7B in the first half of 2026, compared with $10B during the same period last year. The 24% decline was nevertheless less severe than the broader bond market, where total issuance fell by more than 40% over the same period, according to S&P Capital IQ data.
The market began the year strongly, with around $5B of sustainable bonds issued in the first quarter, including $4B in January. Activity subsequently slowed as the conflict and wider geopolitical uncertainty reduced investor and issuer confidence.
Volatility Knocks Issuance Value
A ceasefire between the U.S. and Iran in April, followed by a memorandum of understanding in June, provided a window for some issuers that had been preparing to access the market before the conflict began.
S&P estimates this contributed an additional $2B of sustainable issuance in the second quarter.
Uncertainty surrounding US-Iran negotiations, potential disruptions to energy flows, logistical constraints and risk-averse shipping and insurance markets could continue to weigh on issuance in the second half of the year.
UAE, KSA Lead Issuance
The UAE and Saudi Arabia remain the dominant markets, accounting for around 98% of sustainable bond issuance by value and 73% by volume. Qatar has increased its contribution, partly offsetting weaker issuance from Türkiye.
Financial institutions have also remained the main issuers, accounting for 80% of issuance by value and 87% by volume. Sustainable issuance from non-financial corporates, meanwhile, fell by more than 80% in the first half as companies turned to bank lending and private placements to refinance maturing debt.
Sustainable sukuk has also weakened. Issuance fell to $2.1B in H1 2026 from $5.1B a year earlier, reducing its share of regional sustainable issuance to around 30% from 50%.
Macro Long-Term Fundamentals Hold
S&P maintains a positive medium-term outlook. National energy-transition strategies, emerging instruments such as transition and blue bonds, and continued demand for sustainable sukuk are expected to support the market.
Around $50B of sustainable bonds are also due to mature across the Middle East between 2027 and 2030, potentially creating a significant refinancing pipeline for future sustainable issuance.
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