Sukuk Liquidity Stays Below Pre-Conflict Levels, Fitch Says

Fitch Ratings said Tuesday that liquidity across the sukuk it rates has been largely flat since August 2026 but remains below January 2026, before the Iran conflict. Investment-grade sukuk averaged 67 on Nov. 2, down from 69 in August and up from 64 in March. Non-investment-grade sukuk scored 35, well below the investment-grade level. The all-rated average held at 62 in early November, recovering about 12% from its March low.

Saudi Arabia, Qatar and Kuwait had the most liquid GCC sukuk, averaging about 57. ASEAN paper was more liquid than GCC paper. Hong Kong, Malaysia, supranational issuers and Indonesia led with scores of 69 to 95. Turkish and Egyptian sukuk sat near 50, with Turkey slightly below its March level and Egypt above it. A-rated sukuk improved most between October and November.

Liquidity weakened during Middle East geopolitical volatility, especially in March. Fitch expects it to remain sensitive to geopolitical tension, higher interest rates and capital reallocation from emerging to developed markets.

Issuance and pricing reflected tighter conditions. Sukuk accounted for 13% of US dollar debt issued in emerging markets excluding China in Q3 2026. Core-market sukuk issuance was nearly $200 billion in the first nine months of 2026, down 11.8% year on year, while bond issuance fell 10.3%. GCC investment-grade sukuk yields reached 5.89% in October, and the spread over US Treasuries widened to 88 bp from 66 bp in September, driven partly by a geopolitical risk premium. Fitch put global outstanding sukuk above $950 billion, using a Bloomberg liquidity score.

The gap from January matters because liquidity affects the compensation investors demand to hold sukuk. Scores have recovered from March, but they remain below the pre-conflict starting point, and pricing carries a geopolitical component that can move faster than issuance plans.