Foreign currency sukuk issuances could reach $70–$80 billion in 2025, according to S&P Global. This growth is largely driven by expectations of US Federal Reserve rate cuts. In the first half of the year, issuance volumes rose by 9%, reaching $41.4 billion compared to $38 billion in 2024. The UAE, Bahrain, and Kuwait played key roles in this increase.
GCC Issuances Boost Market Momentum
Despite global capital market volatility, issuance activity remained strong. Market challenges included proposed US tariffs and slower-than-expected monetary easing. Even so, the GCC maintained momentum.
S&P highlighted that key Islamic finance countries needed more funding due to lower oil prices and rising fiscal deficits. These factors supported the increase in sukuk activity.
Saudi Arabia saw a slight dip in volumes but still contributed 38.9% of the market. Most issuances came from banks funding Vision 2030 projects.
In the UAE, favourable conditions encouraged both financial institutions and corporates to raise capital.
Local Currency Activity Slows Global Totals
Global sukuk volumes dropped 15% in the first half of 2025, falling to $101.3 billion from $119 billion last year. The decline stemmed from weaker local currency issuances in core Islamic markets.
According to S&P, this drop reflects tight liquidity in some regions and reduced financing needs in others. Several countries showed stronger fiscal performance, which limited borrowing requirements.
S&P expects local currency issuances to stay low for now. Conditions in core markets remain tight, which could delay any rebound in volumes.
Future Outlook Hinges on Oil and Stability
S&P said the outlook for the second half of 2025 depends on geopolitical developments in the Middle East.
“Since we don’t expect a full-scale regional war, we think the resilient foreign currency issuance trends observed in the first half will continue,” the ratings agency said.
Sukuk will remain important for oil-reliant economies seeking stable financing.
“We assume oil prices will average $60 for the remainder of 2025 and $65 for 2026 and that the market’s oversupply will continue to outweigh demand from 2025,” S&P stated.
