Islamic Bonds Gain Safe-Haven Status
Amid escalating conflict in the Middle East, Islamic bonds (Sukuk) are consolidating their role as a safe-haven asset for regional investors. According to Teniz Capital, the Sukuk market is showing resilience, with geopolitical repricing creating selective buying opportunities in Gulf Cooperation Council debt.
Unlike conventional bonds, which represent a debt obligation, Sukuk grant the investor partial ownership in a tangible asset. This structure means returns are generated from the asset's profits or rent, not from interest payments, providing a foundation of stability that is less susceptible to market volatility. The global Sukuk market was valued at approximately $1.3 trillion in 2025 and is on a rapid growth trajectory, with S&P Global Ratings forecasting total issuance to reach between $270 billion and $280 billion in 2026. This expansion is fueled by strong economic performance and high financing needs in core Islamic finance countries. The Gulf Cooperation Council (GCC) and Southeast Asia are the epicenters of the Sukuk market. Within the GCC, Saudi Arabia and the UAE are the dominant issuers, while Malaysia and Indonesia lead in Asia. The GCC's overall debt capital market is expected to exceed $1.25 trillion in 2026, with Sukuk's share recently hitting a record 41%. This safe-haven status is backed by strong credit quality; Fitch Ratings reports that approximately 84% of its rated Sukuk in the GCC are investment-grade. Furthermore, 90% of issuers currently hold a Stable Outlook, and there have been no recorded defaults in the past four years. A significant trend fueling growth is the alignment with Environmental, Social, and Governance (ESG) principles. The global ESG Sukuk market is projected to surpass $70 billion by 2026, as these instruments are increasingly used to fund renewable energy and sustainable infrastructure projects, particularly in Saudi Arabia and the UAE. National economic strategies, such as Saudi Arabia's Vision 2
