Sunday, 4 October 2026
Debt fundraising across the Gulf slowed during the third quarter of 2026 as rising interest rates increased financing costs, although activity over the year as a whole remained ahead of 2025. GCC governments and companies raised USD 42.5 billion through bonds and sukuk during Q3, a decline of 17.5% from the previous quarter and 19.4% from a year earlier.
The quarterly decline has not reversed the broader expansion recorded during 2026. New GCC debt issuance reached USD 160 billion during the first nine months of the year, 3.3% above the corresponding period of 2025. Activity was particularly subdued in August, when issuance dropped to USD 7.3 billion, before recovering to USD 16.7 billion in September.
Companies accounted for most of the Q3 reduction. Corporate issuance decreased by 25% from the second quarter to USD 23.4 billion, while government borrowing declined by 6% to USD 19 billion. Islamic financing moved sharply in the opposite direction. Sukuk issuance reached USD 18.8 billion, increasing its share of all GCC issuance to 44% from just 15% during Q2.
Saudi Arabia remained the region’s largest market during the quarter, with USD 15.7 billion of issuance, all classified as sukuk in Kamco Invest’s dataset. The UAE followed with USD 12 billion, driven predominantly by companies, while Kuwait generated USD 8.7 billion. Qatar contributed USD 4.7 billion, followed by Bahrain at USD 1 billion and Oman at USD 0.3 billion.
Large sovereign transactions demonstrated that investors were still prepared to commit substantial capital despite the more expensive financing environment. Kuwait raised USD 6 billion in July and attracted orders exceeding USD 18 billion. Saudi Arabia subsequently issued USD 3.25 billion of five- and ten-year sukuk against demand of USD 16.5 billion. Qatar’s USD 3 billion international transaction in September generated peak orders of USD 7.7 billion.
The cost of accessing that capital has nevertheless increased. Kuwait’s new ten-year sovereign bond carried a 5.509% coupon, compared with 4.652% on its October 2025 ten-year issuance. Saudi Arabia’s ten-year sukuk was priced at 5.60%, while three-month SAIBOR climbed to 5.54% by the end of Q3. Saudi banks issuing additional Tier 1 sukuk during the period offered coupons between 6.30% and 6.50%.
Higher interest rates also weighed on the value of existing debt. The combined MENA bond and sukuk index declined 3.8% during the quarter, while the GCC Credit + HY index recorded the same quarterly fall. Credit spreads, however, remained comparatively contained. The GCC US-dollar credit spread finished September at 88 basis points, roughly half the 170 basis points recorded for the wider emerging-market benchmark used in the Kamco analysis.
The figures point to a Gulf debt market facing more expensive financing rather than a broad withdrawal of investor demand. Strong order books for major sovereign transactions continued even as yields moved higher, while the sharp Q3 recovery in sukuk demonstrates the growing range of financing available to regional borrowers. With USD 160 billion already raised during the first nine months of 2026, Gulf capital markets remain an important source of funding for governments and companies despite a substantially tougher interest-rate environment.
