MAYS IBRAHIM (ABU DHABI)
The UAE's sustainable bond market is defying a broader regional slowdown, with issuance value climbing 30% and deal volume rising 17% in the first half of 2026, even as the wider Middle East market cooled amid geopolitical uncertainty, according to a new report by S&P Global Ratings.
The country issued sustainable bonds worth $4 billion across seven deals in H1 2026, making it the standout performer in a region where total issuance value fell 24% year-on-year.
The UAE's growth stands in sharp contrast to its regional peers. Saudi Arabia's issuance value dropped 38% to $3.1 billion despite steady deal volume, while Türkiye's market nearly collapsed, with value down 97% and volume down 80%.
Together, the UAE and Saudi Arabia continue to dominate the region, accounting for about 98% of sustainable bond issuance by value and 73% by volume, S&P noted, with rising activity from Qatar helping offset Türkiye's decline.
The report attributes the region-wide slowdown to heightened geopolitical risk following the outbreak of conflict in the Middle East in late February 2026, as well as tighter financing conditions than previously anticipated.
As a result, S&P lowered its full-year 2026 forecast for Middle East sustainable bond issuance to a range of $15 billion to $20 billion, down from an earlier estimate of $20 billion to $25 billion.
Even so, the report pointed to signs of recovery. A ceasefire between the US and Iran in April 2026, followed by a memorandum of understanding in June, opened a window for issuers who had delayed market access, adding an estimated $2 billion in sustainable issuance during the second quarter alone.
Regionally, banks led activity, accounting for 80% of issuance by value and 87% by volume, as corporate issuers pulled back and increasingly turned to bank lending and private placements instead.
Sustainable sukuk issuance across the Middle East nearly halved, falling to $2.1 billion in H1 2026 from $5.1 billion a year earlier, with sukuk's share of total sustainable issuance dropping to about 30% from 50%.
Despite near-term volatility, S&P maintained a positive medium-term outlook for the sector, citing national energy-transition strategies, the emergence of new instruments such as transition and blue bonds, and continued demand for sustainable sukuk as key growth drivers.
The ratings agency also flagged a significant refinancing opportunity ahead: about $45 billion to $50 billion in Middle East sustainable bonds are due to mature between 2027 and 2030, which could support a fresh wave of issuance if borrowers choose to refinance with sustainable debt.