JEDDAH: GCC dollar sukuk and bond yields have surged to five-year highs as Iran war heightens risk perceptions, tightening liquidity and raising borrowing costs across regional debt markets, Fitch Ratings said.
In a new report, the agency said the widening of spreads reflects a sharp shift in investor sentiment since the conflict began, exceeding volatility seen during recent geopolitical flashpoints and regulatory changes — though still falling short of the dislocation triggered by the COVID-19 pandemic.
The escalating conflict in the Middle East has disrupted the global economy’s growth trajectory, the Organization for Economic Cooperation and Development warned, citing risks of a near-halt in energy shipments through the Strait of Hormuz that could push inflation higher.
The OECD said the global economy had been on track for stronger-than-expected growth before the war, but that outlook has now weakened, with global GDP growth projected to ease to 2.9 percent in 2026 before edging up to 3 percent in 2027 as energy price pressures and geopolitical uncertainty weigh on momentum.
“The yield to maturity for S&P MENA Sukuk and Bond Indices has widened significantly since the war began,” Fitch said, adding that the Sukuk Index YTM rose by 69 basis points over a month to 5.15 percent on March 27, while the Bond Index rose by 64 basis points to 5.37 percent.
