Fitch says Emirati issuers held their access to international investors through six months of regional conflict — a test most emerging markets would have failed.
Aalimi Nation · Business Desk | Dubai
The United Arab Emirates' debt capital market grew 3 per cent year on year to roughly $320 billion outstanding at the end of the first half of 2026, with US dollar issuance reaching $24 billion, according to Fitch Ratings.
That dollar figure is 40 per cent higher than in the second half of 2025 — and it was raised during a period in which the region was at war and the Strait of Hormuz was closed.
Fitch expects the market to expand moderately through the remainder of 2026 and into 2027, supported by funding diversification, financing needs across sectors and regulatory reform. It forecasts consolidated UAE government debt rising to 25 per cent of gross domestic product in 2026, from 22.7 per cent in 2025, with banks and corporates continuing to issue opportunistically.
Sukuk accounted for 21 per cent of outstanding UAE debt at the end of June. More than 70 per cent of the market is denominated in US dollars.
Access, under fire
The headline number is the growth. The more interesting finding is that the market functioned at all.
Fitch noted that UAE issuers remained among the largest emerging-market issuers of dollar bonds and sukuk during the first half despite the volatility generated by the Iran war. "UAE issuers have generally maintained market access so far in 2026 despite regional volatilities," said Bashar Al-Natoor, the agency's global head of Islamic finance.
Maintaining access during a regional conflict is not a routine achievement. International investors typically reprice or withdraw from a geography under military threat, and issuers respond by postponing. Some UAE borrowers did adapt — moving to private placements and syndicated financing to meet funding requirements during the disruption — but the market did not close.
Al-Natoor also pointed to a widening of instrument types: "Market diversity rose, with issuance such as the first dirham digitally native notes, sovereign retail sukuk, blue and green bonds, and certificates of deposits."
Those are not incremental products. Digitally native notes issued in dirhams, and sukuk sold directly to retail investors, both address the structural weakness of Gulf debt markets — dependence on dollar funding and on a narrow institutional investor base. Issuance in dirhams by entities outside the government nonetheless remained limited.
The warning signs Fitch also recorded
The report is not uniformly positive, and the qualifications deserve attention.
More than 80 per cent of Fitch-rated UAE sukuk were investment grade, with no defaults. But the proportion of sukuk issuers carrying stable outlooks fell to 81 per cent during the first half — meaning nearly one in five now sits on negative or evolving outlook. Fitch placed Ras Al Khaimah, along with several corporate and sukuk issuers, on Rating Watch Negative.
Liquidity in Fitch-rated UAE sukuk improved in August compared with March, but remained below its pre-conflict level in January. That is the honest measure of the damage: the market kept working, but it is thinner than it was, and thin markets are where trouble surfaces first.
Fitch was explicit that the near-term trajectory depends partly on regional stability. Improved conditions could produce a more favourable funding environment; renewed escalation would weigh on growth. The market is also sensitive to oil prices — currently elevated with Brent above $91 — and to interest-rate volatility, at a moment when US Treasury yields have been anything but stable.
Where the UAE sits regionally
A July report from the Kuwait Financial Centre, Markaz, put total GCC bond and sukuk issuance at $102.69 billion in the first half, up 6.5 per cent year on year. The UAE was the second-largest issuing market after Saudi Arabia, with entities raising $25.45 billion across 58 issuances — 24.8 per cent of Gulf issuance, but 6.8 per cent lower than the same period of 2025.
The two figures are not contradictory. Markaz counts primary bond and sukuk issuance across all currencies; Fitch's $24 billion refers specifically to US dollar issuance by UAE issuers. Read together, they describe a market where total issuance dipped slightly while the dollar component rose sharply — issuers concentrating on the deepest available pool of capital during a period of stress.
Separately, Nasdaq Dubai recorded 33 fixed-income listings worth $13.8 billion in the first half, with total outstanding listed debt reaching $141 billion: $98.6 billion of sukuk and $42.4 billion of bonds.
Why this matters beyond the Gulf
For readers in India, this is not a distant story.
Gulf debt markets are where the capital funding regional infrastructure, logistics and energy projects is raised — including projects with Indian partners, Indian contractors and Indian labour. A functioning UAE debt market means the India–UAE economic relationship, and the wider $240 billion India–Arab trade relationship, retains its financing plumbing through a period of conflict.
It also offers a lesson India's own borrowers are watching. The UAE spent a decade deepening its local market, diversifying instruments and courting international investors. That work is what allowed it to keep issuing when a war closed the strait next door. Depth built in calm conditions is what gets tested in bad ones.
The question for the second half is straightforward. If the conflict eases, Fitch expects a more favourable environment and continued growth. If it escalates, a market that has already lost liquidity and seen a fifth of its issuers' outlooks weaken will find the next test harder than the last.
