In another outlook for the Islamic banking industry, Fitch Ratings says that amid the ongoing Iran war, credit ratings, countries of risk, and sector type are having varying impacts on global sukuk and GCC debt capital market (DCM) liquidity landscapes. Longer-term effects on the sector, as per the agency, will depend on two things: the quick resolution of the crisis and equally fast restoration of investor confidence.
Fitch assesses liquidity using Bloomberg’s Liquidity Assessment (LQA) scores, which indicate security-level liquidity. The ratio can range from one to 100, with 100 signifying the highest liquidity. Generally, a score of 100 is assigned to securities with the lowest liquidation costs within an asset class, while securities with the highest costs get a score of one.
According to Fitch, LQA is a data-driven model that produces a daily security-specific liquidity surface that captures the relationship between volume, cost, and time.
“The LQA decline for investment-grade sukuk has been less severe than for speculative-grade sukuk on average,” the agency stated further.
“While LQA scores have declined in most GCC debt capital markets since the Iran war’s beginning, as well as for sukuk issuers in Turkey, Egypt and Indonesia. On the other hand, many rated Malaysian, Omani, and supranational sukuk have shown resilience in their LQA scores,” Fitch noted.
“Sukuk in the ‘BB’ and ‘B’ categories have the lowest LQA scores among all Fitch-rated sukuk globally on average, with the steepest liquidity fall compared to other rating categories since the war began. Sukuk in the ‘F1sf’, ‘AAA’, ‘BBB’, ‘AA’, and ‘A’ categories held the highest liquidity of all rated sukuk, but also faced declines, except ‘F1sf’,” it stated.
Sector-wise, corporates, infrastructure and project-finance sukuk had the lowest LQA scores among all rated sukuk globally, with the steepest liquidity falls. Asset-backed, supranational and sovereign sukuk, in contrast, maintained the highest liquidity levels, except asset-backed sukuk, whose scores increased.
“Fitch also analysed liquidity for 52 comparable sukuk and bonds from the same issuers. Liquidity was broadly similar in 50% of cases, sukuk were less liquid than bonds in 31%, and more liquid in 19%. GCC US dollar sukuk and GCC US dollar bonds have displayed broadly similar liquidity trends, with both declining since the war began. The average LQA score for GCC US dollar sukuk fell to 45 on 23 March from 56 at the end of 2025. The average score for GCC US dollar bonds dropped to 48 from 53 in the same timeframe,” the ratings agency remarked.
“About 64% of Fitch-rated sukuk had an LQA score above 50 on 23rd March, down from 82% in January 2025 (excluding local ratings and sukuk without an LQA score). Investment-grade sukuk are generally more liquid, with an average score of 65 as of March 23 (January 2026: 73), compared to 33 for speculative-grade sukuk (January 2026: 48). Historically, GCC DCMs have rebounded fairly quickly when tensions eased following previous Middle East geopolitical episodes, but the impact this time will depend on the scale and duration of the war,” it concluded.