S&P Global Ratings has officially revised its 2026 outlook for sustainable bond issuance in the Middle East, lowering its forecast to a range of $15 billion to $20 billion. This adjustment downward from the original $20–$25 billion estimate comes as the region grapples with heightened geopolitical instability and more restrictive market conditions. Data from the first half of the year shows a total of $7 billion in issuance, a decrease from the $10 billion recorded during the same timeframe in 2025. While the market saw a brief surge following diplomatic developments between the U.S. and Iran, ongoing logistics constraints and the Federal Reserve’s decision to keep interest rates steady have dampened broader momentum.

The market landscape remains heavily concentrated, with the UAE and Saudi Arabia accounting for the vast majority of activity, while the banking sector continues to lead as the primary issuer. Notably, non-financial corporations have largely stepped back, opting instead for private placements and traditional bank loans to navigate current economic pressures. Furthermore, the sustainable sukuk segment has seen a significant contraction, dropping to $2.1 billion from last year’s $5.1 billion. Despite these immediate hurdles, S&P maintains a cautiously optimistic medium-term view. The agency highlights that the urgent need for infrastructure to support energy-intensive AI projects, alongside an upcoming wave of debt refinancing between 2027 and 2030, could provide the necessary catalyst for a sustainable finance rebound in the coming years.