Holding steady as global markets falter
As volatility becomes the watchword around the globe, the Middle East could offer a rare oasis of relative calm
Middle Eastern sovereigns are expected to remain among the few bright spots in global bond markets this year as financial and geopolitical volatility constrains issuance elsewhere.
As of the end of April, year-to-date Middle East sovereign and quasi-sovereign Eurobond issuance had reached US$26bn, down from US$34bn over the same period in 2024, according to LSEG. Annual issuance has increased sharply in recent years — from US$14.7bn in 2022 to US$41bn in 2023 and a record US$52.86bn in 2024. While 2025 has started slightly slower than the same period in 2024, volumes so far in 2025 are still robust compared with earlier years.
As of April 29, year-to-date Middle East sovereign issuance totalled US$14.8bn across three deals, according to LSEG data. That compared with full-year totals of US$24.12bn from 13 issues in 2024 and US$22.31bn from 21 issues in 2023.
Quasi-sovereign issuance stood at US$11.18bn from seven transactions, following full-year totals of US$28.73bn from 28 issues in 2024 and US$18.68bn from 14 deals in 2023.
According to Standard Chartered, the MENA region accounted for nearly 24% of all emerging market hard currency issuance in the first quarter of 2025 — up sharply from 16% five years ago — reflecting continued global demand for Gulf credit.
With strong sovereign balance sheets, dollar pegs and a growing supply of ESG and sukuk instruments, sovereigns and quasi-sovereigns in the Gulf are likely to maintain market access even as global funding conditions tighten.
"The window is firmly open for [Middle East sovereigns and quasi-sovereigns] to issue debt, and I think for most of the Gulf that will stay open for quite some time," said James Swanston, senior Middle East and North Africa economist at Capital Economics, the London-based economics consultancy. "There’s always some underlying risk from global financing conditions, but for almost the entire past decade, [Middle Eastern] spreads over US Treasuries have been very low — and they still are."
Saudi Arabia opened the year with a US$12bn three-tranche Eurobond in January, comprising a US$5bn three-year tranche yielding 5.178%, a US$3bn six-year at 5.44%, and a US$4bn 10-year at 5.734%. The deal attracted around US$37bn in orders.
Israel followed with a US$5bn Eurobond in February, split between a US$2.5bn five-year tranche with a 5.375% coupon and a US$2.5bn 10-year with a 5.625% coupon, priced at 120bp and 135bp over Treasuries, respectively.
In the UAE, the government of Sharjah raised €500m in February through a seven-year bond carrying a 4.625% coupon and yielding 4.698%. Ras Al-Khaimah returned to the market in March with a US$1bn 10-year Eurobond offering a 5% coupon.
"Saudi Arabia’s spread [over Treasuries] is only about 130bp [at the end of April], and that’s only gone up by around 30bp during this recent bout of market uncertainty," said Swanston. "Even where there are concerns, spreads remain tight. Yes, there’s caution about the outlook, but the appetite is clearly there — and the window is very much open."
The second quarter opened against a more uncertain backdrop, testing the resolve of emerging market issuers and highlighting the relative resilience of the Middle East.
"Understandably, the recent tariff volatility has had a near-term impact on CEEMEA bond issuance," said Salman Ansari, global head of capital markets at Standard Chartered. "Emerging market sovereign debt sales have stalled in April 2025 following a record-breaking first quarter due to market turbulence ignited by US trade measures and broader policy uncertainty. However, this disruption may be viewed as a temporary reaction to short-term geopolitical developments."
Furthermore, Middle Eastern sovereign and quasi-sovereign issuers are leading the reopening of CEEMEA's primary markets. "Solid credit fundamentals and consistent, strategic engagement with global investors have positioned the region to be a leader in the primary capital markets, and that trend is very likely to continue," said Ansari.
GCC sovereign and quasi-sovereign borrowers are attracting investor confidence thanks to fiscal discipline, prudent debt management, and structural reforms aimed at long-term economic resilience. Relatively high yields, substantial foreign reserves, strong credit ratings, and currency stability further enhance the appeal of their issuance in global fixed-income markets.
But global volatility and uncertainty around US rate cuts have not compelled Middle Eastern issuers to accelerate Eurobond issuance in early 2025 to lock in favourable conditions.
"We anticipate a further pickup in activity," said Nour Safa, head of MENA debt capital markets at HSBC. "It is more volatile. We agree with that, but there are a lot of windows of opportunity. At the end of April, we started to see a favourable change in the global narrative around markets volatility which is enabling more issuers to come to market. We're expecting a big pipeline from the regional space. We could start seeing some of it materialise as soon as possible given the conducive backdrop."
Others agree that Middle Eastern issuers are staying flexible and strategic despite the volatility. "While market volatility often prompts issuers to reassess the timing of their deals, we have not observed a widespread trend of accelerated issuance in the MENA region," said Ansari. "Most issuers continue to adopt a measured and strategic approach, prepared to take advantage of optimal windows when market conditions allow. Issuers remain flexible and are closely monitoring the markets to identify the most constructive windows."
While regional demand for Middle Eastern bonds remains strong, recent deals have also drawn significant global interest. Sharjah’s €500m bond in February 2025 was oversubscribed 3.4 times, with 45% of allocations to UK investors and 26% to MENA. Ras Al-Khaimah’s US$1bn bond in March 2025 saw 57.8% placed with MENA investors, 35% with the UK and continental Europe, and 7.2% with Asia and others.
GCC sovereigns and quasi-sovereigns have been actively issuing Eurobonds to finance ambitious economic diversification agendas. These focus on green energy, tourism and technology and aim to reduce reliance on hydrocarbons and build broader, service-driven economies.
“Saudi Arabia has been running budget deficits – and large ones," said Swanston. "It flipped back into a budget deficit last year, just shy of 3% of GDP. It’s certainly been on the charge from a debt standpoint of needing to finance that shortfall. But even when it was running surpluses, it was very clear that that mandate was changing. It wants to pursue that broader diversification Vision 2030 plan to spend more. It’s issuing more to be able to finance that.”
With lower oil prices and OPEC+ production cuts, Gulf countries are turning to debt markets to finance developmental projects. Upcoming debt maturities and widening budget deficits are also prompting many governments to issue new bonds.
"Oil price is estimated to average US$68/barrel in 2025 by the [US Energy Information Administration], below the fiscal breakeven price for countries like Saudi Arabia, which would require average oil price at US$90 per barrel," said M R Raghu, chief executive officer at Marmore MENA Intelligence, a Kuwait-based research firm. "This would in turn increase the countries' funding needs. Based on the activity levels and funding needs, issuers are looking to lock in favourable conditions."
Buy local
Beyond the surge in Eurobond activity, Gulf states are also expanding their local debt markets. Efforts to deepen domestic investor bases and launch sukuk and T-bond programmes have gained momentum, particularly in Saudi Arabia, the UAE and Kuwait.
As of April 23, year-to-date Islamic finance issuance in the Middle East totalled US$17.48bn from 17 deals. While lower than the US$46.49bn raised in 2024, volumes remain well ahead of 2022 and 2023, according to LSEG.
Issuance increased from US$16.67bn in 2022 to US$30.57bn in 2023, reflecting growing demand for sharia-compliant instruments. Sovereign and quasi-sovereign issuers have played an expanding role. Sovereign sukuk volumes rose from US$2.5bn in 2022 to US$7bn in 2023, easing to US$4.96bn in 2024.
Quasi-sovereign issuance grew more consistently, from US$750m in 2022 to US$7.38bn in 2023 and US$11.44bn in 2024. To date in 2025, quasi-sovereigns have raised US$6.69bn across four issues, representing 25.5% of total Islamic finance issuance in the Middle East.
According to Standard Chartered, sukuk issuance accounted for nearly one-third of MENA bond activity in the first quarter of 2025, marking a record high. This follows a strong 2024 performance and suggests the sector's rising significance is continuing into 2025.
Saudi Arabia and the UAE are notable examples of countries actively developing their local bond markets, supported by fiscal policy, regulatory reform and investor base expansion. Both have launched targeted initiatives: Saudi Arabia’s riyal-denominated sukuk programme (2017), and in the UAE, the federal government has introduced a T-bond issuance programme (2022) and a T-sukuk issuance programme (2023) to strengthen its local currency debt market.
Under its Saudi riyal-denominated sukuk programme, Saudi Arabia raised SR280bn (US$75bn) between 2018 and March 2025. Banks remained the principal investors, but foreign participation has grown, rising to 5.8% of issuance in 2024 from zero in 2018.
Under its T-bonds and T-sukuk programmes, the UAE has raised Dh28.2bn (US$7.7bn), with Dh11.2bn in bonds and Dh17.1bn in sukuk. The instruments are seeing strong demand, with Dh1.1bn issuance in January 2025 being covered as much as 6.3 times, according to Marmore MENA Intelligence.
Kuwait is expected to expand its local currency debt market against the backdrop of the passage of local debt law and the need for funding developmental projects under Vision 2035 amid the prevailing lower oil price environment relative to the country's estimated fiscal breakeven price of US$90.50 barrel for fiscal year 2025/26.
"The diversification of funding strategies across markets — such as sukuk — has helped to open up access to broader investor bases over the years," said Ansari. "These trends toward such key markets as sharia-compliant financing have positioned regional issuers at the forefront of innovation, allowing them to meet evolving investor needs."
Demand for sukuk is at record levels, prompting issuers across the region to broaden their funding strategies and tap into a broader investor base.
"Regional liquidity remains robust, providing issuers with a solid domestic investor base," said Ansari. "This is particularly evident in the sukuk market, where local investors have played a significant role in supporting issuance."
The convergence of global and regional investor demand highlights the strength of the Gulf’s capital markets. Issuers are well placed to tap this support, with key sukuk deals consistently oversubscribed in early 2025. Notable issues included Ma'aden (US$1.25bn), RAK Capital (US$1bn), and Bapco Energies (US$1bn). Ma'aden's deal was subscribed 9.2 times, while RAK Capital and BAPCO drew subscriptions of 4.4 and four times, respectively.
"As sukuk issuances provide means to tap into the liquidity available with Islamic investors and given the funding demands of the region, sukuk issuances would continue to make up a significant part of the total issuances," said M R Raghu.
Green shoots
Green bond issuance in the Middle East has had a strong start in 2025, with US$4.07bn raised across five deals in the year to April 23 — nearly matching the US$4.36bn raised over the whole of 2024, according to LSEG. While still below the record US$15.58bn issued in 2023, volumes have increased significantly since 2022, when just US$5.74bn was raised.
ESG-labelled issuance is gaining traction more broadly. In the first quarter of 2025, nearly US$6.5bn was raised across sovereigns, government-related entities and banks — the first time first-quarter ESG volumes exceeded 12% of total issuance, according to Standard Chartered.
More regional borrowers are adopting ESG frameworks and issuing labelled instruments to diversify their investor base. This shift aligns the region more closely with global market practices and increases its appeal to mainstream and ESG-focused funds. Sustainability is becoming more embedded in long-term funding strategies.
In February 2025, Saudi Arabia issued its first sovereign green bond, a €1.5bn seven-year, as part of a €2.25bn fundraising that included a €750m 12-year conventional tranche.
The green bond was popular, with orders of more than €7.25bn compared with €2.7bn for the conventional note. That, in turn, helped pricing tighten more on the green bond.
After announcing initial price thoughts in the areas of 155bp over swaps for the March 2032 greens and 175bp for the March 2037s, the bonds launched at plus 115bp and plus 145bp, respectively.
The green bond was issued under the kingdom’s Green Financing Framework released in March 2024.
Other regional issuers — including the UAE, Oman, Israel and Turkey — have also adopted green or sustainable financing frameworks.
Government-related entities are also contributing to the growth. Masdar, the Abu Dhabi-based renewable energy and sustainable development company, issued a US$750m green bond in 2023 and a US$1bn follow-up in 2024. DP World, the Dubai-based global logistics and supply chain company, issued a US$100m blue bond in December 2024 — the first from the region — to fund maritime sustainability projects.
Safe haven
But amid renewed global financial volatility in the second quarter of 2025 — driven by US trade tensions, shifting rate expectations and broader geopolitical uncertainty — the Gulf stands out as a source of macroeconomic stability and investor confidence.
"I do think it's true; I think the Middle East is a bit of a safe haven," said Nour. "Maybe GCC specifically is the safe haven area. The sovereigns are well rated. They still offer a spread that is quite tight but maybe slightly better than US investment-grade counterparts. They're a bit shielded from volatility."
Analysts expect a steady pipeline of sovereign and quasi-sovereign issuance from the Middle East through the remainder of 2025. Saudi Arabia will likely return to the market to complete its borrowing plan alongside its sovereign wealth fund, the Public Investment Fund, which has outlined further funding needs. Sharjah may seek additional financing beyond its initial deal, while Abu Dhabi and the Abu Dhabi National Energy Company (Taqa) are expected to refinance upcoming maturities.
Oman could tap the market if weaker oil prices increase its fiscal deficit. Kuwait, meanwhile, could return to international markets following the passage of a new debt law in April, potentially enabling its first bond issuance since 2017. Bahrain is also seen as a possible issuer, given persistent funding pressures.
Other analysts say the sense of stability is a significant factor underpinning strong investor demand. "I think the Gulf countries, in particular, provide a lot of stability to investors," said Swanston. "The way monetary and fiscal policy works in these countries is very stable. There's very little risk of political unrest around passing policies by virtue of how they are run essentially as autocracies by royal families. So, there's a lot of stability around that."
The Middle East’s strong showing in the first quarter of 2025 highlights its growing importance in global debt markets. While geopolitical risks and rate uncertainty continue to cloud the broader emerging market outlook, Gulf sovereigns appear well positioned to maintain market access, supported by robust fundamentals, investor demand and strategic issuance planning.