Geopolitical tensions and conflict: key areas for consideration for capital markets issuers in the Gulf region

Geopolitical sentiments and financial markets are intrinsically linked, and geopolitical tensions always drive heightened volatility across capital markets. Such volatility is more likely than not going to adversely affect issuers in each of their domestic markets regionally as well as more broadly in the global international capital markets.

Early in 2026, the escalating geopolitical tensions and incidents of conflict in the Gulf region have introduced significant uncertainty into the regional capital markets – with consequences that are likely to be felt well into the future.

From market disruption and liquidity constraints to business and political risks materialising and potentially affecting business continuity and covenant compliance, tremors of tensions or conflicts can already be felt on many levels across the regional capital markets.

In this first market update in March 2026, we are looking at the key areas of consideration for both the most established and well-seasoned market participants as well as more recent market entrants and debut issuers in the Gulf region, all of whom now find themselves in a much more uncertain market environment.

1. Broader Market Impact

For any company operating in the Gulf region that raised funding through domestic or global capital markets (or is considering doing so), general risks arising from regional and global tensions or conflict include (and are not limited to):

• liquidity risks (including higher cost of capital, widening financing terms and more restricted access to capital);
• operating cost pressures and disruptions (including increased pressure on supply chains, reduced access to trade routes, increase in costs of doing business);
• adverse impact on revenue generation (including market closures, reduced demand for goods and services, tightening of margins due to increases in costs); and
• challenges in retaining and deploying human capital.

In addition, for companies raising funding through issuance of sukuk specifically, the  instances of conflict create tangible risks of full or partial loss of tangible assets on which sukuk issuance structures may rely – without such tangible assets, capital markets issuers will struggle to structure and arrange new sukuk transactions and may encounter issues accessing capital in an Islamic finance compliant manner. For existing issuers, loss of tangible assets will have structural repercussions, including potential requirements for asset substitution or early dissolution.

On the operational side, significant uncertainty in times of increased geopolitical tensions or conflict may pose a challenge to the accuracy of cost and revenue forecasts, increase reliance on management judgements, and therefore further compound issues around prudent financial planning.

2. Practical Implications

Each capital markets issuer is unique, and their circumstances will be specific to the industries they operate in and the financial position they find themselves in – and while it is tempting to think that, typically, the investment grade issuers should fare better than their peers in high yield space, each company needs to make a prudent assessment of the impact of the current events on its business, business continuity, client base, profitability, and cash or balance sheet management.

Volatility in capital markets may lead to planned issuances being delayed, or postponed indefinitely, or may lead to an increase in cost of funding – the issuers may therefore find it more difficult on the incurrence side to raise new capital or refinance their existing commitments, or on the maintenance side to meet and maintain their target or current financial ratios or covenants.

All of the above may lead to issues around breaches of covenants or, in more severe circumstances, threats of triggering events of default under existing issuances – in particular, we would expect the following market standard events of default to come into focus first:

• Non-payment;
• Breach of other obligations (including breaches of financial or other covenants);
• Cross-default/cross-acceleration;
• Enforcement.

For sukuk issuances, corresponding dissolution events are the functional equivalent of the same events, and typically we would expect similar events to be in focus, mirroring the categories mentioned above.

In addition, as mentioned above, for sukuk transactions certain events affecting the underlying tangible asset pool may need to be considered e.g. damage to, or destruction of, underlying assets used for sukuk structuring, any issues of governmental expropriation and requisition, or similar, may need to be considered in the context of either structural contractual mechanics relating to sukuk assets or in the context of default and early dissolution.

3. Disclosure Obligations

Geopolitical events may have a material impact on any capital markets issuer, its business and its ability to pay coupon and principal on its issued securities.

So, there are good reasons why capital markets issuers based in the broadly defined emerging markets, or in regions fraught with geopolitical tensions or volatility, count geopolitical risks among accepted and market standard risk factors' disclosure. Such risk disclosures, while sometimes taken for granted, in fact play an important part in ensuring completeness of the overall disclosure package and provide a disclosure and due diligence defence for the issuers of securities, and their issuance managers, vis-à-vis the investor base. Such disclosures need to be updated periodically to ensure completeness of the disclosure package and sufficient levels of protection for the relevant capital markets participants.

Depending on the severity of the impact, or potential impact, of the current geopolitical tensions and incidents of conflict  in the Gulf region, and any associated market disruptions, capital markets issuers may need to look at their existing disclosure package and may need to consider seeking legal advice with respect to their disclosure obligations.

For issuers with established issuance platforms that are not looking to tap the markets in the immediate future, there may be no immediate steps that need to be taken – but for issuers that are heading into their annual programme updates, or that are contemplating an issuance, there may be a case for an update of the existing disclosure package to take account of such recent developments.

In addition, for issuers already subject to continuing disclosure obligations, the current events may have the potential to trigger disclosure requirements either in the context of an ongoing offering or through their impact on the issuer itself – to the extent the issuer or its business is materially impacted, that fact in and of itself may constitute inside information or material non-public information that would be disclosable to the public. The management of such issuer will have to monitor and, where required, disclose such information to the public to ensure compliance with the respective continuing obligations to which the relevant issuer may be subject.

4. Practical Steps for Securities Issuers

Issuers of bonds and sukuk should consider the following immediate steps:

• Monitor disclosure obligations. Establish a process for monitoring whether developments cross the thresholds of materiality which drive the requirements for disclosure, or qualify as information which will also require disclosure, and for accordingly updating offering documents and risk factors where applicable and where required based on each issuer's specific circumstances.
• Review documentation, consider asset base of sukuk. Conduct a thorough review of bond and sukuk documentation to identify any areas which may present a challenge in the current geopolitical circumstances in the Gulf region, and the resulting tensions and their economic effects, should the issuer's business or trading position deteriorate, including reviewing potentially relevant events of default (or dissolution events for sukuk), and other related provisions such as grace periods, materiality thresholds and cure rights.
• Consider sukuk-specific structural risks. Assess the condition and continued performance of underlying sukuk assets and obligor's payment undertakings.

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_{This article is prepared for the general information of interested persons. It is not, and does not attempt to be, comprehensive in nature. Due to the general nature of its content, it should not be regarded as legal advice.}

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