Emerging-Market Bond Sales Hit $190 Billion Despite the Iran War

Emerging-market governments borrowed at a record pace in foreign currencies in 2026, even though the Iran war briefly disrupted bond markets. Institute of International Finance (IIF) figures reported in September put January–August sovereign issuance at $190 billion, compared with $160 billion a year earlier; roughly $10 billion in subsequent offerings brought the reported year-to-date total to about $200 billion. The eight-month increase was $30 billion, or 18.75%.539

How did issuance reach a record despite the war?

Timing was crucial. Emerging-market debt sales began the year strongly, then largely froze as the Iran war unsettled markets and raised borrowing costs. An IMF issuance monitor put hard-currency sovereign borrowing in March at just $4.1 billion, roughly 60% below the year-earlier level. Issuers returned when conditions allowed: the same monitor records Poland selling $6 billion in dollar bonds in early April, across five-, 10- and 30-year maturities.387

Saudi Arabia shows the strength of demand before the interruption. Its January four-tranche dollar sale raised $11.5 billion and attracted an order book of about $31 billion—roughly 2.7 times the amount sold. Orders signal investor interest, though they are not final bond allocations.5758 September reporting says Saudi Arabia and Qatar subsequently returned to publicly marketed dollar bonds for the first time since the war began. That pattern supports an account of early borrowing followed by reopened access; the available evidence does not establish how much Gulf borrowing was deliberately brought forward in anticipation of the conflict.39

Mexico and Turkey also featured among major emerging-market international bond borrowers: Bloomberg reported that borrowers from each raised more than $10 billion in the first half of 2026, as did Poland and Saudi Arabia. But that Bloomberg measure includes sovereigns and corporations, so those amounts cannot be treated as each government’s contribution to the $190 billion sovereign figure. September reporting described further Turkish borrowing as planned, not completed.1739

Why were investors still willing to buy?

Demand recovered after the initial shock. IIF data reported by Reuters showed $58.3 billion in emerging-market portfolio inflows in April, reversing much of March’s $66.2 billion outflow. Those flows cover stocks as well as bonds, so they indicate renewed appetite rather than a direct measure of sovereign-bond purchases.43 Bloomberg also reported that emerging-market international bond spreads were their tightest in almost two decades. A higher U.S. Treasury yield can raise a dollar bond’s overall yield even when the additional yield investors demand for credit risk remains narrow.17

Investors had reasons to view some borrowers as better equipped for shocks than in earlier periods. Reuters points to reforms, deeper domestic capital markets, stronger reserves and larger domestic investor bases as factors reducing emerging-market vulnerability. None makes foreign-currency debt risk-free: the conflict has also brought inflation, fiscal strain and trade disruption to emerging economies.3437

What do the bigger debt figures mean?

Fitch expects Saudi Arabia to remain among the largest emerging-market U.S.-dollar debt and sukuk issuers and forecasts its debt capital market at $600 billion outstanding in 2026. That is a projection for a broad stock of outstanding debt, driven in part by cross-sector financing needs and fiscal deficits—not $600 billion of new sovereign dollar bonds.49

Mohamed El-Erian’s assessment is similarly measured: the additional emerging-market bond supply puts pressure on global yields “at the margin,” while remaining substantially smaller than issuance from advanced economies and technology companies. In other words, this borrowing wave adds to competition for investors’ money, but the cited assessment does not quantify its effect on yields.15