Kuwait raises $6B in oversubscribed bond sale amid Hormuz bypass push

Kuwait raised $6 billion from a three-tranche sovereign bond sale on Thursday, drawing an order book exceeding $18 billion — more than three times the issuance size — as Gulf states continue borrowing at a historic pace to finance alternative export routes that would reduce their dependence on the Strait of Hormuz.agbi+1

The issuance, comprising $3 billion in three-year bonds, $1.5 billion in five-year bonds, and $1.5 billion in 10-year bonds, attracted heavy demand from U.S. investors who took the largest share at 48 percent of the allocation, followed by the UK and Europe at 28 percent. Kuwait's finance ministry called the order book "among the largest for multi-tranche sovereign bond issuance in 2026."agbi

A Region Racing to Diversify

The borrowing spree comes as Gulf nations fast-track pipeline and port projects aimed at bypassing the Strait of Hormuz, through which roughly a fifth of the world's oil flowed before the U.S.-Iran conflict erupted on February 28. The UAE's West-East Pipeline project is now about 50 percent complete, with Abu Dhabi ordering its completion by 2027, while Iraq is building the 435-mile Basra-Haditha pipeline connecting to Jordan, Syria, and Turkey. Saudi Arabia is considering expanding its crude pipeline capacity to the Red Sea to 9 million barrels per day.aljazeera+1

Goldman Sachs The Goldman Sachs Group, Inc. ↘ 1.38% estimated that enough pipeline capacity should exist to divert up to 45 percent of pre-war Persian Gulf oil exports by the end of 2027. GCC bond and sukuk issuances totaled $55.04 billion in the first quarter alone, up 5.64 percent year-over-year, and First Abu Dhabi Bank data indicates hard-currency issuance from the GCC has reached approximately $108 billion so far this year.nypost+3

Spreads Widen, Then Recover

Gulf sovereign spreads widened sharply after the conflict began but have since partially recovered. The S&P GCC Bond Index spread narrowed to 89 basis points over Treasuries by mid-June, down from 126 basis points in March, though still above the pre-conflict level of roughly 100 basis points. Investment-grade spreads on the S&P GCC Sukuk Index fell to 67 basis points by June 15, approaching the pre-conflict level of 70 basis points.fortune+1

The Strait of Hormuz reopened to some commercial traffic this week, sending oil prices down roughly 10 percent to near pre-war levels, according to Nuveen's fixed income commentary. But U.S. Central Command continued strikes against Iranian military targets as recently as July 23, underscoring the fragility of any stabilization. Kuwait, which returned to international debt markets in September 2025 after an eight-year absence with an $11.25 billion offering, has now raised nearly $20 billion in less than a year — a pace that reflects both the urgency of infrastructure investment and investor confidence in Gulf credit fundamentals despite the ongoing conflict.centcom+3