Levent Gürses
The US-Israel joint attack on Iran, which began in the early hours of 28 February, is severely impacting both the Turkish economy and the global economy and markets. The war on Iran is causing economic concerns in Turkey, which shares a 534-kilometre border with Iran and has an annual trade volume of $5.5 billion.
On Thursday, 5 March, the war entered its sixth day. The attack by the ‘two rogue states,’ the US and Israel, against Iran is increasingly taking on the character of a war of annihilation and destruction, and, as US President Donald Trump said, it looks like it will ‘last for weeks.’
The war waged by those who bombed a girls’ primary school, killing more than 150 innocent people, and sank an unarmed warship outside the conflict zone, killing 148 Iranian sailors, could lead to significant developments in our region and economy. If this war, which began suddenly while diplomatic talks were ongoing, continues, it carries significant implications for the Turkish and global economies.
The Strait of Hormuz closed; the energy market was turned upside down
The war’s greatest impact on the economic front was on the energy market. Due to the closure of the Strait of Hormuz, which is of strategic importance for global energy supply following the attacks, the price of Brent crude oil for May delivery exceeded $86 per barrel on Thursday, 5 March, closing at $85.41. It had been trading at around $70. Brent crude gained 19 per cent in value in the week ending Thursday.
April-dated West Texas crude also rose to $79.43 at Thursday’s close, up from $67 per barrel before the war. Experts warn that if the blockage in the Strait of Hormuz continues, prices could rise to $100 in a short time.
The critical Strait of Hormuz, through which approximately 20 per cent of global oil trade passes, has effectively come to a standstill due to security risks. Tanker owners have suspended voyages, while insurance costs (premiums) have reached record levels.
Additionally, benchmark gas prices in Europe surged by over 30% at one point due to Qatar Energy halting production at some facilities and regional risks.
IMF warns of growth slowdown, interest rate cuts may also slow down
There are concerns that rising energy costs could reignite global inflation, which has only just been brought under control. The International Monetary Fund (IMF) has warned that this situation could slow down global growth. The war has also complicated central banks’ interest rate cut plans. Markets have begun to price in the possibility that institutions such as the US Federal Reserve (Fed) and the Bank of England may postpone the interest rate cuts they had forecast for 2026.
The risk of derailment in Turkey’s sluggish economy
It is well known that the Turkish economy was not being well managed; particularly inflation, the high cost of living, mainly due to high food prices and rents, unemployment, income inequality, tax injustice, waste of public resources, especially on projects such as Treasury-guaranteed bridge-road-city hospitals, energy imports and current account deficit, rising interest payments, exchange rate risk and external borrowing, the shrinking of the agricultural sector, and low production.
The Iran war may lead to high inflation and further decline in production due to rising oil prices, pressure on the Turkish lira to lose value, increased external borrowing costs, contraction in trade with neighbouring countries, and a decline in export revenues.
Economist Mahfi Eğilmez stated in an article published on his website, ‘If there is a simultaneous increase in the exchange rate and other energy prices, this effect could reach $5 billion in the current account deficit and 1.2 points in inflation.’
Economist Mustafa Sönmez criticised the situation, saying, “Şimşek, Yılmaz and the Central Bank of the Republic of Turkey (CBRT) did not foresee the war. In the latest Inflation Report, they wrote that geopolitical risks would ease. They lowered their crude oil price forecast from $65 to $61 in the Medium-Term Programme (MTP)! War broke out and oil hit $79. I’d be a fool to trust these people’s judgement,‘ he criticised.
Despite switching to the sliding scale system, fuel prices have risen again
The first negative impact of the war on Turkey was the switch to the ’sliding scale” system to curb fuel prices. Under the new regulation, 75 per cent of price increases will be covered by excise tax. At the beginning of the week, there was talk of a historic increase of 12.45 TL for diesel and 3.68 TL for petrol. However, despite the introduction of the escalator system, petrol prices rose by 92 kuruş per litre and diesel prices by 3.11 TL per litre. With this increase, petrol rose to 59.32 lira in Istanbul and diesel to 63.51 lira. The increases in fuel prices are expected to trigger a new wave of price hikes across the supply chain, particularly in transportation, agriculture, and food.
The Istanbul Stock Exchange and global stock markets have entered a downturn
Markets have shifted from expectations of a ‘quick operation’ to the risk of a ‘protracted conflict’… At the beginning of the week, more cautious selling gave way to declines towards correction territory. As of 5 March, on a weekly basis, the BIST 100 index fell by 4.66 per cent, while Wall Street’s Dow Jones index lost 2.09 per cent. Declines were steeper in Europe; Germany’s DAX fell by 5.81%, France’s CAC 40 by 6.23%, and the UK’s FTSE 100 by 4.55%. In Asia, South Korea’s KOSPI index fell by 10.63%, China’s Hang Seng by 3.16%, Indonesia by 8.82% and Taiwan by 7.30% to end the week.
South Korea’s Kospi index, which is particularly dependent on oil and is the world’s eighth largest crude oil importer, experienced its biggest two-day drop in recent years, with losses reaching 20% at one point.
Unfortunately, the winners were the arms manufacturers…
Of course, as always, there are winners in every war; shares in arms manufacturers such as Lockheed Martin and Northrop Grumman, as well as major oil companies, rose. Airline companies were the group that lost the most value due to rising fuel costs and security concerns.
Gold is very interesting; it started to decline when the war began…
Gold followed an interesting trajectory. Gold, which investors traditionally turn to as a safe haven to protect their assets in times of uncertainty, lost value during the war. Spot gold, which rose to $5,419 per ounce on 2 March when the markets opened the day after the war began, subsequently lost significant ground despite the war.
Gold prices failed to exceed the historic level of $5,400 on 28 January and began to decline, citing reasons such as the appreciation of the US dollar and expectations of a slower-than-expected interest rate reduction process in the US. After closing at $5,397 per ounce on 2 March, gold closed at $5,077 on Thursday, 5 March. Gold closed the week with a 3 per cent loss, while silver fell more than 10 per cent.
Annual inflation rose to 31.53 per cent according to TÜİK and 54.14 per cent according to ENAG
The rise in oil prices will return to the Turkish economy as inflation. Last week, February inflation rates were announced.
Annual inflation stood at 31.53 per cent according to TÜİK and 54.14 per cent according to ENAG
In February, monthly consumer inflation was 2.96 per cent, while annual inflation rose to 31.53 per cent. The expectation was for the CPI to increase by 2.87 per cent in February and to reach 31.42 per cent on an annual basis. Inflation also exceeded expectations in January, reaching 4.84 per cent, with annual inflation rising to 30.65 per cent.
According to ENAG data, inflation rose by 4.01% on a monthly basis in February, while annual inflation stood at 54.14%.
With the announcement of February’s inflation figures, the rent increase rate for homes and workplaces was determined. The rent increase rate for homes and workplaces was set at 33.39%. In January, the increase rate was 33.98%.
First two months at 8%, annual target at 16%!
Economist Emre Şirin commented on the current situation, stating, ‘Inflation for the first two months is roughly 8%, the 2026 inflation target is 16%… That’s the joke!’ Economist Orhan Karaca added, “Inflation for the first two months is higher than last year. Annual inflation has also risen again to 31.5%. I am curious to see how this inflation will fall to 18% (the CBRT’s latest 2026 year-end forecast).”
Mehmet Şimşek: The increase in food prices is temporary
Treasury and Finance Minister Mehmet Şimşek stated that the increase in food prices above the long-term average caused a ‘temporary rise’ in annual inflation, adding, ‘Core goods inflation fell to 16.6 per cent, and services inflation fell below 40 per cent, the lowest level in the last 47 months.’
Şimşek said that the increase in food prices, which is well above the long-term average, has caused a temporary rise in annual inflation. “Core goods inflation has fallen to 16.6 per cent. Service inflation, which is highly sticky, has fallen below 40 per cent, the lowest level in the last 47 months. This outlook indicates that the downward trend in inflation is continuing,‘ he said.
Şimşek said, ’We expect the high increases in food prices seen in the last two months to be offset in the coming period, depending on weather conditions.” He added that they are working to limit the impact of rising oil prices caused by geopolitical developments on inflation.
“Our institutions have taken proactive measures against temporary effects”
In a statement made on his social media account, Deputy President Cevdet Yılmaz, who is responsible for the economy, drew attention to the resilience of the Turkish economy against external shocks, saying, ‘Our macroeconomic fundamentals are sound. Our economy has proven its resilience against many external effects experienced before.’
Regarding the economic repercussions of the geopolitical tensions in the region, Yılmaz said, ‘Our institutions have taken proactive measures against the temporary effects that may arise from the geopolitical developments in our region. Developments will continue to be closely monitored.’
“Unfortunately, very high inflation in March due to the war will come as no surprise”
Economim writer Alaattin Aktaş stated that very high inflation would come as no surprise due to the increase in energy prices, particularly crude oil, following the US and Israeli attack on Iran. Although it is impossible to predict what will happen in March, Aktaş said in his article dated 2 March that the picture emerging due to the war would be very bleak:
“Last March, there was a 2.46 per cent increase in the CPI. This time, we are likely to see a rate that will dwarf both the expected increase of around 3 per cent in February and last March’s 2.46 per cent increase.‘
’Either we reduce the risks or we will pay a higher price”
Decision writer İbrahim Kahveci stated that the US-Israel attacks on Iran and Iran’s retaliation would cause many problems, saying, ‘We are now facing a double risk. Either we will reduce the risks or we will pay a higher price.’
Kahveci, who mentioned that energy bills would rise due to the increase in energy prices and that there would likely be a deterioration of between 20 and 30 billion dollars in the current account deficit, wrote: ‘In short, one of our biggest financial problems will be the need for foreign currency. While we are experiencing difficulties in exports, we will also experience an increase in costs, so problems will pile up. This is an obvious situation.’
The Turkish economy grew by 3.6 per cent in 2025
On Monday, the Turkish Statistical Institute (TÜİK) announced the growth rates for 2025 and the fourth quarter. According to the Gross Domestic Product (GDP) data for the fourth quarter of 2025, Turkey grew by 3.4 per cent in the last quarter of 2025, while growth for the whole of 2025 stood at 3.6 per cent. Quarterly growth was 0.4 per cent. The 8.8 per cent contraction in the agricultural sector in 2025 was particularly alarming.
Treasury and Finance Minister Mehmet Şimşek said, “National income rose to $1.6 trillion, and per capita income rose to $18,040. We anticipate that we will join the group of high-income countries in 2025, which is a critical threshold for our goal of sustainable prosperity growth.‘
Şimşek stated that national income had reached $1.6 trillion, adding, ’We anticipate that we will join the group of high-income countries in 2025, which is a critical threshold for our goal of sustainable prosperity growth.”
Emphasising that the effects of frost and drought in agriculture continued in the last quarter of the year, Şimşek said that, on the other hand, production growth continued in other sectors. Noting that industrial added value recorded its highest increase in the last four years at 2.9 per cent in 2025, Şimşek said that the strong performance in the construction sector was maintained due to the effect of accelerated housing deliveries in the earthquake zone.
For per capita income to reach $18,000, a household of four must earn £240,000 per month
Economist Orhan Karaca commented on per capita income, stating, “For per capita income to reach $18,000, a household of four must earn £240,000 per month. How many families do you think will be in this situation in 2025? The answer to this question will reveal the imbalance in income distribution.‘
Mustafa Sönmez: A completely traditional growth
Economist Mustafa Sönmez shared the growth data on his social media account, stating, ’Supposedly disinflation, but growth is 3.6%. A completely traditional growth. Agriculture has collapsed with a 9% contraction, industry has grown by 2.9%, and construction is close to 11%. A so-called growth with unemployment reaching 30%. Fragility will be tested with an attack on Iran anyway,” he commented.
Tensions alter forecasts: JP Morgan revises inflation and interest rate projections
Following heightened geopolitical tensions, JPMorgan has revised its interest rate and inflation forecasts for Turkey upwards. The bank does not expect an interest rate cut at the Central Bank of the Republic of Turkey (CBRT) meeting on 12 March, but has revised its policy interest rate forecast and inflation expectations for the end of 2026 upwards.
The bank announced that it does not anticipate an interest rate cut at the Central Bank Monetary Policy Committee meeting on 12 March. It also raised its policy rate forecast for the end of 2026 from 30 per cent to 31 per cent. JPMorgan also revised its consumer inflation (CPI) forecast for Turkey upwards for the end of 2026. The bank raised its previous forecast of 24 per cent to 25 per cent.
It was stated that the revision was due to rising oil prices, the widening current account deficit and the risks associated with possible capital outflows.
ING: Turkey may be the country most affected by the rise in oil prices
ING assessed that Turkey could be the country most affected by changes in oil prices following the conflict in the Middle East and that the Central Bank may pause interest rate cuts at its meeting on 12 March. According to the bank, a 10 per cent increase in oil prices pushes inflation up by approximately 1.10 points in Turkey.
Bloomberg also expects the Central Bank to pause interest rate cuts at its 12 March meeting. It is expected to pause interest rate cuts in March as rising energy costs due to the conflict in Iran threaten the disinflation process.
Deutsche Bank economists have also revised their expectations, announcing that they expect the CBRT, which has cut interest rates at its last five meetings, to keep its policy rate unchanged this month.
Deutsche Bank noted that risks to their year-end forecast of a 30 per cent policy rate could be on the upside, depending on the duration of the oil price shock.
Unemployment rose to 8.1 per cent in January
According to the Turkish Statistical Institute’s (TÜİK) January 2026 Labour Force Statistics, the unemployment rate rose to 8.1 per cent. The seasonally adjusted unemployment rate rose by 0.3 percentage points compared to the previous month to 8.1 per cent in January 2026, while employment fell by 516,000 and the underemployment rate rose to 29.9 per cent.
The number of unemployed people aged 15 and over rose by 73,000 to 2,819,000. The unemployment rate was estimated at 6.6 per cent for men and 11.0 per cent for women. In January, the number of employed persons decreased by 516,000 to 31,953,000. The employment rate was recorded at 47.9 per cent, a decrease of 0.8 percentage points. This rate stood at 65.3 per cent for men and 30.9 per cent for women.
The labour force decreased by 443,000 to 34,772,000, while the labour force participation rate also fell by 0.8 percentage points to 52.1%. The participation rate was calculated as 70.0% for men and 34.7% for women.
DİSK-AR: Broadly defined unemployment rises to 11.9 million
The Unemployment and Employment Outlook Report (February 2026) prepared by DİSK-AR has been published. According to the report, the number of broadly defined unemployed in Turkey reached 11 million 946 thousand as of January 2026, and the broadly defined unemployment rate was announced as 29.9 per cent.
DİSK-AR’s report states that the number of broadly defined unemployed, which was 10 million 225 thousand in January 2024, rose to 11 million 946 thousand in January 2026, noting that the gap between narrowly and broadly defined unemployment is rapidly widening. It was stated that the increase in the number of broadly defined unemployed persons was due to time-related underemployment, discouraged unemployed persons, and an increase in the potential labour force.
According to the report, the number of people working less than 40 hours per week and wanting to work more increased from 3.4 million to 3.9 million in the last year. The potential labour force rose from 4.9 million to 5.3 million. Thus, as of January 2026, 5.3 million people cannot find work despite wanting to work.
Unemployment among women higher than men in all categories
According to the report’s findings, unemployment among women was higher than men in all categories. While the narrowly defined unemployment rate among young people was 14.3 per cent, the rate among young women was recorded as 19 per cent. In January 2026, 2.3 million unemployed people were unable to benefit from unemployment benefits.
DİSK-AR emphasised that narrowly defined unemployment figures fail to reflect all the problems in the labour market and stated that broadly defined unemployment data reveal the employment problem more clearly.
Poverty line exceeded 32,000 lira
According to TÜRK-İŞ’s February 2026 survey, the monthly food expenditure (poverty line) required for a family of four living in Ankara to eat a healthy and balanced diet rose to 32,365.44 TL.
According to the research, the monthly food expenditure required for a family of four living in Ankara to eat a healthy, balanced and sufficient diet has risen to 32,365 TL. In addition to food expenditure, the poverty line was calculated at 105,424 TL, including essential expenses such as clothing, housing, transport, education and health. The monthly cost of living for a single worker has risen to 41,077 TL.
The foreign trade deficit rose by 18.1 per cent in February
Trade Minister Ömer Bolat announced that exports rose by 1.6 per cent in February to reach $21.06 billion, the second highest February figure in history, despite international challenges. On the other hand, imports increased by 6.1 per cent to $30.3 billion, while the foreign trade deficit rose by 18.1 per cent to $9.2 billion. Providing information on February’s figures, Bolat stated that exports increased by 1.6 per cent compared to the same month last year, rising to $21 billion 65 million.
Stating that this figure was the second highest February performance, Bolat commented, ‘In this sense, it is the second highest February figure.’ Bolat reported that exports reached $41.4 billion in the January-February period, while imports increased by 3.1 per cent to $59 billion.
Bolat stated that the ratio of exports to imports was 70.2 per cent and that the foreign trade deficit was recorded at 9.2 billion dollars in February.
8.6 million out of 22 million children live in poverty
According to Eurostat data, 8 million 617 thousand out of 21 million 817 thousand children in Turkey are growing up in poverty. It was noted that a significant proportion of children are affected by poverty and the risk of social exclusion, with the number of children not in formal education reaching 1.5 million. According to TÜİK data, one in ten families cannot provide their children with fresh fruit and vegetables during the day, and one in ten families cannot afford new clothes for their children. Along with poverty, dropping out of school and children being forced into working life are also emerging as major issues.
Official data reveals the grim reality: 15.9 million citizens are in need
The rosy picture painted by the economic administration was painted black by the social assistance data dated 2 March 2026. According to a report by Birgün, in 2025, 15,967,064 citizens in Turkey were in need of social assistance, 262,229 children were not being cared for by their families, and 3.5 million households were unable to pay their electricity bills.
In 2025, 3,991,766 households benefited from social assistance. According to TÜİK’s calculation, which considers a household to consist of four people, 15,967,064 citizens could only meet their needs with social assistance in 2025.
The total number of children who could not have even their most basic needs met by their families and were at risk of being taken away from their families in 2025 was also shared. According to data from the Ministry of Family and Social Services, 262,229 children who could not be cared for by their families were included in the Social and Economic Support Programme in 2025 and were supported while remaining with their families.
Other important news of the week is as follows:
- Reuters reported that Turkey’s gold reserves have reached half of its GDP, with most of it held under mattresses. The amount of gold held under mattresses stands at $600 billion. Looking at January alone, the increase in global gold prices broke a historic record with a 25 per cent rise. This translates to a wealth effect of 80 billion dollars in January alone.
- Minister of Industry and Technology Mehmet Fatih Kacır announced a new 100 billion lira financing programme for the manufacturing industry. SMEs and large-scale companies will have access to loans of up to 50 million lira, with a 6-month grace period and a 36-month maturity.
- Details of the ‘citizenship income’ initiative, which has been in the works for some time, are beginning to emerge. According to these details, it will only be granted to families with a total income not exceeding 9,000 lira. The ‘support’ will not exceed 20 per cent of the minimum wage, i.e. 5,615 TL.
- The Turkish banking sector’s net profit reached 87 billion 249 million lira in January. The sector’s total assets amounted to 48 trillion 574 billion 239 million lira, with a capital adequacy ratio of 16.77 per cent.
- A new support scheme is being launched to help young people start work. For young people aged 18–25 entering employment, the portion of wages and insurance premiums corresponding to the net minimum wage will be covered by the Unemployment Insurance Fund. A total of 228 billion TL has been allocated for this purpose.