Levent Gürses
The war launched by the US and Israel—the so-called ‘rogue states’—against Iran has now entered its third week. The effects of this conflict, which has triggered an oil supply shock and caused a rise in the prices not only of oil but also of many other raw materials, are gradually becoming apparent on the global economy and, consequently, on the Turkish economy.
Whilst credit rating agency Fitch has commented that the impact of the war and the closure of the Strait of Hormuz on Turkey is ‘limited, but the picture will change if it drags on’, according to the Turkish Economic Policy Research Foundation (TEPAV), the Strait of Hormuz crisis will affect the Turkish economy not only through oil prices but also via industrial production, fertiliser costs and logistics expenses. TEPAV emphasised that one of the most critical risk areas for Turkey is industrial production, given the significant role played by aluminium and petrochemical raw materials in Turkey’s trade with Gulf countries.
As highlighted by Joe Kent, the Director of the US National Counter-Terrorism Centre who resigned on moral grounds, “Iran did not pose an immediate and urgent threat to our country. Furthermore, it is clear that this war was initiated as a result of pressure from Israel and its powerful lobby in America.” US President Donald Trump, who launched the war on flimsy grounds, now does not know what to do. The war is dragging on, and Iran is not backing down; it is bombing strategic targets in the Gulf with missiles and drones and has closed the Strait of Hormuz, through which 20 per cent of global oil supplies pass. The closure of the Strait of Hormuz, which plays a key role in the oil exports of countries such as Saudi Arabia, Iran, Iraq and the UAE, has pushed oil prices to the $110 mark.
Attacks on energy facilities have caused oil prices to rise to $110
27 per cent of Gulf oil was destined for China, 14 per cent for India and 42 per cent for other Asian countries. In other words, by starting a war with Iran, Trump has severed the lifeline of Asia, particularly China. Both Asia’s economic slowdown and oil prices rising above $110 per barrel will have profoundly negative consequences for the global economy.
Finally, on Wednesday 18 March, following attacks by the US and Israel on the South Pars region—home to Iran’s largest gas facilities—and the Aseluye oil refinery, Iran announced that it would retaliate by striking US-linked oil facilities in Saudi Arabia, the United Arab Emirates and Qatar, causing the price of Brent crude to rise to $110 per barrel.
Indeed, Iran inflicted “significant damage” on the LNG export facility in the Ras Laffan Industrial Area, owned by Qatar Energy—the state-owned company of Qatar, which houses the world’s largest liquefied natural gas export facility.
Following the attacks on energy infrastructure, the price of a barrel of May-dated Brent crude rose to as high as $111.90 on 18 March before closing at $107.38; by the morning of 19 March, it was trading at $112.85. US West Texas Intermediate (WTI) crude for May delivery also approached $100 per barrel on 18 March, reaching $99.76, before closing at $98.29; by the morning of 19 March, it had fallen to $96.67.
Meanwhile, attention is being drawn to a significant gap that is rapidly widening between the oil prices displayed on screens and those in the real world. This is because whilst Brent crude is shown at $114 on screens, it is reported to be trading at $160 in the UAE and between $200 and $225 in the Far East market.
Natural gas prices in Europe, meanwhile, are rising sharply, having risen by 30 per cent on 18 March to approach €70. The price prior to the war was €31. According to Goldman Sachs, the tightening of natural gas supply in Europe will support further price rises in the second quarter.
The dollar is strengthening, whilst gold and stock markets are falling
The US dollar is strengthening due to the war. The Dollar Index (DX) has risen above the 100 mark for the first time since April last year. As of 19 March, over the past month, the dollar has appreciated by 9.7% against the Russian rouble, 6% against the South African rand, 4% against the Mexican peso, 3% against the Japanese yen, 2.86% against the Indian rupee, 2.14% against the Swiss franc and 1.14% against the Turkish lira.
The dollar’s appreciation has not benefited gold. Despite the war in the Middle East, gold prices are falling. Expectations that the inflationary pressure caused by rising oil prices will slow down US interest rate cuts—and that interest rate hikes might even be on the cards—are causing the dollar to strengthen and gold to lose value. In an environment where investors are puzzled as to how gold prices can fall whilst there is a war in the Middle East, the price of an ounce of gold lost 5 per cent in value last week as of 19 March. The spot price of an ounce of gold continued to fall throughout the week; on 12 March, it dropped below $5,100 per ounce. On 18 March, it fell by 3.74 per cent, dropping below the critical $5,000 mark to close at $4,818.81. Last week, silver prices also fell sharply (by 12.28 per cent), with the price per ounce dropping to $72.57.
On Wall Street, which had attempted a rally at the start of the week, there was a 1.5 per cent decline on 18 March. The Dow Jones index fell by 1.63 per cent, whilst the S&P 500 index dropped by 1.36 per cent. Around 420 shares in the index lost value. Over the past month, the Dow Jones has fallen by 6.95 per cent and the S&P 500 by 4.12 per cent.
Last week, the Russian and Chinese stock markets fell the most. Russia’s RTSI index lost 4.64 per cent over the week, whilst China’s Shanghai Composite index fell by 4.13 per cent. The stock markets of Asian countries dependent on Gulf oil—including Indonesia, the Philippines, Pakistan, India and Japan—were among the week’s biggest fallers.
The BIST 100 index on the Istanbul Stock Exchange also closed the week down by 1.29 per cent.
Despite all this, Israel’s TA 35 index gained 3.59 per cent last week. In Israel, shares are gaining value despite the war and bombings, driven by strong earnings expectations and global demand for defence and technology stocks. This situation brings to mind the saying, as some experts put it, that “war is actually a profitable business”.
The week’s key developments are as follows:
TEPAV: It will have multi-layered effects not only on oil but also on industry
An assessment note published by the Turkish Economic Policies Research Foundation (TEPAV) titled “The Hormuz Crisis: Global Supply Risks in Petrochemicals, Fertilisers and Industrial Inputs and Their Impact on Turkey” reveals that the crisis’s effects may not be limited to oil prices alone. According to TEPAV, the tensions in the Strait of Hormuz could create multi-layered pressure on the Turkish economy through energy markets, industrial inputs, the fertiliser market, logistics costs and energy bills.
According to the report, one of the most critical risk areas for Turkey is industrial production. Aluminium and petrochemical raw materials play a significant role in Turkey’s trade with Gulf countries. Turkey imports between approximately 700 million and 1 billion dollars’ worth of aluminium and aluminium products annually from Gulf producers such as Bahrain, Qatar, the United Arab Emirates and Oman.
Vulnerabilities are rising in the petrochemical, plastics, textile and fertiliser sectors
Imports of plastics and petrochemical raw materials from these countries amount to approximately $2 billion. The majority of these products are shipped from ports in the Persian Gulf and reach Turkey via the Strait of Hormuz. Consequently, any disruption in the Strait could create a serious logistical vulnerability in terms of the basic inputs for industrial production.
Another critical input that could be affected by the crisis is monoethylene glycol (MEG). As the primary raw material for polyester fibre and PET production, MEG is of vital importance to Turkey’s strong textile and packaging sectors.
According to a TEPAV assessment, another potential impact of the Hormuz crisis could emerge in the agricultural sector. Annual chemical fertiliser consumption in Turkey stands at around 6–7 million tonnes, with a significant portion of this demand met through imports. The share of Gulf countries in Turkey’s nitrogen fertiliser imports ranges between 15% and 25%.
Rising freight costs could affect the automotive and white goods sectors
Furthermore, rising freight costs and extended delivery times could complicate delivery planning, particularly in the textile, automotive components, machinery and white goods sectors.
According to TEPAV’s assessment, a prolonged crisis in the Strait of Hormuz has the potential to create a wide-ranging impact on the Turkish economy, extending from energy prices to industrial production.
Fitch: Risk is limited, but the picture changes if it drags on
Fitch assessed that if the Iran-related conflicts remain short-lived, the impacts on the Turkish economy and banking sector would remain manageable. The agency noted that strong reserve buffers and tight monetary policy support this outlook, whilst warning that risks could rise significantly should the conflict prolong or intensify.
Fitch noted that, in its base scenario, it assumes the disruption in the Strait of Hormuz will be short-lived, whilst emphasising that uncertainty regarding the duration of the conflict and disruptions to transit remains. It was stated that the current policy framework would play a significant role in limiting such shocks.
Şimşek: The claim that the burden is borne by those on low incomes is pure rhetoric
Mehmet Şimşek, the Minister of Treasury and Finance, made some interesting remarks during his appearance on Akit TV. Şimşek said, “What is this, sir? That the burden of the programme is being borne by the low-income earners, by the workers. No figures support this. This is a complete cliché. And this cliché is not a correct one.” As justification, he pointed to improvements in income distribution and the Gini coefficient, as well as the increase in the share of wage earners within national income.
Şimşek stated, “If the war drags on, there is a risk of serious inflation, tightening financial conditions and a slowdown in growth from a global economic perspective; furthermore, if global energy prices and disruptions in the supply chain persist, there is also a risk of recession and stagflation.”
“I am somewhat concerned about the current account deficit, as oil prices are directly increasing the deficit”
Şimşek, expressing concern about the current account deficit due to the war, said: “We are facing a major external shock that could have serious effects on the current account deficit, inflation, growth and the budget. Inflation will continue to fall this year, but it is still too early to say whether it will reach the level we are targeting. I am somewhat concerned about the current account deficit, as oil prices are directly increasing the deficit. If you ask which aspect of the programme concerns me the most, I would say the current account deficit at the moment, but I believe it will remain at a manageable level.”
“It may not be possible to continue applying the sliding scale”
He also stated that “it may not be possible to continue applying the sliding scale whilst oil prices remain high”, adding:
“Had we not applied the sliding scale system, the price of a litre of diesel in Ankara, for example, would be 83 lira 10 kuruş as of today. With this rise in oil prices, the diesel price, which would have been 83 lira 10 kuruş, is currently 67 lira 10 kuruş thanks to the sliding scale. As for petrol, the price today is 62 lira 30 kuruş; however, had we not implemented this sliding scale, it would have been 71 lira 11 kuruş. Why did we do this? Naturally, we wanted to limit the impact on our citizens. We believe this is temporary. If it were to become permanent, it would not be sustainable. We implemented this system on the assumption that it would be temporary. Because its impact on the budget is significant; it is a major source of revenue for us.”
Aktaş: We may soon bid farewell to the escalator mechanism
Commenting on Şimşek’s statements, Economy newspaper columnist Alaaddin Aktaş noted that we may soon bid farewell to the escalator mechanism, stating: “When? That remains to be seen. The public does not yet know when the escalator mechanism will be scrapped or after how much tax revenue loss this decision has been made. But at some point, the brakes will be applied. While I’m on the subject, let me remind you. This year’s budget forecasts excise duty revenue of 656.5 billion lira from petroleum products and natural gas. Revenue for the first two months totalled 93.7 billion lira, with 49.4 billion in January and 44.3 billion in February. The figure for March is expected to be significantly lower due to the escalator mechanism. Under these circumstances, 562.8 billion lira in excise duty must be collected from March until the end of the year. The figure Minister Şimşek referred to as ‘we cannot give up on’ essentially amounts to this. Or perhaps it is anticipated that a certain portion of this amount could be waived; we do not know that. It is clear that once that level is reached, the sliding scale will be terminated; that is how it appears,” he said.
Aktaş also wrote, “Şimşek is stating very clearly that exports could be disrupted due to the war. Nothing could be more natural than such a negative development. Moreover, the contraction in exports will not be limited to regional countries. Exports to other countries may also be lower due to the contraction expected in global economies.”
Aktaş: Minister Şimşek’s points, item by item
Aktaş summarised Minister Şimşek’s remarks as follows:
– Energy prices are very high and this will have a cost; prepare accordingly.
– We are currently applying the escalator mechanism, but if the war drags on, we cannot afford to reduce excise duty any further, and substantial price hikes on fuel may be unavoidable; be prepared.
– The current account deficit may rise far above projections; be aware of this.
– As in other countries, a slowdown may be observed in the Turkish economy, and this will have negative consequences.
– As a result of all this, prices may rise above projections. Our aim is to bring inflation below 20 per cent, but this may not be possible, particularly this year. We cannot state this openly, but we are working towards it – please understand!
The Central Bank left its policy rate unchanged
The Central Bank kept its policy rate steady at 37 per cent. The Monetary Policy Committee (MPC) also left the Central Bank’s overnight lending rate at 40 per cent and the borrowing rate at 35.5 per cent.
The market had also expected the rate to be kept unchanged. The CBRT had cut rates by 100 basis points at its first meeting of the year in January.
Cautious message: Geopolitical tensions have heightened inflation risks
Meanwhile, whilst the Central Bank kept the policy rate unchanged at its March meeting, the Monetary Policy Committee (MPC) meeting summary highlighted that rising energy and commodity prices, driven by geopolitical tensions, have accentuated the upside risks to the inflation outlook.
Whilst maintaining a tight monetary policy stance at the March meeting, it was noted that the stabilisation of demand conditions was contributing to the disinflation process. The Committee stressed that further tightening measures could be considered should the inflation outlook deteriorate in the face of rising global uncertainties.
Central Bank survey: Market’s year-end inflation forecast rises again
The Central Bank released its survey of market participants for March. According to the survey, participants’ current year-end consumer price inflation (CPI) expectation stood at 25.38 per cent in this survey period, up from 24.11 per cent in the previous survey period. The 12-month-ahead CPI expectation, which stood at 22.10% in the previous survey period, was recorded at 22.17% in this survey period.
Minister signals price hike: We will review electricity and natural gas on 1 April
Energy and Natural Resources Minister Alparslan Bayraktar announced that a new assessment regarding electricity and natural gas prices would be carried out on 1 April. “We have not caused any difficulties for our country regarding natural gas and crude oil,” said Bayraktar, adding, “We are particularly sourcing crude oil from Iraq and Saudi Arabia. This accounts for around 10 per cent of our total supply. From a supply security perspective, this region does not pose a problem. There is the natural gas aspect to consider. It is a hub where Qatar’s LNG meets the global market. Again, we are not dependent on the Strait of Hormuz. We do not import significant quantities of LNG from Qatar. Therefore, we have not caused any difficulties for our country regarding natural gas and crude oil, and we will not do so in the future,” he said.
The budget recorded a surplus, but rising revenues are being absorbed by interest payments
According to February’s central government budget figures, revenues rose by 42 per cent in real terms, whilst expenditure fell by 2.2 per cent in real terms. The budget balance recorded a surplus of 24.4 billion TL, whilst the primary surplus stood at 208 billion TL.
Tax revenues, which accounted for 83 per cent of central government budget revenues in February, rose by 91.8 per cent compared to February last year, reaching 1.1 trillion TL. Due to variations in the collection period, Corporation Tax rose to 376 billion TL. Income Tax rose by 67.5 per cent year-on-year to 220 billion TL, whilst increases in VAT and excise duty revenues from imports stood at 34.4 per cent and 21.1 per cent respectively.
Interest expenditure surpassed expenditure on social and public services.
The budget deficit for the January–February period stood at 190.2 billion lira. In the first two months of the year, central government budget expenditure was recorded at 2 trillion 965 billion TL, whilst budget revenue stood at 2 trillion 774.8 billion TL. Interest expenditure, meanwhile, reached 640.1 billion TL. Interest expenditure accounted for 21.6 per cent of total expenditure.
The funds allocated to interest expenditure exceeded the public sector’s expenditure on social and public services. According to the economic classification, interest expenditure again exceeded many other expenditure items within the budget. As of February, expenditure of 256.1 billion TL on health services, 409.3 billion TL on education services, and 526.9 billion TL on social security and social assistance all fell short of the 640.1 billion TL allocated to interest payments.
Atabay: Cuts in social transfers and education
Güldem Atabay, a columnist for the Birgün newspaper, analysed the budget figures in an article titled ‘A budget working for interest: Who is it taken from, and who is it given to?’, stating:
‘Whilst such a vast amount of resources is being channelled into interest payments, the improvement in the main budget categories is being achieved by cutting other expenditure items under the Ministry of Treasury and Finance led by Mehmet Şimşek.
It is striking that the items experiencing real contraction or suppression in 2026 compared to the first two months of 2025 reveal the government’s political priorities. There has been a significant decline in social transfers. In particular, the increase in the ‘transfers to households’ category is below the rate of inflation. This means a reduction in resources going directly to the poorest households. Income support cut from the poorest is being converted into interest income for the wealthiest.”
On the education front, there is a marked squeeze on scholarships and accommodation support for students. Increases in these forms of support are failing to keep pace with inflation. In effect, this amounts to a cut in students’ funding.
Heavy indebtedness is leading to new legal proceedings
In January, the number of people subject to legal proceedings due to debt exceeded 4.2 million, whilst the number of debtors transferred to asset management companies rose to 2.2 million. According to a report by Havva Gümüşkaya in Birgün, during a period when wages have eroded in the face of inflation and living conditions have become more difficult, citizens have turned to consumer loans and credit cards.
The resulting picture shows millions struggling to survive under the weight of insufficient income and heavy debt burdens. According to data from the Turkish Banks Association’s Risk Centre, as of January 2026, the number of people who fell into legal proceedings for failing to repay their personal loans and credit card debts—and whose debts are still outstanding—reached 4,256,494.
According to the Risk Centre’s data, whilst 1,674,471 people were subject to legal proceedings due to personal loan debt in January 2025, this figure has risen by approximately 97,000 this year to reach 1,711,909. During the same period, the number of individuals subject to legal proceedings due to personal credit card debt also rose from 1,622,147 to 1,813,511. Consequently, the number of people facing legal action due to credit card debt increased by 191,000 in a single year.
IPA: One in two Istanbul residents cannot pay off their debt in full
According to a survey conducted in February by the Istanbul Planning Agency (IPA), affiliated with the Istanbul Metropolitan Municipality (İBB), the proportion of those unable to pay off their credit card debt in full stood at 50.5 per cent. 67.5 per cent of Istanbul residents also stated that food prices had risen during Ramadan.
The proportion of those who stated they had paid off their entire credit card debt in February was recorded at 49.6 per cent. The proportion of those who stated they had paid less than the minimum amount was 4.5 per cent, those who paid between the minimum and the full amount was 7.5 per cent, those who stated they could not pay at all was 9.7 per cent, and those who stated they had paid the minimum amount was 28.8 per cent.
The Fed and other central banks have adopted a ‘wait-and-see’ policy
Global markets focused last week on interest rate decisions by the world’s leading central banks. Central banks in major economies such as the US, Europe, the UK and Canada have paused interest rate cuts and adopted a cautious “wait-and-see” approach, as the escalating conflict in the Middle East has rapidly driven up energy prices, weakened the growth outlook and cast uncertainty over the monetary policy outlook.
The rise in energy costs is creating a classic “supply shock” environment, where it weakens growth whilst increasing price pressures. This situation is narrowing the policy space for central banks.
The US Federal Reserve (Fed) kept its policy rate steady at 3.5–3.75 per cent, in line with expectations. The Fed’s monetary policy statement noted that the impact of developments in the Middle East on the US economy remains uncertain. This suggests that an interest rate cut in the US could be delayed until much later than previously anticipated.
Ray Dalio: US power could be ‘undermined’ in the Strait of Hormuz
According to renowned investor Ray Dalio, the war in the Middle East and risks in the Strait of Hormuz could create a breaking point capable of shaking the US’s global leadership and the dollar’s dominance. Dalio noted that the US is at a critical juncture, warning that rising debt burdens, internal political tensions and potential geopolitical losses could accelerate this process.
The renowned investor emphasised that blocking transit through the Strait of Hormuz or the use of non-dollar currencies—particularly the Chinese yuan, as Iran has indicated—for payments in these transit routes would deal a major blow to the US’s global economic power.
Mahfi Eğilmez: The dollar is losing its power; the question is how we will find our way in this multipolar jungle
Economist Mahfi Eğilmez addressed the transformation in global power balances in an article titled “The Future of Capitalism and the Dollar” on his blog “Notes to Myself”. Pointing to the beginning of the unravelling of the US-centred unipolar world order, Eğilmez highlighted that the world is evolving back into a multipolar structure, noting that China’s rise, the erosion of the dollar’s role in the global system, and the new spheres of power created by technology are fundamentally altering both the economic order and capitalism.
Eğilmez stated, “Ultimately, the issue is not merely the weakening of the US or the dollar. The real breaking point is the dissolution of the idea of a single-centre, super-currency world. In the new multi-centre order, the dollar will most likely shift from absolute supremacy to a leading position amongst equals. The real question is not when this new order will be established, but how we will find our way in this digital and multipolar jungle,” he said.