Levent Gürses
As the war—which began with US and Israeli attacks on Iran and has gradually spread across the Middle East—enters its second week, it has started to take its toll on the global economy and financial markets. We are moving step by step towards a nightmare scenario.
It is still far too early to speak of an economic crisis, but an energy shock is underway. This brings with it the risk of ‘stagflation’ – a combination of inflation and economic stagnation. Kristalina Georgieva, Managing Director of the International Monetary Fund (IMF), struck a pessimistic tone, noting that the resilience of the global economy is being ‘tested once again’. International stock markets, which initially believed the war would end quickly and were quite optimistic, are now bracing for the worst.
Kristalina Georgieva, Managing Director of the International Monetary Fund (IMF), struck a pessimistic tone, noting that the resilience of the global economy was being “put to the test once again”. Georgieva said that a 10 per cent rise in oil prices, assuming it persists for most of the year, would increase global inflation by 0.4 per cent and reduce global economic growth by up to 0.2 per cent. International markets, which were initially quite optimistic, expecting the war to end early, are now bracing for the worst.
The biggest problem is the closure of the Strait of Hormuz, through which one-fifth of the world’s oil passes…
The conflict created by US President Donald Trump is becoming the world’s latest economic headache. The biggest problem is the Strait of Hormuz, through which one-fifth of the world’s oil passes and which has effectively been closed since missile strikes against Iran began last week… Because nowhere in the world is there sufficient spare capacity to make up for this shortfall.
Maurice Obstfeld, the IMF’s former chief economist, says: “For a long time, the nightmare scenario that had deterred the US from considering an attack on Iran and prompted them to call for restraint from Israel was the Iranians closing the Strait of Hormuz. Now we are in that nightmare scenario.”
Amin Nasser, CEO of Saudi Aramco, Saudi Arabia’s national oil producer and the world’s largest company, said: “The longer this disruption lasts, the more catastrophic the consequences will be for global oil markets, and the more dire the consequences will be for the global economy.”
Despite the IEA’s ‘supply boost’, oil remains above $100 a barrel
The panic stems from the closure of the Strait of Hormuz, through which 20 per cent of global oil production passes. May-dated Brent crude, which briefly rose to $119.50 last Monday, fell to $86 the following day following Trump’s market-calming remarks, and closed at $92 on Wednesday, surged by 9% on Thursday and Friday to rise above $100. As of Friday morning, 13 March, Brent crude is trading at $100.35. Brent crude has risen by 47.78 per cent over the past month as of Friday, 13 March.
Sharp rise in natural gas prices leaves Europe in a bind
Alongside oil, natural gas prices are also on the rise, with a serious sense of panic prevailing, particularly in Europe. In the European market, natural gas prices had risen by 66.5 per cent over the past month and by 5.85 per cent over the past week as of Friday 13 March. At the TTF, the deepest virtual natural gas trading hub based in the Netherlands, natural gas prices—which closed at €31.95 per megawatt-hour for April delivery on 27 February, prior to the attacks on Iran—have risen by 67 per cent to as high as €53.40.
The fact that the fill rate of Europe’s natural gas storage facilities has fallen below 30 per cent is also increasing upward pressure on prices. Twenty LNG tankers are stuck in the Strait of Hormuz and unable to leave… This represents half the number of tankers capable of transporting the volumes involved in global spot trade…
IEA stocks can meet four days’ global demand
The decision by the International Energy Agency (IEA) – which represents approximately two-thirds of global energy production and consumption – to release 400 million barrels of reserves for its members, including Turkey, has not been enough to quell market concerns.
The 400 million barrels of oil, sufficient to meet approximately four days’ global demand, are intended to offset shortages caused by attacks on Iran’s oil production and storage facilities and threats to shipping traffic.
Prices of raw materials, fertilisers and grain are also rising
With oil and its derivatives remaining at high levels for months, food and other goods transported by sea will become more expensive. And consumers and businesses affected by rising costs may choose to spend less, thereby constraining economic growth.
The damage the war is causing to commodity prices extends far beyond energy. It has affected the prices, supply or production of various commodities, ranging from plastic raw materials and fertilisers produced in Saudi Arabia and Oman to sugar from Brazil and helium from Qatar.
The Gulf region supplies a significant portion of the world’s largest nitrogen fertiliser exports and underpins global food production. Qatar, Saudi Arabia, Bahrain and Oman produce a total of 15 million tonnes of urea, diammonium phosphate and anhydrous ammonia annually.
Consequently, the rise in prices of food commodities such as barley, wheat, soya beans and maize—ranging from 7 per cent to 20 per cent since the start of the war—is also striking…
Pessimism has taken hold on Wall Street
Pessimism is not confined to the energy markets; the US stock markets, which had initially maintained their optimism, also joined the wave of pessimism on Thursday with a sharp fall. On Thursday, Wall Street indices lost 1.5 per cent in value.
The Dow Jones index fell by 739 points to 46,677. The Dow Jones had risen above 50,000 points at the start of February (reaching 50,188 on 10 February), with a 7 per cent decline from that peak. The S&P 500 index also fell by 1.52 per cent to 6,672 at Thursday’s close. As of Thursday 13 March, the Dow Jones had fallen by 5.7 per cent and the S&P 500 by 2.39 per cent over the past month, whilst European stock markets were also reacting sharply; Germany’s DAX index fell by 5.32 per cent and France’s CAC 40 index by 3.94 per cent over the month. The sharpest reaction came from Asia’s major economies, which are dependent on imported oil and have seen supply chains disrupted. Over the past month, the Pakistani stock market fell by 14 per cent, Indonesia by 12 per cent and India by 9 per cent.
The BIST 100 index of the Istanbul Stock Exchange, meanwhile, closed the week with a loss of 3.86 per cent as of Thursday 13 March, though the monthly loss reached 6.31 per cent.
The mood in the stock markets has now shifted regarding the war being short-lived
Wall Street had been hoping the war would be short-lived. It anticipated that Iran would accept the ceasefire call, that mines in the Strait of Hormuz would be cleared swiftly, that oil prices would fall below $70, that Iran’s nuclear facilities and air force would be destroyed, and that a crisis would eventually erupt within the Iranian regime. In other words, it was pricing in the war ending within weeks, oil prices falling, and the world and the markets carrying on as normal. It didn’t happen…
As many pessimistic experts have written, the worst-case scenario is being discussed:
- Iran rejects the ceasefire (This has happened twice).
- Mines are laid in the Strait of Hormuz, cutting off the flow of oil (This has happened).
- Iranian unmanned naval vessels begin sinking tankers (This is still happening).
- The Patriot defence missile fails to intercept an Iranian missile (this has also happened).
- Iranian unmanned aerial vehicles breach the US Navy’s defences (a genuine threat, according to US intelligence).
- The Strait of Hormuz closes completely. 21 per cent of global oil supply is lost.
- Oil prices rise to $200.
- Europe, unable to replace Russian energy supplies, now also loses energy supplies from the Gulf.
- US bombs run out and a ground invasion begins. The war could last for months and cost over $500 billion.
“We could face an even greater shock than the crisis of the 1970s”
A significant warning has come from Nobel Prize-winning economist Paul Krugman. Krugman emphasised that if the war drags on, the global oil supply could face a shock even greater than the crisis of the 1970s. He noted that a potential disruption in the Strait of Hormuz, through which approximately 20 per cent of the world’s oil trade passes, could create a “massive energy supply shock”.
Let’s turn to Turkey and other key developments of the week:
Fuel price hikes one after another; diesel reaches 65 lira
Reflecting the rise in oil prices, fuel prices in Turkey are constantly fluctuating. As is now well known, the escalator system has been adopted, and price increases are covered by the Special Consumption Tax (ÖTV) and, to a lesser extent, Value Added Tax (VAT). Deputy President Cevdet Yılmaz clarified the matter, stating, “We have decided to cover 75 per cent of fuel price increases.”
The latest fuel price hike took effect at midnight on 12 March. Of the increase, 75 per cent was covered by the escalator system through tax adjustments, with 0.46 TL for petrol and 0.76 TL for diesel reflected at the pump. In the European side of Istanbul, the prices per litre are: petrol: 60.85 TL, diesel: 64.92 TL, and LPG: 30.49 TL.
Due to the escalator system, not all of the price increases are reflected in pump prices. For example, the latest increase for diesel was actually 3.04 TL; of this, 0.76 TL was passed on to the pump and, consequently, to the consumer, whilst 2.28 TL (1.90 TL excise duty + 0.38 TL VAT) was covered by tax.
Prior to this, a price reduction was implemented on 12 March following a fall in oil prices, whilst price increases were introduced on 5, 7 and 10 March. Since the start of the war in Iran, the total price of diesel has risen by 22 TL, with 5.5 TL of this increase passed on to the consumer.
The cost of the war on the Central Bank’s reserves: a loss of $13 billion
Turkey is not at war, but it is paying a heavy price for the conflict. Selling continues in the stock and bond markets. Major fuel price hikes are on the way, with the current account deficit and rising inflation on the agenda… The latest negative data is the loss of reserves stemming from war-related tensions… The Central Bank’s total reserves fell by $12.8 billion in the week ending 6 March, dropping to $197.5 billion.
As of 6 March, the Central Bank’s gross foreign exchange reserves fell by 10.663 billion dollars to 62.770 billion dollars, whilst gold reserves also dropped by 2.120 billion dollars, falling from 136.827 billion dollars to 134.707 billion dollars.
Turkey is also releasing part of its oil stocks onto the market
Following the IEA’s activation of its emergency plan, Turkey has also decided to temporarily release part of its strategic oil stocks onto the market. Refiners and distributors will be able to release a portion of their mandatory stocks onto the market on specified dates.
According to a statement published on the Energy Market Regulatory Authority (EPDK) website, a portion of the mandatory oil stocks that refinery and fuel distributor licence holders are required to maintain may be temporarily used for market operations.
Under the decision, companies will be able to release an amount equivalent to 46 per cent of their mandatory oil stocks between 13 and 31 March, and 42 per cent between 1 April and 10 June.
Member countries’ emergency oil stocks exceed 1.2 billion barrels
IEA Executive Director Fatih Birol announced that member countries had agreed to release 400 million barrels of strategic oil reserves—the highest amount in the organisation’s history—onto the market. According to the IEA’s decision, emergency oil stocks will be released onto the market within a timeframe appropriate to each member country’s national circumstances and will be supported by additional emergency measures in some countries.
Whilst member countries currently hold over 1.2 billion barrels of emergency oil stocks, there are also approximately 600 million barrels of industry stocks held under government obligation.
Historic level of oil supply from the IEA
Similar decisions were previously taken in 1991, 2005, 2011 and 2022 following the outbreak of the Russia-Ukraine war. The 400 million barrels of oil is higher than the amount released onto the market in 2022 following Russia’s invasion of Ukraine…x
The US has also announced plans to release 172 million barrels of oil from its Strategic Petroleum Reserve as part of efforts to lower global prices.
Global oil consumption stands at just over 100 million barrels per day. Production cuts in the Gulf region have so far amounted to approximately 6 per cent of this figure. Experts warn that further supply disruptions could occur if security risks in the Middle East persist.
US EIA raises forecast to $79
The US Energy Information Administration (EIA) has significantly raised its oil price forecasts for 2026, citing conflicts in the Middle East and potential supply disruptions. The agency expects the average price of Brent crude to reach approximately $79 per barrel this year, whilst emphasising that risks in the Strait of Hormuz remain the biggest uncertainty in the market. The price had previously been forecast at $57.69 in the previous report.
The average price per barrel of West Texas Intermediate (WTI) crude oil is projected to be $73.61. Last month’s price forecast for WTI stood at $53.42.
Russia: We will redirect Russian gas to the Asian market instead of Europe
Describing how the Russian government had held talks with companies following Putin’s instructions, Russian Deputy Prime Minister Aleksandr Novak said, “We have decided to redirect part of the liquefied natural gas (LNG) supplied to Europe to other markets where we can establish constructive relations and have the opportunity to sign long-term contracts.”
Novak noted that Russian companies had begun talks with the relevant countries, adding, “Our companies are exploring opportunities with other nations such as India, Thailand, the Philippines and China to sign new long-term contracts with our partners, without waiting for new restrictions from Europe.” Novak emphasised their intention to supply Russian natural gas to friendly nations.
Putin, stating that Russia could withdraw entirely from the European gas market, had instructed the government to carry out the necessary work to completely halt gas supplies to the European Union (EU). The EU Council had approved a decision envisaging a complete halt to natural gas and LNG imports from Russia via pipelines next year.
Hormuz Strait tensions drive coal prices to record highs
Rising shipping costs and delays in transport following the closure of the Strait of Hormuz have also caused coal prices to rise. Whilst insurance companies have cancelled war risk policies for ships in the region, leading container and tanker companies have suspended transits through the Strait. According to data from the UK Maritime Trade Organisation, historically an average of 138 commercial vessels passed through the Strait daily. Following attacks by the Iranian Revolutionary Guard Corps, particularly targeting commercial vessels linked to the US and Israel, a significant drop in vessel traffic was observed.
In Asia, Newcastle coal futures, a key benchmark, rose from $115.80 per tonne on 27 February to $138 per tonne on 9 March. This marked the highest level seen since December 2024. The closing price on 10 March was recorded at $133.65 per tonne. API2 Rotterdam Coal also rose from a closing price of $106 per tonne on 27 February to $132 on 9 March.
Inflation forecasts for Turkey have changed
The war has also affected the Turkish economy. Nine institutions, including US-based JP Morgan and Spanish BBVA Research, announced their year-end inflation forecasts for Turkey this week. JP Morgan withdrew its expectation of a rate cut by the Central Bank of the Republic of Turkey (TCMB) on 12 March following geopolitical tensions in the Middle East. The US bank forecast that the policy rate could stand at 31% and the annual CPI at 25% by year-end.
Following the release of February’s inflation figures and recent geopolitical developments, the year-end inflation forecasts published this week by financial institutions are as follows:
-İş Yatırım: 25.50%
-Alnus Yatırım: 25.29%
-Garanti BBVA Yatırım: 25.00%
-Akbank: 25.00%
-BBVA Research: 25.00%
-OYAK Investment: 24.80%
-Kuwait Türk Investment: 24.10%
-Şekerbank: 23.50%
An analysis shared by Gedik Investment indicated that if the rise in oil prices stabilises at current levels, it could contribute 0.3 percentage points to March inflation. The analysis stated: “We estimate that a 10% rise in oil prices could contribute to inflation by approximately 1.0–1.5 percentage points over a 6–12-month period, including indirect effects.”
The new name for the raw materials crisis: Polyethylene
The war in the Middle East, Turkey’s largest supplier of oil and petrochemical products, has triggered a new raw materials crisis. There is a severe supply bottleneck in polymer raw materials and petrochemical products, particularly polyethylene. Whilst the crisis has driven raw material prices to record highs, industry representatives are signalling significant production losses, stating, “Even if the war were to end today, we would not be able to secure supplies for at least 90 days.”
Pension bonus becomes a burden on the government
The AKP refused to increase the holiday bonuses for millions of pensioners, citing a ‘lack of budget’. The holiday bonus paid to pensioners has remained unchanged for both holidays since 2018. The decision not to increase the holiday bonus, which 17 million pensioners receive at 4,000 lira, was made by the AKP regime on the grounds that it ‘would place a burden on the budget’. AKP Group Deputy Chairman Abdullah Güler cited ‘budgetary discipline’ and the ‘Medium-Term Programme’ as justifications. Pensioners, however, reacted angrily to the government’s use of “budget” excuses, arguing that their monthly pensions remain at a poverty level and that the government should have compensated them through the bonus. Stating that the decision was a deliberate choice, pensioners said, “There’s plenty of money for crony contracts and the palace. But there’s no money for a pensioner to buy chocolate for their grandchild.”
The elderly population is growing but cannot make ends meet and are looking for work
The population aged 65 and over in Turkey has reached 9,583,059. Whilst 9 out of every 100 people fell into the elderly category in 2020, this figure rose to 11 by 2025. Turkey, which for many years stood out due to its young population, has undergone a significant demographic transformation due to falling birth rates and increased life expectancy
The elderly, numbering 9.5 million, face poverty, loneliness, the necessity to work and insecurity. 267,000 elderly people are in work; in 2025, 126 of them died whilst working.
The number of unemployed registered with İŞKUR rose by 14.5 per cent compared to the previous year, reaching 2,455,884, with the over-60 age group drawing particular attention among the registered unemployed. In February of last year, there were 31,051 unemployed people aged 60 and over registered with the agency, whereas by February 2026, this figure had risen to 36,467. Consequently, the number of registered unemployed aged 60 and over increased by approximately 17 per cent over the course of a year. Furthermore, as of January, 1,650 people aged 60 and over applied for unemployment benefit. Fifty-six per cent of applicants were eligible to receive unemployment benefit.
Industrial production got off to a poor start this year: lowest figure in nine months
The industrial production index fell by 2.8 per cent month-on-month and 1.8 per cent year-on-year in January. This marks the lowest figure recorded in nine months. According to TÜİK data, when examining the sub-sectors of industry, the mining and quarrying sector index fell by 2.8 per cent compared to the same month of the previous year, the manufacturing sector index fell by 2.5 per cent, whilst the electricity, gas, steam and air conditioning production and distribution sector index rose by 5.6 per cent. The unadjusted industrial production index fell by 2.6 per cent year-on-year.
On a monthly basis, in January, the mining and quarrying sector index rose by 2.1 per cent compared to the previous month, the electricity, gas, steam and air conditioning production and distribution sector index rose by 1.8 per cent, whilst the manufacturing sector index fell by 3.4 per cent.
Central Bank keeps interest rate at 37 per cent
While the economic impact of the war in the Middle East is anticipated, the Central Bank paused interest rate cuts at its March meeting. The Central Bank’s Monetary Policy Committee (MPC) kept the policy rate steady at 37 per cent. The Monetary Policy Committee also kept the Central Bank’s overnight lending rate at 40 per cent and the borrowing rate at 35.5 per cent.
The statement noted: ‘Should there be a significant and persistent deterioration in the inflation outlook, influenced by recent developments, the monetary policy stance will be tightened.’ The market had also expected the rate to be kept unchanged. The CBRT had cut interest rates by 100 basis points at its first meeting of the year in January.
“The impact of geopolitical developments on the inflation outlook is being closely monitored”
In a statement issued by the CBRT, it was noted that the underlying trend in inflation remained broadly stable in February. The statement, which noted an increase in uncertainty stemming from geopolitical developments, a deterioration in global risk appetite and a rise in energy prices, included the following remarks:
“Decisions supporting a tight monetary policy and fiscal measures taken in coordination have been implemented to limit the risks that these factors could pose to the inflation outlook. The effects of geopolitical developments on the inflation outlook via the cost channel and economic activity are being closely monitored.”
Current account deficit exceeded expectations in the first month of the year
According to Central Bank data, the current account balance recorded a deficit of $6.8 billion in January, significantly exceeding expectations. The annual current account deficit reached $32.9 billion.
According to balance of payments data released by the Central Bank, in January 2026, the current account recorded a deficit of 6 billion 807 million dollars, whilst the current account excluding gold and energy recorded a deficit of 1 billion 228 million dollars. During this period, the balance of payments-defined trade deficit also stood at 6 billion 967 million dollars.
Based on annualised data, the current account deficit stood at approximately $32.9 billion in January, whilst the balance of trade deficit, as defined by the balance of payments, amounted to $71.2 billion. During the same period, the services balance recorded a surplus of $63.1 billion, whilst the primary and secondary income balances recorded deficits of $24.1 billion and $695 million respectively.
One in three textile looms has been shut down, bringing production to a halt
Industrial production fell by 1.8 per cent year-on-year, marking the sharpest contraction in nine months. Labour-intensive sectors, in particular, are struggling to return to their previous production levels. Alongside textiles, production in the furniture and mining sectors has contracted sharply. Textile manufacturing, which has been declining continuously over the past 12 months, contracted by 6 per cent in the first month of the year. Clothing manufacturing contracted by more than a quarter over the year, recording a 25.8 per cent decline. Leather goods also contracted by 20.7 per cent. According to analyses by the Turkish Economic Policies Research Foundation (TEPAV), these sectors have contracted by one-third over the past three years.
TEPAV’s analyses also identified an employment crisis in related sectors. The contraction in labour-intensive sectors has led to job losses here. As production declined and production lines and looms stood idle, hundreds of thousands of workers lost their jobs. TEPAV had previously reported that employment losses in textile-related sectors alone reached 138,000 in November.
Debt crisis fuels bank growth; consumers paid 118 billion lira in interest
Consumers paid banks 118 billion lira in interest on loans and credit card debts in January. Banks’ fee and commission income from loans rose by 35.1 per cent compared to the previous year, whilst service income increased by 39.2 per cent. According to data from the Banking Regulation and Supervision Agency (BDDK), the sector’s net profit rose by 84 per cent in the first month of the year compared to the same period last year, reaching 87.2 billion lira. According to a report by Birgün, the net profit of public banks rose by 89.9 per cent in January to 29.5 billion lira. The net profit of private and foreign-owned banks, meanwhile, rose by 81.6 per cent to reach 57.8 billion lira. Banks’ interest income totalled 789.3 billion lira in January, with 505.4 billion lira of this coming from interest on all loans.
Togg’s loss stands at 14.6 billion TL, whilst Tarım Kredi Market’s is 4.7 billion TL
Both projects, which the economic management has consistently boasted about, reported significant losses last year. The electric car project Togg’s loss for 2025 reached 14.61 billion TL, whilst the total loss over the last two years amounted to 28 billion TL.
Tarım Kredi Cooperative Markets, meanwhile, recorded a net loss of 4 billion 744 million 189 thousand lira in 2025, despite generating 66.3 billion lira in sales revenue.
The stock market was the most profitable investment in February
According to TÜİK data, the highest real return in February was achieved by the BIST 100 index. The stock market, which yielded a return of 7.06 per cent according to the CPI, ranked first, whilst the dollar and the euro caused losses for investors during the same period. When adjusted for the CPI, the return on the BIST 100 index in February was 7.06 per cent. Gold bullion provided a real return of 5.03 per cent to investors, whilst deposit interest (gross) resulted in a loss of 0.03 per cent, government bonds (DİBS) 0.86 per cent, the euro 1.05 per cent and the dollar 1.81 per cent.
Iran war hits India
The situation in India is not good; the war has hit the massive economy; factories and restaurants have closed, basmati rice has piled up in ports, and airline flights have been cancelled. Approximately 50 per cent of the country’s crude oil imports pass through the Strait of Hormuz. In 2025, 89 per cent of the country’s liquefied petroleum gas supply also passed through this critical waterway. New Delhi has activated emergency measures.
China, having unveiled an ambitious development plan, aims to strengthen the domestic market
Whilst the world was discussing the Iran crisis, China quietly unveiled its 15th Five-Year Plan on 4 March. The 141-page plan, which includes humanoid robots, artificial intelligence, machine learning and new production and development models, was announced. The Chinese government has signalled its intention to strengthen the domestic market in the face of external economic uncertainties. Trade Minister Wang Wentao stated: “Some countries are turning to protectionism by using the market as a weapon or a bargaining chip. As a responsible major country, China is effectively opening up its vast market to the outside world, viewing this as an opportunity and a basis for cooperation.”
The total wealth of 3,428 individuals reached $20.1 trillion
The number of people featured on Forbes magazine’s Billionaires List rose to 3,428 this year, whilst the total wealth of billionaires increased to $20.1 trillion. Accordingly, the number of billionaires worldwide has reached a record high of 3,428, an increase of 400 compared to last year. The total wealth of billionaires has risen by 4 trillion dollars compared to last year, reaching a record level of 20.1 trillion dollars. It was noted that 20 people worldwide possess a fortune of 100 billion dollars or more.
Elon Musk, owner of companies such as Tesla, SpaceX, X and xAI, topped the list for the second consecutive year. Musk became the richest person on record with an estimated fortune of 839 billion dollars.
Google co-founder Larry Page ranked second on the list with a fortune of $257 billion, followed by his partner Sergey Brin with a fortune of $237 billion. Amazon founder Jeff Bezos ranked fourth with $224 billion, whilst Meta founder Mark Zuckerberg ranked fifth with $222 billion.
US President Donald Trump’s fortune, meanwhile, rose by 27 per cent following the overturning of his conviction in a case alleging he had engaged in crypto transactions and fraud. With his fortune estimated at $6.5 billion, Trump ranked 645th on the list.