The war in Western Asia is beginning to ripple through Türkiye’s economy, testing the resilience of a country that sits at the crossroads of Europe and the Middle East and shares a border region with Iran.
For now, daily life appears largely unaffected. At a central Istanbul gas station, there are no visible signs of panic buying or shortages.
Yet beneath this calm, financial markets reacted swiftly. “There was panic selling on the Istanbul stock exchange, at first, but now it has swayed again. We also note that speculative investment in bonds has left the country,” said Recep Erçin, editor-in-chief of the economic newspaper Dunya.
The initial panic triggered capital outflows and a surge in demand for foreign currency. In response, Türkiye’s central bank intervened heavily, selling billions of dollars in reserves within days to stabilize the lira. Net reserves have declined as a result, reflecting the cost of defending the currency.
Still, some economists argue the country entered the crisis better prepared than in past crises. “The Central Bank had a policy of strengthening reserves for a long time. He accepted the high interest cost. Reserves are well-prepared to respond to these shocks,” said Professor Cüneyt Dirican of Istanbul Arel University.
But that buffer may prove temporary if the conflict drags on. “If the war or its effects continue for a long time, we would probably see the imbalance of the balance of payments… possibly a trend of inflation and stagflation”, Dirican warned.
Rising Energy Costs and Inflation Pressures
Recent developments in the Iran war have heightened concerns. Attacks on energy infrastructure and instability around key transit routes have driven global oil prices sharply higher, intensifying pressure on energy-importing economies like Türkiye.
The country spent roughly $47 billion on energy imports in 2025, according to official figures cited in the report. A 10% increase in prices would add an estimated $5 billion to that bill—widening the current account deficit and fueling inflation.
The war is also disrupting trade and regional economic flows. Turkish exporters face growing uncertainty in Middle Eastern markets, while tourism—especially visitors from the region—could decline if instability persists.
Agriculture and Supply Chain Effects
The economic impact extends beyond oil. “The situation not only affects the price of oil, but also of gas and hence, the price of fertilizers. Production costs in agriculture would increase… A profound change in policy would be necessary,” Erçin said.
Rising fertilizer costs threaten to push up food prices, complicating Ankara’s anti-inflation efforts. In response, the government has already moved to restrict the re-export of fertilizers and has tapped strategic reserves to ease pressure on fuel prices.
Policy Shift and Long-Term Risks
The central bank has also adjusted its policy stance. It has paused its previous easing cycle and kept the benchmark interest rate at 37%, signaling a more cautious approach as external risks mount.
In the short term, analysts say markets have stabilized after the initial shock. But the longer the conflict continues, the greater the effect to Türkiye’s macroeconomic balance.
Economists warn that prolonged high energy prices could lead to a deterioration in the balance of payments, renewed inflationary pressures, and even stagflation—echoing trends seen globally.
A Test of Resilience
Türkiye has weathered multiple shocks in recent years, including the war in Ukraine and the devastating 2023 earthquake. That track record has fostered confidence in its ability to manage crises.
However, the current conflict may pose a more sustained challenge. As a key economic bridge between Europe and Asia, Türkiye is deeply exposed to regional instability.
For now, the pumps in Istanbul remain quiet and orderly. But if the war persists, the real test for Türkiye’s economy may still lie ahead.
