Morning Brief: Markets Turn Volatile as Geopolitical Tensions Resurface

Global markets started the week on a negative footing after renewed US–Iran tensions reversed last week’s optimism. Oil prices surged again while risk appetite weakened. In Türkiye, equities pulled back from record highs and CDS spreads widened, although foreign inflows and improving reserves offered some support. Markets have shifted into a cautious “wait-and-see” mode.

Global Markets: From Optimism to Renewed Uncertainty

Global financial markets entered the weekend on a strong footing, supported by improving sentiment around the Middle East. Reports suggesting a potential easing of restrictions on Iran’s foreign exchange assets, along with statements indicating that the Strait of Hormuz had reopened to commercial traffic, boosted risk appetite significantly.

As a result:

• Brent crude dropped below $86 per barrel
• The US dollar weakened
• Gold surged toward $4,900
• Equities rallied across major markets

However, developments over the weekend quickly reversed this trend. The US blockade of Iranian ports and the interception of an Iranian-flagged cargo vessel, just days before the ceasefire deadline, heightened tensions and undermined hopes for a diplomatic breakthrough.

At the start of the week:

• Brent crude rose to around $97
• Gold retreated to $4,735
• The US dollar strengthened
• Global equities closed lower

Turkish Equities 1Q26 Preview: Banks to Lead Earnings Growth as Iran War Adds Uncertainty

Diplomacy Hopes Offer Late Support

During Monday’s session, tentative signs of renewed diplomacy between the US and Iran provided some relief. Attention turned to possible talks in Pakistan, while China called for an immediate and comprehensive ceasefire, emphasizing the importance of keeping the Strait of Hormuz open.

These developments helped markets recover later in the day:

• Gold climbed back above $4,800
• The dollar index (DXY) erased earlier gains
• Bitcoin held above the key $75,750 level

Energy Markets: Hormuz Tensions Keep Prices Elevated

Disruptions in shipping through the Strait of Hormuz have once again brought energy markets into focus. Oil prices closed near $95 per barrel, well above last week’s optimistic levels.

This situation poses risks to:

• Global inflation dynamics
• Economic growth prospects

Türkiye Markets: Pullback After Record Highs

In Türkiye, the BIST 100 index tested record highs on Friday amid global optimism but retreated by 0.7% at the start of the new week as sentiment deteriorated.

Key developments included:

• USD/TRY edging higher to 44.85 in a controlled manner
• 5-year CDS rising to 233 basis points
• The Treasury issuing $2 billion in eurobonds at a 6.40% yield

Demographics Signal Long-Term Risks

Data released by TÜİK showed that Türkiye’s child population ratio fell to 24.8% in 2025, the lowest level in the Republic’s history.

• 1970: 48.5%
• 2025: 24.8%
• 2100 projection: 14.5%

This trend highlights the accelerating aging of the population.

Focus on Central Bank Decision

Markets are now closely watching the upcoming policy decision by Central Bank of the Republic of Turkey.

Consensus expectations point to unchanged rates, supported by:

• Weak domestic demand for foreign currency
• High share of TRY deposits (~59%)

Foreign Inflows and Reserve Recovery

Following the ceasefire, foreign investor interest in Turkish assets has strengthened:

• Net inflows: $1.5 billion
• Net FX reserves rose from $8.3 billion to $35.8 billion

Improved US–Türkiye relations and expectations around easing CAATSA measures have also supported sentiment.

Market Positioning: Cautious Optimism

Markets remain highly volatile, with investors adopting a cautious stance:

• Gold: $4,800 is a key technical level
• Silver: $79 threshold
• Bitcoin: Holding above $75,750 remains critical

Asia and Global Outlook

At the start of the new trading day:

• South Korea’s Kospi surged over 2%
• Japan’s Nikkei gained 1.2%
• US futures edged slightly higher

Meanwhile, oil, the dollar, and gold remained broadly stable, indicating a market in consolidation.

Macro Watch: Fed and Global Central Banks

Attention in the US has shifted to upcoming remarks by Kevin Warsh, particularly regarding Federal Reserve independence and policy direction.

In Asia, the Bank of Japan is expected to hold rates steady, with markets looking ahead to June for potential adjustments.

Central Bank Survey: Higher Inflation and FX Expectations

According to the latest survey by the Central Bank of the Republic of Turkey:

• Year-end inflation forecast: 27.53%
• 12-month inflation: 23.39%
• USD/TRY forecast: 51.23
• 12-month policy rate expectation: 29.56%

Emre Degirmencioglui Kıbrıs İktisat Bankası

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