Iran-Israel Tensions Fuel Economic Anxiety in Turkey

Our Contributors: Güldem Atabay, Atilla Yeşilada, Erol Taşdelen, Çetin Ünsalan

As geopolitical tensions between Iran and Israel simmer just below the threshold of outright war, a growing chorus of Turkish economists and market analysts warn that the knock-on effects could spell serious trouble for Turkey’s economy. While no missiles have yet crossed borders between the two adversaries, the economic implications are already ricocheting through global markets—and Turkey stands directly in their path.

In recent columns published across leading Turkish platforms, Güldem Atabay, Atilla Yeşilada, Erol Taşdelen, and Çetin Ünsalan offer a range of critical insights into how Turkey’s fragile macroeconomic environment may not be equipped to withstand an external geopolitical shock—especially one that disrupts energy supplies, accelerates capital flight, or reignites inflation.

Güldem Atabay: Energy Dependency Is Turkey’s Structural Weakness

Economist Güldem Atabay emphasizes that Turkey’s dependence on imported energy leaves it acutely exposed to any instability in the Middle East. “The Iran-Israel conflict does not need to escalate into full-scale war to cause damage,” she writes. “Even the risk of conflict is enough to raise oil prices and increase the cost of imports.”

Atabay points out that Turkey imports over 90% of its oil and gas. With Brent crude trading near $90 and analysts warning of a possible surge toward $100–110 in the event of regional escalation, Turkey faces a renewed wave of imported inflation that could derail its fragile price stability efforts.

“Mehmet Şimşek’s disinflation roadmap assumes relative geopolitical calm,” she argues. “That assumption is no longer safe.”

Atilla Yeşilada: Market Sentiment Could Collapse Overnight

Veteran market analyst Atilla Yeşilada focuses on investor behavior and capital flows. He warns that Turkey’s recent relative calm in the foreign exchange and bond markets could be short-lived. “Foreign capital is already nervous,” Yeşilada says. “If regional war breaks out, Turkey will suffer outflows before any other emerging market.”

He points to Turkey’s 5-year credit default swap (CDS) premium, which has recently climbed back above 300 basis points, reflecting increased perceived risk. “This level of CDS suggests that global investors are preparing for turbulence,” he notes.

Yeşilada is particularly concerned about the real economy, especially the industrial sector. “Manufacturing relies on imported energy, raw materials, and predictable logistics. All of that breaks down if oil surges or if shipping lanes in the region become risky,” he writes.

Erol Taşdelen: Fragile Real Sector Can’t Withstand Another Shock

Economic commentator Erol Taşdelen offers a grounded, institutional view of the domestic consequences. He argues that Turkey’s reel sektör—especially SMEs—is already burdened by high financing costs, chronic uncertainty, and weak domestic demand. “Throw a geopolitical crisis into that mix, and you have the perfect storm,” he says.

Taşdelen warns that rising energy costs will be quickly transmitted to production prices, worsening the inflation outlook and triggering further interest rate pressure on businesses already struggling with high debt servicing costs.

“Turkey’s interest rate is already at 50%. If inflation expectations spike again, we may be forced into even tighter monetary policy—at the expense of growth and employment,” he concludes.

Çetin Ünsalan: Policy Must Shift from Optimism to Realism

Business journalist and economic analyst Çetin Ünsalan takes a more political-economic approach. He argues that Ankara must abandon its “gradual normalization” narrative and prepare for a high-risk period marked by uncertainty and external shocks.

“The government has tried to balance orthodox monetary policy with political realities,” Ünsalan says. “But global developments may no longer allow for that luxury.”

He adds that the 2026 election cycle, already casting a long shadow over fiscal and monetary decisions, could make it politically difficult to pursue painful but necessary adjustments. “If Erdoğan’s government reverts to populism to preserve support while the region is on fire, the cost could be catastrophic,” he warns.

Ünsalan suggests the government should prepare contingency plans for three scenarios:

1. Oil at $110+

2. Capital outflows exceeding $10 billion

3. Collapse in tourism revenue due to regional instability

“These aren’t remote tail risks anymore,” he says. “They are baseline planning assumptions.”

A Perfect Storm Brewing?

All four commentators converge on a sobering conclusion: while Turkey has made some progress in restoring policy credibility, its macroeconomic architecture remains too fragile to absorb a full-blown geopolitical shock.

The reliance on foreign capital, the need for imported energy, and the limited fiscal space leave Ankara with little room to maneuver. Meanwhile, inflation remains above 70%, and real wages have yet to recover meaningfully. Any renewed currency volatility or supply chain disruption could reignite stagflationary dynamics.

Moreover, with foreign participation in Borsa Istanbul and the domestic bond market still well below historic averages, Turkey remains on the edge of investor trust—but not quite within it.

Time to Rethink Policy Before Crisis Hits

The analysts are aligned in urging Turkish authorities—especially the Ministry of Treasury and Finance and the Central Bank—to shift from crisis reaction to crisis anticipation.

• Build FX reserves while markets are open.

• Reduce off-budget spending to create fiscal room.

• Enhance market communication to manage expectations.

• Coordinate with allies to diversify energy supply routes.

“Hope is not a strategy,” writes Atabay. “A conflict may be averted. But if it isn’t, Turkey must not be caught unprepared.”

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