Turkish Markets Surge After CHP Case Postponed — Relief Rally or False Dawn?

A Turkish court’s decision to postpone a politically charged case that could destabilize the country’s main opposition party sparked a sharp rally across financial markets on Monday. But can the momentum hold?

Postponement Delays Political Risk

An Ankara court adjourned proceedings until September 8 in a case that challenges the legitimacy of the Republican People’s Party (CHP) leadership election held in November 2023. The hearing concerns allegations of vote buying, which could overturn Özgür Özel’s election as party leader and potentially reinstate his predecessor, Kemal Kılıçdaroğlu.

Markets viewed the delay as a temporary reprieve from political turmoil that has clouded the outlook for Turkish assets since the March arrest of Istanbul’s opposition mayor Ekrem İmamoğlu. The hearing’s short duration and the lack of immediate escalation eased fears of a swift political upheaval.

Market Reaction: Broad-Based Rally

Turkish Markets Surge as Court Delays Critical CHP Leadership Trial

Turkish equities soared in response. The benchmark BIST 100 index jumped 5.4%, on track for its strongest daily performance since April 2024. The banking sub-index surged 9.6%, its biggest gain in over a year, fueled by hopes of interest rate cuts and lower political risk.

The Turkish lira also strengthened modestly, trading at 39.77 against the U.S. dollar by late afternoon, up from 39.88 on Friday’s close. Government bond yields fell across the curve, and credit default swaps narrowed, signaling improved investor sentiment.

Analysts See Room for Policy Easing

Filiz Eryılmaz, chief economist at ALB Yatırım, attributed the market rally directly to the adjournment:

“Markets had feared a destabilizing verdict. That didn’t materialize, so expectations of a July rate cut are now fully priced in.”

With the CHP court drama temporarily defused, the Central Bank of Turkey may have a freer hand to pursue monetary easing, especially if June inflation — due Thursday — surprises to the downside. Markets are now anticipating a 350 basis point rate cut at the July meeting.

Onur İlgen, head of treasury at MUFG Bank in Istanbul, noted:

“The delay gives the central bank more room to maneuver. With political pressure reduced and reserves recovering, conditions are aligning for rate cuts.”

Underlying Risks Remain

Despite the rally, risks are far from eliminated. A September ruling that annuls the CHP congress result could return Kılıçdaroğlu — a figure associated with a string of election defeats — to the party helm, or even install a government-appointed trustee. Either outcome would shake investor confidence and deepen political uncertainty.

Foreign investors have already shown sensitivity to perceived political interference. The March arrest of İmamoğlu, a popular opposition figure and potential 2028 presidential candidate, triggered capital outflows and forced the central bank to draw heavily on reserves to stabilize the lira.

“The court decision offers short-term relief, but it’s not a political grenade defused — just delayed,” warned SEB’s Erik Meyersson.

Nick Rees of Monex Europe added:

“The delay lowers near-term volatility, but the overhang remains. Political fragility is still a structural factor in Turkish risk pricing.”

Outlook: Tactical Opportunity, Structural Fragility

The rally could mark the beginning of a tactical re-rating for Turkish assets — especially banks and lira-denominated bonds — if Thursday’s inflation data supports easing and the central bank delivers a rate cut in July.

Analysts also see an opportunity for the central bank to rebuild reserves and regain control of monetary policy, as long as the political backdrop remains relatively calm.

Yet this is still a high-beta environment. Investors must stay nimble, as any negative surprise in inflation, court rulings, or foreign policy could quickly reverse the gains.

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