Turkish assets hit by Iran war fallout as foreign investors exit
doviz-TL
Escalating tensions in the Iran war have triggered a sharp sell-off in Turkish assets, with foreign investors pulling billions from bonds, equities, and carry trade positions. Record outflows from government debt, declining reserves, and rising geopolitical risks are placing increasing pressure on Türkiye’s financial markets.
Record foreign sell-off in Turkish bonds
Foreign investors executed a record $2.9 billion net sale of Turkish government bonds in the week of March 13, according to data from the Central Bank of the Republic of Türkiye (CBRT).
The scale of the outflow marks one of the largest weekly exits on record and highlights the growing risk aversion toward Turkish fixed-income assets amid regional instability.
Equities also under pressure
The sell-off extended to Turkish equities:
- Foreign investors sold $322 million worth of stocks in the same week
- Total equity outflows exceeded $1 billion in the first two weeks of March
This reflects a broader retreat from emerging markets exposed to geopolitical risk.
Carry trade unwind accelerates
One of the most striking developments has been the rapid unwinding of carry trade positions.
- Total outflows reached $12 billion in the first two weeks of March
- A single-week outflow of $6.6 billion marked the largest weekly exit
The total size of carry trade positions dropped to $47.2 billion, down sharply from a peak of over $61 billion in late January.
The reversal underscores how quickly global investors are reducing exposure to high-yield strategies in times of uncertainty.
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Geopolitical shock reshapes flows
The US-Israel war with Iran has significantly altered investor behavior.
Rising tensions in the Middle East and disruptions in the Strait of Hormuz have:
- Increased global risk aversion
- Driven capital out of emerging markets
- Reduced appetite for Turkish assets
The shift has been particularly pronounced given Türkiye’s proximity to the conflict zone.
Central bank reserves decline sharply
Türkiye’s foreign exchange buffers are also coming under pressure.
CBRT data shows:
- Total reserves fell to $189.6 billion as of March 13
- Gross reserves declined from $218.2 billion the previous month
The drop reflects both capital outflows and efforts to stabilize markets amid volatility.
Net reserves fall significantly
A key indicator of financial resilience — net reserves excluding swaps — has also weakened:
- Fell to $54.3 billion
- Down from nearly $80 billion in February
This decline signals reduced policy space for authorities to manage external shocks.
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Pressure from Hormuz disruption
The partial disruption of the Strait of Hormuz continues to weigh on Türkiye’s macro outlook.
As a major energy importer, Türkiye is particularly vulnerable to:
- Rising oil prices
- Supply chain disruptions
- Increased import costs
These factors are adding to inflationary pressures and external imbalances.
Market sensitivity to political and global risks
Recent capital outflows highlight how sensitive Turkish markets are to both domestic and global developments.
Previous episodes, such as the detention of Istanbul Mayor Ekrem İmamoğlu, had already triggered significant capital flight.
The Iran war has now amplified these pressures, accelerating investor exits.
BRSA, CBRT
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