China’s factory activity expanded in March following two months of contraction, the government data showed on Tuesday, but analysts suggest that a prolonged impact of the Iran war could weigh on growth.

The official manufacturing purchasing managers index (PMI) rose to 50.4 from 49 in February, the National Bureau of Statistics reported, beating economists’ expectations and notching the strongest reading in a year. PMI is measured on a scale of 0 to 100, and a reading above 50 indicates expansion.

While the latest official data covered a period after the Iran war began on Feb. 28, analysts say the impacts of surging energy costs have not yet been fully seen. “So far, supply disruptions have not occurred in a material way,” said Jacqueline Rong, a chief China economist at BNP Paribas.

A years-long property sector slump in China has also weighed on economic growth and weakened domestic consumption and investment demand in China, the world’s second-largest economy after the U.S.

To help drive its economy, China has been reliant on growing exports, especially to regions such as Southeast Asia and Europe, which propelled its trade surplus last year to a record $1.2 trillion despite higher U.S. tariffs.

China’s export engine could hit headwinds as the Iran war drives up energy costs and disrupts supply chains, with most maritime traffic blocked from passing the Strait of Hormuz, through which roughly a fifth of the world’s oil normally passes.

The extent of the impact will depend on how long the energy flows from the Middle East are cut off, said BNP Paribas’ Rong. “If it is months, rather than weeks, then the supply disruptions, not just from oil, but also from the shortage of many chemical products – such as rare gases – would manifest itself in disrupting industrial production and services,” she said.

China’s exports could also suffer if overall global growth takes a serious hit from the energy crisis, Rong said. Analysts say, for example, that higher global inflation could weaken consumption demand for Chinese goods.

Chinese leaders in early March unveiled an economic growth target of 4.5% to 5% for this year, a slightly lower goal than the “around 5%” last year and the lowest growth target since 1991.

For now, China’s economy “appears to have weathered” the energy shock from the Iran war well, wrote Zichun Huang, China economist at Capital Economics, in a recent research note, although she also cautioned it is “likely that the fallout from the Iran war will grow over the coming months.”

With China’s exports to the U.S., its largest trading partner, in decline over the past months, economists are closely watching for positive signs in trade relations between Washington and Beijing as U.S. President Donald Trump is expected to meet with Chinese leader Xi Jinping in May.

Some analysts say lower U.S. tariffs following a recent Supreme Court ruling against Trump’s wide-reaching global tariffs could give China a small boost to exports and factory activity.

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Türkiye is positioned to become a technology and investment hub attracting foreign capital, as regional and global economic developments are driving a shift in that direction, according to a council chair at a major Turkish business body on Monday.

“On the route of foreign capital, Türkiye is in a position to become a natural technology and investment base. For Istanbul to turn into a finance and technology center, the public and private sectors need to act together,” said Erdem Erkul, the head of the Digital Technologies Business Council at Foreign Economic Relations Board (DEIK).

“With joint investment models and new generation fund structures, Türkiye can attract this capital,” he told Anadolu Agency (AA).

In the statement, he pointed out that on a global scale, capital, entrepreneurs, and technological infrastructure are rapidly relocating.

Explaining that the critical situation created, especially in the U.S., Europe, and the Gulf line, has led to a new economic equation, Erkul said that this contains both risks and new opportunities for countries involved in global competition.

Moreover, he emphasized that competition now occurs not only between companies but also between cities, countries, and ecosystems. He noted that due to recent accelerated geopolitical fractures, changes in global trade balances, and the effects of the new artificial intelligence-centered economic order, Türkiye’s position needs to be redefined.

He went on to say that Türkiye is in a process not only as a country that regulates but also as a center attracting more entrepreneurs, gathering capital, and producing technology.

“Whoever enables company establishment faster, provides a stronger digital infrastructure, and gives more confidence to entrepreneurs is the winner,” he maintained.

In this context, Erkul opined that it is “important” for Türkiye to simplify its entrepreneurship and technology policies.

“From company establishment to the tax system, from the investment environment to the international legal infrastructure, a new approach has become obligatory in many areas. With a fully digital, cross-border-compliant, and multilingual company establishment infrastructure, Türkiye can become one of the top choices for global entrepreneurs,” he further said.

Incentive models

Erkul also highlighted that Türkiye should move beyond its traditional incentive models and establish an entrepreneur-friendly, predictable, and competitive structure.

He pointed out that regulations related to stock options, company sales processes, and income tax could transform the country into a regional attraction center, also adding that creating a fast and reliable visa mechanism for entrepreneurs is also a key part of this transformation.

Additionally, he also stated that artificial intelligence and data center investments have become the core determinants of the new economy.

He emphasized that the new form of capital is computing power and noted that it is not possible to attract entrepreneurs without establishing a data center or building a strong artificial intelligence infrastructure.

Erkul also suggested that Türkiye needs to reconsider its energy, infrastructure, and incentive policies in this area.

“Establishing a strong national cloud-based artificial intelligence ecosystem is of strategic importance. Türkiye needs to be a center not just for starting enterprises but also for scaling them and enabling global exits,” he noted.

“Deepening the capital markets, integrating with international stock exchanges, and strengthening the legal infrastructure to increase investor confidence are critically important,” he added.

‘New economic order’

Furthermore, Erkul said that the world “is entering a new economic order,” conveying that in this order, “speed, scale, and trust are the three most critical factors.”

“If Türkiye takes the right steps, it can achieve regional hub status in a very short time,” he added.

Erkul also said that, as the Digital Technologies Business Council, they continue to work with the public, private sector, and international stakeholders to implement this approach that will accelerate Türkiye’s technology-focused economic transformation.

Stating that as the council, they are working for Türkiye to become the most important part of the global artificial intelligence infrastructure, Erkul concluded his remarks by saying: “As Türkiye, we need to become the production, data, energy, and access corridor of the artificial intelligence era.”

“As the business world, we are ready to fulfill our responsibilities.”

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Türkiye’s top economy officials are due to meet investors in London this week, with ​investors set to watch their comments ​closely amid the Iran war, a report said on Monday.

Treasury and Finance Minister Mehmet Şimşek and Central Bank of the Republic of Türkiye (CBRT) Governor Fatih Karahan will present Türkiye’s disinflation-focused economic program and answer investors’ questions, Reuters reported.

They will hold both investor meetings and one-on-one discussions during the trip, the report said, citing sources.

The meetings come as investors closely monitor the Turkish authorities’ response to the month-long U.S.-Israel war on Iran, particularly its impact on inflation, the current account deficit and financial markets.

The Treasury and Finance Ministry confirmed the London meetings but did not provide further details.

During the meetings, Şimşek and Karahan are expected to tell investors that the government remains committed to prioritizing its economic program and disinflation policies.

Their presentations are also expected to highlight the strengths of the Turkish economy, while addressing investor concerns about the potential fallout from the conflict.

The economic management last held similar meetings in January in the United Kingdom and the United States as part of regular outreach efforts to international investors.

Since the conflict began, Turkish authorities have taken several measures aimed at limiting the impact on markets. Those measures have helped keep the Turkish lira relatively stable. Since the start of the conflict, the lira has weakened by only around 1.3% against the U.S. dollar.

The central bank this ​month halted ​its ⁠easing cycle, keeping its benchmark rate at 37% due to inflation ​risks linked to fallout from the ​war that has engulfed the region and slashed global energy supplies.

Annual inflation was 31.5% in February after a gradual decline from 75% in 2024, the year in which the CBRT began slowly cutting rates.

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Oil prices continued to rise on Monday as Brent crude headed for a record monthly gain, after Yemeni Houthis launched their first attacks on Israel over the ‌weekend, widening the U.S.-Israel war with Iran in the Middle East.

Brent crude futures jumped $3.94, or 3.5%, to $116.51 a barrel at 0703 GMT after settling 4.2% higher on Friday. U.S. West Texas Intermediate was at $102.14 a barrel, up $1.86, or 1.87%, following a 5.5% gain in the previous session.

Global stocks, meanwhile, were in limbo as investors dug in for a conflict they fear will bring a spike in inflation ⁠and the risk of recession to much of the globe.

“The market has all but discounted the prospect of ​a negotiated end to the war, (U.S. President Donald) Trump’s claims of ongoing ‘direct and indirect’ talks with Iran notwithstanding, and is bracing for ​a sharp escalation in military hostilities, which is a bullish signal for crude, with huge uncertainties on ⁠the timing and nature of the outcome,” said Vandana Hari, founder of oil market analysis provider Vanda Insights.

Trump said ​the U.S. and Iran have been meeting “directly and indirectly” and that Iran’s new leaders have been “very reasonable,” as more U.S troops arrived in ​the region, while the Israeli military said on Monday it is attacking the Iranian government’s infrastructure throughout Tehran.

Brent has soared 59% this month, the steepest monthly jump, exceeding gains seen during the 1990 Gulf War, after the Iran conflict effectively closed the Strait of Hormuz, a conduit for a fifth of the world’s ​oil and gas supplies.

The war, launched on Feb. 28 with U.S. and Israeli strikes on Iran, has spread across the Middle East, ​raising concern about shipping lanes around the Arabian Peninsula and the Red Sea.

The Financial Times late on Sunday quoted Trump saying the U.S. ​could ⁠seize Kharg Island in the Persian Gulf, from where Iran exports much of its oil, but also that a cease-fire could come quickly.

The Israeli military on Monday said Iran launched multiple waves of missiles at Israel ‌and an ⁠attack had also been launched from Yemen for only the second time since the war began.

“The conflict is no longer concentrated in the Persian Gulf and around the Strait of Hormuz, but now extends into the Red Sea and the Bab el-Mandeb – one of the world’s most crucial chokepoints for crude and refined product flows,” JPMorgan analysts led by Natasha Kaneva said in a note.

Saudi crude exports ​redirected from the Strait of ​Hormuz to the Yanbu port ⁠in the Red Sea reached 4.658 million barrels per day last week, data from analytics firm Kpler showed.

If exports from Yanbu were disrupted, Saudi oil would need to pivot toward Egypt’s Suez-Mediterranean (SUMED) pipeline to ​the Mediterranean, JPMorgan analysts said.

Attacks in the region escalated over the weekend and damaged Oman’s Salalah ​terminal despite efforts ⁠to start cease-fire talks.

Pakistan said it was preparing to host “meaningful talks” to end the conflict over Iran in the coming days, even though Tehran accused Washington of preparing a land assault as the U.S. military builds up forces in the region.

Separately, Vietnam’s Binh Son ​Refining and Petrochemical on Monday said it is in talks with Russian partners to buy crude oil. The company said it would also buy more crude oil from Africa, ​the U.S. and Southeast Asia.

Stocks in limbo

Meanwhile, shares across ⁠Asia fell, with Japan’s Nikkei index closing down 2.8%, in a region more reliant on Gulf oil exports. European stock markets were firmer in early trading and Wall Street futures pointed to gains, although they were slim given a recent sell-off.

“Oil is the lightning rod right now,” said Eren Osman, managing director of wealth management at Arbuthnot Latham, adding a reopening of the Strait of Hormuz was the key to calming world markets.

“The biggest challenge for us as investors today is that you’ve got one of the widest ranges of potential outcomes,” he said, adding he did not expect a prolonged conflict as he believed Trump had a “pain threshold” for market losses.

Madison Cartwright, senior geo-economics analyst at Commonwealth Bank of Australia, said Iran’s control of the Strait of Hormuz nonetheless gave it little incentive to concede and the bank expected the war to run until at least ⁠June.

The ⁠clampdown on the Strait has sent prices for oil, gas, fertilizer, plastic and aluminium surging, along with fuel for planes and shipping. Prices for food, pharmaceuticals and petrochemical products are all set to rise.

That is particularly bad news for Asia, as much of the region is highly dependent on energy from the Middle East.

MSCI’s broadest index of Asia-Pacific shares outside Japan dropped 1.8%.

European stocks were last up 0.3%, while S&P 500 futures and Nasdaq futures pointed to gains of about 0.5% apiece.

“The longer the Strait remains closed, the sharper the drawdown in buffer supplies that could spark dramatic increases in the price of crude oil, natural gas and other commodities,” warned Bruce Kasman, global head of economics at JPMorgan.

“A scenario in which the Strait remains closed for an additional month would be consistent with ⁠oil prices rising towards $150/bbl and constraints on industrial consumers of energy supply.”

Fed in focus as payrolls loom

The inflationary threat has led investors to ​revise up the outlook for interest rates almost everywhere. U.S. Federal Reserve (Fed) Chair Jerome Powell will have a chance to air his own views at ​an event later on Monday and the influential head of the New York Fed, John Williams, is also talking.

Data on U.S. retail sales, manufacturing and payrolls this week will provide an update on how the economy is faring. The energy shock, combined ⁠with pressure on ‌fiscal budgets from higher ‌borrowing costs and the need for more defence spending, has hit sovereign bond markets. Ten-year ⁠U.S. Treasury yields were last at 4.3959%.

Heightened volatility in markets has tended to benefit ‌the U.S. dollar as the world’s most liquid currency. The U.S. is also a net energy exporter, giving it a relative advantage over Europe and much of Asia.

The dollar index ​was trading near a 10-month high at 100.26, broadly ⁠flat on the day. Yet more warnings of possible intervention from the Japanese authorities did see the ⁠dollar ease 0.3% to 159.775 yen. It crossed the 160 barrier last week for the first time since July 2024, when Japan last ⁠acted to buy yen.

The euro ​dipped 0.1% to $1.1493, not far from a March trough of $1.1409.

In commodity markets, gold gained 0.9% to $4,534 an ounce, having recently drawn scant support as a safe haven or as a hedge against inflation risks.

Türkiye will provide interest-free financing support through regional development agencies as part of efforts to accelerate the country’s green transition and support vulnerable groups, a senior official said on Monday.

The new support package worth about TL 3 billion (over $67 million) will be launched simultaneously across 31 provinces through 10 regional development agencies under the Socially Inclusive Green Transition Project, Industry and Technology Minister Mehmet Fatih Kacır said.

The project, known as SoGreen, is being implemented in cooperation with the World Bank and has a total budget of $400 million.

“We are announcing a TL 3 billion Interest-Free Financing Support Program simultaneously in 31 provinces through 10 of our development agencies,” Kacır wrote on the social media platform NSosyal.

Focus on women, youth, green industries

The minister said the program is designed to support employment among groups expected to be most affected by the green transition, particularly women and young people.

He said the financing would also encourage investments in priority sectors related to resource efficiency, cleaner production, the circular economy and emissions reduction.

According to Kacır, the initiative is intended to accelerate Türkiye’s shift toward a greener economy while also strengthening social inclusion.

Kacır said development agencies are playing a key role in supporting green transformation and inclusive growth across all 81 provinces under the government’s local development strategy.

He said the government would continue contributing to local prosperity by backing projects that support both environmental sustainability and economic development.

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The Turkish economic confidence index decreased 2.8% month-over-month to 97.9 in March, according to the official data released by the country’s statistical office on Monday.

The index stood at 100.7 in February and 99.4 in January, according to the Turkish Statistical Institute (TurkStat).

All sub-indices posted declines in March, with the real sector and construction confidence indexes both dropping 3.9%.

Consumer confidence edged down 0.8%, while services and retail trade confidence indices fell 0.5% and 2%, respectively.

The economic confidence index, a composite indicator of the country’s overall economic situation, indicates an optimistic outlook when above 100 and a pessimistic one when below 100.

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