Economy
Iran war hurts fight against inflation, Turkish central bank says
Türkiye’s central bank chief on Tuesday cautioned about the impact of the fallout from the Iran war on its fight against inflation, noting that in such situations it is a “natural choice” to turn to gold-based transactions to support liquidity.
Central Bank of the Republic of Türkiye (CBRT) Governor Fatih Karahan said the monetary authority would maintain the needed tight policy to continue the disinflation process.
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. But expectations have risen amid the war, largely due to soaring global energy prices.
In response, the central bank has halted its easing cycle with the main rate at 37%, lifted its overnight rate by about 300 basis points to near 40%, and undertaken sales and swaps of foreign exchange and gold reserves to support the Turkish lira.
In the last two weeks, the bank began swapping or selling billions of dollars worth of gold reserves, marking its most aggressive use of the precious metal since 2018.
The CBRT has doubled its gold reserves that were 377 tons back in 2016, Karahan said on Tuesday. As of this month, the share of its gold reserves in total reserves exceeded 60%.
“Therefore, using gold-backed transactions during periods when foreign exchange liquidity needs to be supported is a perfectly natural choice,” Karahan told Anadolu Agency (AA).
He said it’s not a correct approach to assess such transactions with a mere profit-loss perspective. “Our priority is financial stability and policy effectiveness,” he stressed.
‘Proactive’ approach
The CBRT is pursuing a “proactive, flexible and controlled” approach to its reserve-management and liquidity tools, Karahan said. “The objective of all the steps we take is to support price stability and reinforce financial stability,” he added.
Karahan said the pressure on reserves emerges as a natural outcome of changes in the global risk appetite. In this context, he said they are taking measures to limit the impact of this risk aversion on the inflation outlook. “With the outbreak of war, we began funding at the upper band,” he noted.
The central bank started to conduct lira-settled foreign exchange forward selling transactions with residents and brought forward its bond purchases to prevent a possible outflow from money market funds.
“These measures have helped maintain the attractiveness of the Turkish lira in domestic markets. While there has been a moderate domestic demand for gold and foreign currency during this period due to falling gold prices, residents’ foreign exchange demand has remained limited compared to previous stress periods,” said Karahan.
“I would like to reiterate that we are facing an external situation which adversely affects our fight against inflation.”
The ongoing tensions in the Middle East, according to Karahan, have driven a sharp rise in energy prices, adding cost-push pressure on inflation and indirectly affecting prices across sectors.
In the medium term, he said the war is expected to have further side effects on inflation; cost- and supply-side disruptions already creating additional pressures.
But he stressed policymakers are “determined to ensure the tightness required for the continuation of the disinflation process.”
FX-based lira swap transactions
Karahan and Treasury and Finance Minister Mehmet Şimşek will discuss their strategy on Wednesday and Thursday with foreign investors in London, where Barclays is hosting both group and one-on-one events, bankers said.
One investor who is attending said they will likely face questions about monetary policy given Türkiye’s heavy reliance on energy imports and about the central bank’s ability to sustain the slow rate of lira depreciation. The investor declined to be named.
In its latest step, which aims to give lenders flexibility managing liquidity, the central bank restarted foreign exchange-based lira swap transactions with buyside auctions worth $10 billion on Tuesday.
To curb price hikes, authorities earlier this month introduced a “sliding-scale” system, which adjusts the special consumption tax (ÖTV) on fuel products and prevents higher oil prices from being fully passed through to consumers.
Karahan said their calculations showed the system reduces the impact of oil prices on inflation to one-third.
He still stressed analyses that he said indicate that a permanent 10% increase in oil prices adds approximately 1.1 percentage points to consumer inflation over a year.
“So far, we have promptly introduced measures to reduce inflationary effects. Currently, uncertainties remain as to the course of the war,” Karahan said.
“We will ensure the tightness required to contain the inflationary effects of the developments through expectations and pricing behavior.”
Cooling of economic activity
Karahan went on to say that they expect the rising energy costs, external uncertainties and the resulting potential weakening of external demand to create a downward pressure on economic activity.
And the growing uncertainties will also have an impact on investment appetite and private consumption, he added. “Our analyses suggest that a 10% supply-side increase in oil prices leads to a 0.4-to-0.7 percentage points of decline in the growth rate over a one-year period,” he said.
Recent developments, Karahan said, will affect the current account balance diversely through energy and non-energy items.
“Our analyses show that a $10 increase in oil prices deteriorates the one-year net energy balance by approximately $3 billion to $4 billion. In case of a parallel rise in natural gas import prices as well, this impact may go up to $5 billion,” he said.
Regarding non-energy items, Karahan said a potential moderation in global demand would have an upward effect on the current account deficit through exports and tourism. “However, cooling of economic activity will affect the trade balance favorably,” he noted.
The level of the current account deficit is currently below its historical average, he added. “We think that the possible deterioration of the current account balance amid recent developments will be manageable.”
Türkiye officially launched 5G technology on Tuesday in what President Recep Tayyip Erdoğan said will mark the beginning of a new era not only in communications but in all other industries.
Commercial 5G services are scheduled to begin as of Wednesday and are expected to cover the whole country within about two years, according to officials.
Speaking at a launching ceremony, Erdoğan said the next-generation services would strengthen Türkiye’s competitiveness, improve productivity in communications, technology, energy and manufacturing and reinforce the country’s digital independence.
He said it would open a new chapter across transportation, health care, agriculture, manufacturing, the economy and education.
The technology is expected to enable users to experience significantly higher speeds and lower latency across all forms of internet use, supporting wider adoption of advanced digital services.
Erdoğan said sovereignty in today’s world is no longer limited to geography and physical borders, arguing that technological capability, cybersecurity and control over data have become central to national strength.
“In today’s data age, political stability, economic independence, military deterrence and digital sovereignty are inseparable,” he said.
He argued that countries seeking influence and credibility in an increasingly competitive global environment must invest in cyber technologies, cybersecurity measures and digital infrastructure.
Erdoğan said the collection, processing and protection of data now play a critical role in national security, particularly amid recent conflicts in places such as Gaza, Lebanon and Iran.
“The wars and conflicts occurring in our immediate vicinity, particularly in Lebanon, Gaza and Iran recently, have once again demonstrated the importance of cybersecurity,” he noted.
“If you want to be strong, deterrent, and respected on the global stage, you must accelerate your efforts in cyberspace and take the necessary cybersecurity measures.”
Cybersecurity seen as part of national defense
The president said 5G should be viewed not only as a communications technology but also as part of a broader digital sovereignty and national security strategy that includes data centers, cloud infrastructure, artificial intelligence and cybersecurity capacity.
“If you can protect your borders and airspace but cannot protect your cyber homeland and the data that is an inseparable part of it, then you have a serious weakness in your sovereignty,” Erdoğan said.
He said the government has spent the last 23 years building the foundations for this transition through investments in digital infrastructure and cybersecurity.
Türkiye’s fiber optic network has expanded from 81,000 kilometers in 2002 to 657,000 kilometers (408,240 miles) as of the third quarter of 2025, Erdoğan said.
During the same period, the number of broadband subscribers rose from 3,000 to 98 million, while mobile phone subscribers increased from 23 million to nearly 100 million.
Mobile use and cybersecurity efforts expand
Erdoğan said more than 55 million people in Türkiye currently use secure internet services, while total monthly voice traffic through mobile and fixed-line networks has reached 82 billion minutes.
Türkiye ranks first in Europe with an average monthly mobile usage time of 494 minutes, he added.
The 5G will be rolled out in all 81 provincial centers initially before becoming available across the country within two years, said Erdoğan.
The president also highlighted the work of the Cybersecurity Directorate, established last year to protect communications systems, critical infrastructure and national networks from cyber threats.
He said law enforcement, intelligence agencies and other public institutions are also developing contingency plans and response mechanisms against potential cyber risks.
Erdoğan added that the government is closely monitoring debates over foreign-owned messaging and calling applications, particularly since the conflict in Gaza, and will gradually introduce additional measures to strengthen the security of data belonging to state institutions.
Digital transformation
Also addressing the ceremony, Abdulkadir Uraloğlu, the transport and infrastructure minister, echoed the president’s view that 5G would transform Türkiye’s economy, industry, healthcare, transportation and agriculture.
Noting that information technology, artificial intelligence, cybersecurity, and high-speed connectivity play a vital role in countries’ economic development, competitiveness and national security, Uraloğlu said: “As Türkiye, we have taken decisive steps over the past quarter-century by making unique infrastructure investments.”
He stressed that more inclusive, fast and resilient communication systems need higher digitalization capacity.
The minister stated that 5G is not just about faster internet, but is also the key to a smarter, safer and more efficient future.
Noting that 5G, with data transfer speeds 10 times faster than the currently used 4.5G, ultra-low latency and the capacity for massive device connectivity, will position Türkiye at the center of digital transformation, he stated: “With this technology, we are providing a new infrastructure that will transform every aspect of life.
“In transportation, road safety will improve with fully autonomous driving and smart transportation systems, and traffic will become more efficiently manageable.”
He noted that production processes will be optimized through smart factories, autonomous robots and real-time data analysis in the industry field.
In smart cities, innovative solutions will emerge in every area, from energy management to parking systems, he said, adding that students will have access to world-class education through high-resolution and augmented reality-supported content.
Türkiye’s unemployment rate rose 0.3 percentage points month-over-month to 8.5% in February, official data showed on Tuesday.
The number of unemployed people rose by 133,000 to 2.98 million, the Turkish Statistical Institute (TurkStat) said.
The unemployment rate was estimated 6.9% for men and 11.6% for women, the TurkStat stated.
The data showed the labor force participation rate increased 0.3 points to 52.6% in February, while a seasonally adjusted measure of labor underutilization rose 0.1 percentage points to 29.9%.
The TurkStat noted that the number of persons in the labor force realized as 35.14 million, up by 286,000 over the same period.
The youth unemployment rate – aged between 15 and 24 – was at 15.8%, up 1.4 percentage points compared to the previous month, according to the data.
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.
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.”
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.
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.
Harsh reaction from the Speaker of the Grand National Assembly of Turkey, Kurtulmuş, to Israel’s death penalty law: All states must show their side!
Erdoğan heralds new era as Türkiye launches 5G services
4th ballistic missile from Iran neutralized over Türkiye’s airspace
Harsh reaction from the Speaker of the Grand National Assembly of Turkey, Kurtulmuş, to Israel’s death penalty law: All states must show their side!
Erdoğan heralds new era as Türkiye launches 5G services
4th ballistic missile from Iran neutralized over Türkiye’s airspace
-
Daily Agenda3 days agoMİT President İbrahim Kalın: As Türkiye, we will fight vigilantly until the end
-
Daily Agenda2 days agoCHP municipality remained silent to the risk of disaster
-
Daily Agenda2 days agoHarsh response from AK Party member İnan to Özgür Özel: You are the puppet of thieves! Support for Özlem Çerçioğlu
-
Sports2 days agoTeenage sensation Antonelli takes F1 lead with Japanese GP win
-
Daily Agenda3 days agoBahçeli: If there is to be a regime change, it should start with Israel
-
Politics2 days agoExperts see Türkiye filling gap as Gulf reassesses security strategy
-
Politics2 days agoIsrael biggest obstacle to peace, FM Fidan says
-
Economy2 days agoIran signals tighter control, possible tolls for Strait of Hormuz