Economy
Could Türkiye be alternative energy corridor amid Hormuz impasse
The effective closure of the Strait of Hormuz following attacks by the U.S. and Israel on Iran has disrupted global energy supplies and increased interest in alternative export routes.
And many see Türkiye emerging as one of the key options due to its multiple pipeline and transit links.
While the Strait of Hormuz has not been formally declared closed, Iranian authorities have imposed tight controls and restrictions on maritime traffic and oil shipments.
Only ships from selected countries are reportedly being allowed to pass freely, while other vessels face conditional access.
The Strait of Hormuz handles around 20% of global oil trade, and disruptions have put roughly 15 million barrels per day of crude oil flows at risk.
Tanker movements in the area have slowed dramatically, with some days seeing almost no traffic and overall transit falling by more than 90%.
Rising insurance costs and security concerns have added further pressure on shipments.
Oil prices have climbed from around $70 per barrel to as high as $120, marking an increase of roughly 70%, while Europe’s benchmark TTF gas contracts have risen from around 30 euros ($35) to between 60 and 70 euros.
Although the International Energy Agency (IEA) has moved to release 400 million barrels of emergency oil stocks to ease market pressure, concerns over a broader regional war continue to drive volatility.
Existing alternatives have limited capacity
Alternative routes through Saudi Arabia and the United Arab Emirates (UAE) remain available, but their combined spare capacity is limited.
According to International Energy Agency data, about 20 million barrels per day passed through Hormuz in 2025, while alternative pipelines through Saudi Arabia and the UAE can only provide between 3.5 million and 5.5 million barrels per day of additional capacity.
The UAE exports around 1.1 million barrels per day through the Abu Dhabi-Fujairah pipeline and has roughly 700,000 barrels per day of spare capacity.
Saudi Arabia’s East-West crude oil pipeline has a design capacity of around 5 million barrels per day, though only 3 million to 5 million barrels per day of additional space is available after current usage.
Strategic route
Energy Minister Alparslan Bayraktar recently highlighted the potential role of the Iraq-Türkiye Crude Oil Pipeline, which stretches from Kirkuk to Ceyhan.
Bayraktar said the pipeline has a capacity of 1.5 million barrels per day and could be used more intensively to transport Iraqi crude to the Mediterranean.
He also pointed to the possibility of transporting gas from Qatar to Türkiye and potentially onward to Europe through pipelines, especially at a time when LNG exports face risks from damaged infrastructure and Hormuz-related disruptions.
Türkiye has also been discussed as a possible destination for future oil pipelines terminating in Hatay as part of longer-term diversification efforts.
While some alternatives exist for crude oil, experts say the LNG market remains far more vulnerable because Hormuz remains a critical route for global liquefied natural gas shipments.
Türkiye is also strengthening its role in natural gas transit to Europe.
Flows through the TurkStream pipeline rose 22% year-over-year in March to 55 million cubic meters per day.
Exports through the Kirkuk-Ceyhan pipeline, which resumed on March 17, are expected to rise from an initial 170,000 barrels per day to 250,000 barrels per day.
Türkiye’s role likely medium-term
Claudia Kemfert, head of the Energy, Transportation and Environment Department at the German Institute for Economic Research, said a prolonged disruption in Hormuz would keep oil and LNG prices elevated and increase dependence on strategic reserves.
Kemfert said existing alternative pipelines, particularly those in Saudi Arabia and the UAE, do not have enough capacity to offset a major disruption, leaving global markets structurally vulnerable.
She said Türkiye could strengthen its role as a transit corridor connecting the Caspian region, the Middle East and Europe in the medium term,
“However, current infrastructure constraints limit the capacity to compensate for large-scale disruptions in the short term. Türkiye’s alternative role may predominantly be at a strategic and medium-term level,” Kemfert noted.
She also said prolonged instability in Hormuz is likely to accelerate a shift away from Gulf dependence and benefit LNG exporters such as the U.S., as well as pipeline gas suppliers, including Norway and North African producers.
Türkiye’s inflation rate cooled at a faster pace than analysts anticipated both on an annual and a monthly basis in March despite pricing pressures amid the Iran war, official figures showed on Friday.
Annual inflation dipped to 30.9%, compared to 31.5% in February, according to the Turkish Statistical Institute (TurkStat).
Energy prices have been soaring after the U.S.-Israel attacks on Iran unleashed a conflict that has run for more than a month and effectively closed the Strait of Hormuz, through which a fifth of global oil and liquefied natural gas is shipped.
That came as a test for the world economies, including Türkiye, where authorities have acted to limit the pass-through of volatile energy costs to domestic prices.
On a monthly basis, consumer prices rose 1.9%, compared with 2.96% in February, the TurkStat data showed.
Surveys had forecast monthly inflation to be 2.32%, with the annual rate seen at 31.4%, driven by a rise in fuel prices and weather-related pressures on food inflation.
Friday’s data showed the biggest annual price increases were in education, at 51.97%, housing, at 42.06%, and transport, at 34.35%.
Food inflation improving
Food inflation eased by 4.8 percentage points compared with the same month last year to an annual rate of 32.4%.
Treasury and Finance Minister Mehmet Şimşek said improving climate conditions following last year’s frost and drought are expected to support the food inflation outlook in 2026.
Disinflation in services, Şimşek said, is likely to become more visible thanks to declining rent inflation, government policies aimed at increasing housing supply and rule-based pricing in education.
Annual services inflation has fallen by 16.1 percentage points over the past year, he said.
The data showed the smallest increases in March were recorded in clothing and footwear, at 7.2%, furnishings and household equipment, at 20.2%, and information and communication, at 24.12%.
The food group was the key driver for the positive surprise in the headline rate, though pricing pressures in the energy group have increased with the geopolitical shock, as expected, said analysts at the Dutch financial giant ING.
The data showed transport and food prices were the biggest monthly drivers of inflation in March.
Vice President Cevdet Yılmaz linked transport cost increase to higher energy prices due to the Iran war, which he said created upward risks for the global inflation outlook.
Separate data on Friday also showed the domestic producer index rose 2.30% month-over-month in March for an annual increase of 28.08%.
Central Bank of the Republic of Türkiye (CBRT) raised its year‑end inflation forecast range by two percentage points to 15%-21%, while keeping its interim 16% target unchanged in February.
CBRT Governor Faith Karahan said earlier this week that the bank would maintain the needed tight policy to continue disinflation.
The 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 heavy sales and swaps of foreign exchange and gold reserves to support the Turkish lira.
Karahan defended the moves as a “natural choice” amid such market turmoil.
Fiscal room used to limit shocks
A slide presentation that Şimşek made to investors in London, published on Wednesday, said short-term war effects were negative but manageable.
On Friday, he said the government had taken the necessary steps to limit the economic impact of the conflict.
He said the fiscal room created during the government’s medium-term program period has enabled authorities to quickly and effectively reintroduce measures such as the fuel price adjustment mechanism to ease inflationary pressures.
The “sliding-scale” system, launched last month, adjusts the special consumption tax (ÖTV) on fuel products and prevents higher oil prices from being fully passed through to consumers. Yılmaz said a significant portion of fuel price increases is being absorbed through the budget.
The mechanism has absorbed roughly two-thirds of the oil price shock and reduced the impact on the monthly figure, analysts at ING said.
While short-term geopolitical shocks may have some impact on inflation, Şimşek said, “We continue to implement our holistic and decisive policy set that will ensure we reach our goal of permanent price stability.”
Yılmaz said authorities would continue to offset the direct and indirect impact of geopolitical developments through coordinated monetary, fiscal and income policies, while supporting disinflation with supply-side measures in social housing, food supply, logistics and renewable energy.
Hydroelectric plant power production in Türkiye nearly doubled in March from a year earlier to 40%, official data shows, as heavy rainfall helped to ease pressure on the energy bill of one of Europe’s largest natural gas importers.
Türkiye used 16 billion cubic metres, or more than a quarter, of the natural gas it imported last year for electricity generation, according to market regulator EPDK. Natural gas, along with crude oil, constitutes the largest item in its energy import bill, which was $62 billion last year.
Hydroelectric plants lessen the need for thermal plants to use imported natural gas, which like oil, has seen a global price surge due to the war in the Middle East.
According to data from Türkiye’s national energy exchange and market operator EPIAŞ, the share of hydroelectric power plants in licensed electricity production was only 21% in March last year and amounted to 16% throughout 2025, which was the driest year in five decades.
Elvan Tuğsuz Güven, head of Türkiye’s private hydroelectric power plant operators’ body HESIAD, told Reuters the plants will maintain a high share of electricity production until June, unless an extraordinary situation arises.
“We expect the momentum to continue in the short term. It’s difficult to say anything about the long term, but we expect production to gradually decline to a 25%-30% range by June,” she said, compared with a 17% decrease a year earlier.
The share of natural gas power plants in overall production fell to 8% in March from 20% last year due to the sharp increase in hydroelectric production and the contribution of coal-fired power plants.
Güven said the increase in hydroelectric power plant (HPP) production, which was 26% of Türkiye’s electricity generation capacity at the end of 2025 with 32 gigawatts (GW) of installed power, has replaced natural gas.
“They play and will continue to play a significant role in supply… and are an important resource to support energy security,” she said.
A one percentage point increase in HPP production can save more than $300 million annually, Güven said.
About two-thirds of Türkiye’s 32 GW of installed HPP capacity are reservoir-type plants that can produce electricity year-round, while the remaining third are run-of-river type plants with very limited water storage capacity.
Global food prices rose for a second straight month in March to hit their highest level since September last year and could rise further if the Middle East conflict that pushed up energy prices continues, the United Nations Food and Agriculture Organization (FAO) said on Friday.
“Price rises since the conflict began have been modest, driven mainly by higher oil prices and cushioned by ample global cereal supplies,” FAO Chief Economist Maximo Torero said in a statement.
But if the conflict lasts over 40 days and input costs remain high, farmers may reduce inputs, plant less, or switch crops to less intensive fertiliser crops, he said.
“Those choices will hit future yields and shape our food supply and commodity prices for the rest of this year and all of the next,” he added.
The FAO Food Price Index, which measures changes in a basket of globally traded food commodities, rose by 2.4% from its revised February level. It is 1% above its value a year ago, although nearly 20% below its March 2022 peak, reached after the start of the war in Ukraine.
Fertilizer costs
The cereal price index increased by 1.5% from the previous month, led by a 4.3% increase in international wheat prices due to worsening crop prospects in the U.S. and expectations of lower plantings in Australia due to higher fertiliser costs.
Global maize prices edged up as ample global supply offset concerns over fertiliser costs, and indirect support from greater ethanol demand prospects linked to higher energy prices.
Rice prices dropped 3% due to harvest timing and weaker import demand.
Vegetable oil prices increased 5.1%, marking the third consecutive monthly rise. Higher quotations for palm, soy, sunflower, and rapeseed oil reflected the impact of rising global energy prices and expectations of stronger biofuel demand.
Palm oil prices reached their highest level since mid-2022.
Sugar prices jumped 7.2% in March to their highest since October 2025, as higher crude oil prices drove expectations that Brazil, the world’s largest sugar exporter, would channel more sugarcane into producing ethanol.
Meat prices rose 1%, led by higher pig meat prices in the European Union and bovine meat prices in Brazil, while poultry prices edged lower.
In a separate report, the FAO slightly raised its estimate for the 2025 global cereal production forecast to a record 3.036 billion metric tons. It would be 5.8% higher year-over-year.
Türkiye’s inflation rate cooled at a faster pace than analysts anticipated both on an annual and a monthly basis in March, official figures showed on Friday.
The Consumer Price Index (CPI) came in at 30.9% in March, compared to 31.5 in February, according to the Turkish Statistical Institute (TurkStat).
On a monthly basis, consumer prices rose 1.9%, compared with 2.96 in February, driven by education and housing prices, the data showed.
Monthly inflation was forecast to be 2.32%, with the annual rate seen at 31.4%, driven by a rise in fuel prices and weather-related pressures on food inflation.
The data also showed the domestic producer index rose 2.30% month-over-month in March for an annual increase of 28.08%.
International efforts to restart energy transits through the Strait of Hormuz intensified Thursday after U.S. President Trump warned of “extremely hard” upcoming strikes on Iran, sending oil prices higher for a public already feeling the strain.
In a speech Wednesday night, Trump said operations would be intensified and gave no timeline for ending hostilities, drawing threats of retaliation from Tehran and depressing share prices.
“We’re going to hit them extremely hard over the next two to three weeks. We’re going to bring them back to the Stone Ages where they belong,” Trump said in the speech amid mounting domestic pressure to end the conflict.
Britain chaired a virtual meeting Thursday of some 40 countries to explore ways to restore freedom of navigation. The meeting did not produce a specific agreement, although participants agreed all nations should be able to use the waterway freely, an official said.
Trump persisted with his threats Thursday, saying in a social media post: “IT IS TIME FOR IRAN TO MAKE A DEAL BEFORE IT IS TOO LATE.” He also posted footage of what appeared to be strikes on a bridge in Iran.
Iran has effectively shut down the Strait of Hormuz, which normally carries about a fifth of the world’s total oil consumption, in retaliation for U.S.-Israeli strikes that began Feb. 28. The war has caused a spike in oil prices, inflation concerns, supply chain problems and worries about the impact on the global economy.
Still defiant despite the death of several of its leaders, Tehran offered a competing vision for future control of the strait and said it was drafting a protocol with Oman that would require ships to obtain permits and licenses.
“These requirements will not mean restrictions, but rather to facilitate and ensure safe passage and provide better services to ships that pass through this route,” Deputy Foreign Minister Kazem Gharibabadi said, according to the official IRNA news agency.
An Iranian military spokesperson said Thursday the strait would remain closed “long term” to the U.S. and Israel.
The European Union’s foreign policy chief, Kaja Kallas, pushed back against Tehran’s plan, saying Iran cannot be allowed to charge countries a bounty to let ships pass. “International law doesn’t recognize pay-to-pass schemes,” Kallas wrote on X.
Oil hits $108
Benchmark Brent crude prices jumped by about 7% to around $108 per barrel, U.S. bond yields spiked and global equity markets gave back gains.
“The key question in all investors’ minds is ‘When is this going to be over?'” said Russel Chesler, head of investments and capital markets at VanEck Australia.
Trump warned that the war could escalate if Iran did not give in to Washington’s terms, with strikes on its energy and oil infrastructure possible. He told countries that rely on fuel shipments through the Strait of Hormuz to “just grab it.”
However, European and other states have said they will only help secure the strait if there is a ceasefire.
“It can only be done in consultation with Iran,” French President Emmanuel Macron said.
Iran threatens more attacks
Iran’s armed forces responded to Trump with a warning of “more crushing, broader and more destructive” attacks.
The war will continue until the “permanent regret and surrender” of Iran’s enemies, said Ebrahim Zolfaqari, spokesperson for the Iranian military’s Khatam al-Anbiya central headquarters, in a statement carried by Iranian media.
Iran’s Fars news agency later listed several bridges in Saudi Arabia, Kuwait, Abu Dhabi and Jordan as potential targets for Iranian military operations after one of its own bridges was hit by airstrikes. The Revolutionary Guard said it had targeted an Amazon cloud computing center in Bahrain.
There are fears the conflict may leave Iran with a stranglehold over Middle East energy supplies now that it has shown it can block the Strait of Hormuz by targeting oil tankers and attacking Gulf countries hosting U.S. troops.
Gulf states say they reserve the right to self-defense but have refrained from responding militarily to repeated Iranian attacks over the past month, seeking to avoid escalation into an all-out Middle East war.
Iran’s parliament was reviewing a bill that would formalize the blocking of vessels from hostile countries passing through the strait and the charging of tolls for others, spokesperson Abbas Goodarzi said.
Strike on Iran bridge kills 8
Thousands of people have been killed and tens of thousands injured across the Middle East since the war began. The head of the International Federation of Red Cross and Red Crescent Societies delegation said Thursday that medical needs were rising exponentially and supplies could run low.
Iran’s state media said eight people were killed and 95 wounded when a bridge linking Tehran and the western city of Karaj was hit by airstrikes. Some large steel producers and the Pasteur Institute of Iran medical research center were reported to have sustained serious damage.
The Revolutionary Guard said it had targeted U.S.-linked steel and aluminum facilities in Gulf states and an Oracle data center in Dubai, and would step up such attacks if Iranian industries were hit again.
Sirens and the booms from interceptors rang out over Jerusalem after the Israeli military said it identified the launch of a missile from Yemen toward Israel.
Yemen’s Iran-aligned Houthis first claimed an attack on Israel at the end of March, as the conflict with Iran has expanded across the region.
Fuel shortages have already caused economic strains across Asia and are expected to bite in Europe soon, while a report by two U.N. agencies warned a sharp economic slowdown could spark a cost-of-living crisis in Africa.
SpaceX has pushed its target IPO valuation past the $2 trillion mark, a report said on Thursday, setting Elon Musk’s rocket and satellite company for what could become the largest public listing the stock market has ever seen.
SpaceX and its advisers are floating the figure to prospective investors in its initial public offering, Bloomberg News reported, adding that deliberations are ongoing and details of the IPO could still change.
The startup submitted confidential IPO paperwork with the U.S. Securities and Exchange Commission recently and is targeting a market launch later this year.
The Starbase, Texas-headquartered firm could raise as much as $75 billion, according to the report, surpassing the 2019 IPO of Saudi Aramco, which remains the largest on record.
An earlier expectation of a $1.75 trillion valuation was already sparking debate over how much of that value was driven by SpaceX’s cash-generating Starlink business and how much of a premium could be applied to its dominance in space launches, and unproven ventures such as Starship and space-based AI.
The IPO comes after Musk merged SpaceX with his artificial intelligence startup, xAI, in a deal that valued the rocket company at $1 trillion and the developer of the Grok chatbot at $250 billion.
The rocket maker has been lining up anchor investors well ahead of its stock market debut. It has had discussions with Saudi Arabia’s Public Investment Fund about taking an anchor stake of around $5 billion in the IPO, Reuters reported on Thursday.
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