Economy
EBRD unlocks $5.9 billion for war-hit economies
The European Bank for Reconstruction and Development (EBRD) on Thursday unveiled 5 billion euros ($5.9 billion) to help shore up economies hit by the fallout of the Iran war.
In a statement, the EBRD said it will “deploy EUR5 billion in 2026 in economies impacted by Middle East conflict.”
The funds would be focused on Iraq, Jordan, Lebanon, the West Bank and Gaza “and affected neighboring economies,” including Egypt, Türkiye, Armenia and Azerbaijan, the bank said.
“The economic and social impact of the conflict is already being felt across many of the bank’s economies in the form of disrupted trade routes, energy and commodity shocks, weakened investor confidence and broader costs to the population,” it added.
Established in 1991 to help former Soviet bloc nations embrace free-market economies, the bank later extended its reach to the Middle East and Africa.
“In a time of rising uncertainty, we are stepping up where others may pull back,” said EBRD President Odile Renaud-Basso.
“We are here to support economies, clients and people in our countries of operation in tough times,” she added.
The bank said “the volume of conflict response investment will be demand driven due to the fast-changing nature of the situation.”
The funds will provide immediate relief “by supporting economic activity” and “fostering financial sector stabilization.”
EBRD will aim to strengthen energy security and aid state-owned enterprises to “ensure the uninterrupted provision of essential goods and services.”
On Thursday, it had approved “a project to support Lebanon’s retail chain,” it said, adding it also aimed to safeguard access to jobs, finance and essential services.
The impact of the conflict in the Middle East on the Turkish economy may be temporary and reversible if the recent cease-fire holds, and authorities are ready with a different set of tools if the shock persists, Treasury and Finance Minister Mehmet Şimşek said Thursday.
In a live interview, Şimşek said authorities are prepared with a new response beyond steps already taken if the newly agreed U.S.-Iran cease-fire does not hold. He also pointed to the importance of measures being taken, as he touted Ankara’s capacity to tackle shocks.
“We have a good capacity to manage shocks,” the minister told Bloomberg HT broadcaster, as he recalled trade wars, issues such as drought and frost and political events last year.
He did not detail the potential response but said authorities’ “main scenario” was for a month-long war, adding that a three-month conflict would be bad.
“The macroeconomic fundamentals of emerging economies are actually strong. We saw this in Türkiye as well. Risk pricing in Türkiye dropped dramatically yesterday,” he said, referring to the fall in risk premiums in response to the two-week cease-fire agreed upon.
“The likelihood of a turnaround in risk appetite is quite high,” he added.
This week’s cease-fire has mostly halted the more than five-week war that gripped the Middle East and sent energy prices soaring, although Israel bombed more targets in Lebanon on Thursday, potentially jeopardizing the deal.
Answering questions in the interview, Şimşek described the shocks from the war as the biggest since World War II, referring particularly to disruptions related to energy supplies.
“Reaching a cease-fire is welcome, but normalization will take months at best,” he suggested.
He also drew attention to the risk of global inflation, even stagflation and recession.
“There is a much bigger shock than those experienced in the 1970s. If high energy prices remain a concern, there is a risk of a global recession,” he noted.
He also highlighted that the continuation of the cease-fire and the reconstruction of supply chains are crucial.
“The oil shock – it reduces growth in many countries, there is a cost dimension. … There are negative effects on growth. It triggers fund outflows. If this shock continues, there is a high probability of inflation, growth … stagflation, and a risk of recession,” he explained.
Şimşek also said the central bank’s reserves had fallen by about $48.7 billion since the war began and that some $162 billion remained. He also conveyed the expectations for reserves to rebound.
“We are better off than in the past in terms of reserve adequacy, close to the IMF’s indicator. There is currently no problem with reserves; our reserves are strong. We are also in surplus in net reserves, excluding swaps,” he said.
Comparing Türkiye with other stock markets, including those far away from the region, Şimşek said that Turkish stock markets “have proven resilient” in the face of declines. “This means that Türkiye is performing better than other developing countries,” he suggested.
Disinflation priority
Among others, the minister emphasized that the government remains committed to its goal of disinflation and lowering prices, also conveying that they found certain assessments for inflation heading towards 30% as “exaggerated.”
“The core of our program is combating the high cost of living. The sliding scale adjustment system is one example of this,” he said, referring to a special system introduced to curb the impact of higher fuel prices on consumers.
He also dismissed the revision of the government’s targets, adding: “We can’t say, ‘Let’s publish a new Medium-Term Program.’ We don’t see such a need.”
Similarly, he also said there is some deterioration in growth expectations and expectations related to the current account balance. He also noted that, besides energy, Türkiye has trade and tourism relations with the conflict-impacted region.
The minister also pointed to the potential of Türkiye emerging as a supplier in the region with the disruption of flows through the Strait of Hormuz.
“What’s important for us is to maintain the general outline of the program; there may be deviations from the targets, let’s be realistic, but we will ensure that it converges towards the targets,” he said.
The International Monetary Fund (IMF) greenlighted $700 million more in loans for Sri Lanka on Thursday, while urging Colombo to speed up reforms to guard its post-2022 economic recovery and address shocks from the Middle East crisis.
The fund’s mission approved the latest tranche of its four-year $2.9 billion bailout, provided officials restore cost recovery in energy pricing, among other conditions.
The government has said it will spend nearly $200 million on fuel subsidies after an energy crunch caused by the Iran war forced it to raise retail prices by a third, in line with global trends.
The IMF is opposed to general energy subsidies and wants Colombo to ensure cost recovery in electricity prices, which are subsidised for smaller consumers.
“Sri Lanka is significantly exposed to the Middle East conflict, which has heightened energy prices, disrupted a key air hub for tourists, and affected Sri Lankans working in the region,” the IMF said in a statement.
It emphasized the “urgency of accelerating reform momentum to safeguard macroeconomic stability.”
Colombo had been on the verge of drawing an IMF instalment of $340 million when it was hit in November by Cyclone Ditwah, the island’s worst natural disaster in two decades that killed at least 641 people and made thousands homeless.
The World Bank estimated infrastructure damage at $4.1 billion, and the government requested that the IMF give it a $206 million emergency loan for disaster relief instead.
Sri Lanka’s economy suffered its worst recession in 2022, contracting 7.3%, when then-president Gotabaya Rajapaksa resigned after months of street protests.
The leftist administration of President Anura Kumara Dissanayake, who came to power in late 2024, has retained many of the austerity measures and high taxes introduced by his predecessor.
Shippers looking to revive the passage of tankers through the Strait of Hormuz were seeking clarity on the logistics, while refiners inquired about new crude loadings on Wednesday, in response to a cease-fire deal between the U.S. and Iran.
Most stranded oil and gas tankers remained inside the Gulf, LSEG shipping data showed, hours after President Donald Trump announced the two-week cease-fire and said the U.S. would help with the traffic build-up.
Iran’s foreign minister, Abbas Araqchi, said that if attacks against it stop, Tehran would cease counter-attacks and provide safe passage in coordination with its armed forces “and with due consideration of technical limitations.”
Ship tracker Kpler said some 187 laden tankers carrying 172 million barrels of crude oil and refined products were afloat inside the strait as of Tuesday.
A senior Iranian official involved in the discussions told Reuters Tehran could open the Strait of Hormuz on Thursday or Friday ahead of planned peace talks in Pakistan, if a framework for the cease-fire is agreed.
With more than 1,000 ocean-going vessels trapped within the Gulf, it would likely take more than two weeks to clear the backlog even under normal conditions, said Daejin Lee, global head of research at Fertmax FZCO.
“A 14-day window is simply too short to restore the level of confidence needed to fully unwind the embedded uncertainty premium – particularly for Arabian Gulf loading routes,” he said.
Lee said details remained unclear, including what actions ships and charterers must take to gain passage.
“Many blue-chip shipowners may wait several days to ensure the cease-fire holds before committing vessels,” he said.
Jakob Larsen, chief safety and security officer at shipping association Bimco, said the industry was awaiting technical details from the U.S. and Iran.
“Leaving the … Gulf without prior coordination with the U.S. and Iran would entail heightened risk and would not be advisable,” he said.
Wait-and-see
Iran blockaded the strait in response to U.S. and Israeli attacks that started on Feb. 28, all but closing the waterway through which 20% of global oil and liquefied natural gas cargoes transit, sending energy prices soaring and rattling economies and markets. The cease-fire, announced about 90 minutes before Trump’s deadline to reopen the strait, led to a plunge in oil prices.
Two shipbrokers said shipowners are likely to remain in a wait-and-see mode before allowing vessels to enter the Gulf.
Inquiries for very large crude carriers to load Middle East crude for Asia jumped on Wednesday with Asian refiners including Reliance Industries, Indian Oil Corp, Nghi Son Refinery and Petrochemical and CNOOC, as well as Abu Dhabi National Oil Co, Glencore and TotalEnergies, looking for vessels, three shipping sources said.
Glencore and TotalEnergies declined to comment. The other firms named did not immediately respond to requests for comment. Danish shipping group Maersk said the cease-fire may create transit opportunities for vessels in the Strait of Hormuz, but that it did not yet provide full maritime certainty.
Indonesia’s Foreign Ministry said it is working with Iranian authorities to secure the passage of two Pertamina vessels that have been stranded in the gulf.
“Several technical matters are being followed up to ensure safe passage through, including matters such as insurance and crew readiness,” said ministry spokesperson Vahd Nabyl Achmad Mulachela.
China’s Foreign Ministry said it hopes all parties make joint efforts to facilitate early resumption of normal trade through the strait, while Japanese Prime Minister Sanae Takaichi held talks with Iran’s president.
Asian economies are the main buyers of oil shipped through the strait and have been hit especially hard by the disruption.
“We expect tankers and oil flowing to Iranian-friendly countries to be the first ones to transit,” said Anoop Singh, global head of shipping research at Oil Brokerage.
“Most of the crude tankers will be allowed to pass,” he said, adding that he expects more than 50 Very Large Crude Carriers and about 15 Suezmaxes to exit.
Global stock markets took a breather on Wednesday while oil dipped below $100 a barrel as a two-week Middle East cease-fire was agreed and hopes arose for a resumption of oil and gas flows through the Strait of Hormuz.
The news capped weeks of market volatility and geopolitical upheaval after U.S. and Israeli strikes on Iran at the end of February pushed tensions to the brink, with Tehran effectively choking off the strategic waterway that typically carries about 20% of the world’s energy supplies.
U.S. President Donald Trump on Tuesday announced the cease-fire less than two hours before his deadline for Iran to reopen the strait or face devastating attacks on its civilian infrastructure. Iran said it would cease counterattacks and provide safe passage through the waterway if attacks against it stop.
The market rally revived investor talk of the “TACO trade” – or “Trump Always Chickens Out” – after past policy reversals, although some noted the damage to energy infrastructure across the Middle East over the month-long conflict would inflict long-term strains on the global economy and the prospect of a lasting peace was far from certain.
Market reaction was swift and dramatic, as oil prices plunged and stocks from Asia to Europe rallied.
“It’s a huge relief to see that we finally have a cease-fire between the U.S. and Iran,” said Nabil Milali, portfolio manager at Edmond de Rothschild, adding he believed Trump had calculated that further escalation would likely backfire.
“So he did the only other option he had in front of him, which is a unilateral TACO,” he said.
Oil prices would likely remain “structurally higher” for a while, he added.
Brent oil futures were last down 13.7% at $94.29 by midday, while U.S crude futures were down 16% at $94.93 a barrel, but were still well above pre-war levels.
European stocks rose 4%, following strong gains across Asian markets. Wall Street futures pointed to gains of 2.7%-3.5%.
The U.S. dollar fell broadly, having been the haven of choice during the tumult, with the index against other major currencies easing to 98.842.
“Markets can worry about the complexities later. For now, they’ve been given the green light to rally,” said Matt Simpson, a senior market analyst at StoneX.
Two weeks of relief
The six-week conflict had sent oil prices soaring, reignited inflation fears and thrown the global rates outlook into disarray, forcing governments and companies to scramble for cover against a sudden energy shock.
Trump’s social media announcement on the cease-fire marked an abrupt reversal from hours earlier, when he issued an extraordinary warning that “a whole civilization will die tonight” unless his demands were met.
Beyond the immediate relief, investors remain keen to see whether the cease-fire leads to a broader resolution before placing major bets.
“Does it mean people are going to take new risks? No, it doesn’t,” said Martin Whetton, head of financial markets strategy at Westpac. “It would have to actually be a lasting peace (to change things). People aren’t actually taking risk.”
Gold prices climbed 1.7% to $4,783 per ounce.
U.S. Treasuries surged after the announcement, with traders putting the prospect of rate cuts from the Federal Reserve later in the year back on the table, although doubts about whether oil prices will go back to pre-war levels kept enthusiasm in check.
The yield on the benchmark U.S. 10-year Treasury note dropped to 4.2438%, the lowest since mid-March, while the U.S. two-year Treasury notes sank to 3.7318%.
Eurozone government bond yields also dropped sharply, as the ceasefire prompted traders to dramatically scale back their bets on future rate hikes from the European Central Bank (ECB).
“The evolution of oil would determine if this rally (in bonds) continues or gets faded, which of course depends on how the negotiations go,” said Rohan Khanna, head of euro rates strategy at Barclays.
“In the very short term, it may remove the impulse for the ECB to hike rates in April and the market has repriced that meeting accordingly, but the meeting is still three weeks away, and that’s a long time in these markets.”
Türkiye’s five-year credit default swap (CDS) risk premiums dropped on Wednesday, while its main stock index gained close to 5% by midday in response to the temporary cease-fire between the U.S. and Iran.
The bullish trend followed the global markets, which largely enjoyed a dose of relief after the cease-fire was announced overnight.
The two-week cease-fire drove down Türkiye’s borrowing costs, while its BIST 100 index soared 4.8% to 13,541 points by 1:00 p.m. local time (10:00 a.m. GMT).
U.S. President Donald Trump said the talks mediated by Pakistan, just hours before the deadline he set for Iran, resulted positively.
Trump accepted Pakistan’s proposal, which includes reopening the Strait of Hormuz, saying that the bombing and attacks against Iran will be suspended for two weeks.
Trump had previously claimed the U.S. had completed its military objectives in Iran and was close to reaching a long-term peace deal. He recently said Washington received a 10-point proposal from Iran as a basis for negotiations.
The U.S. 10-Year Treasury yield fell 8 basis points to 4.24%, the two-year yield dropped 9 basis points to 3.73%, and the five-year yield fell 9 basis points to 3.86%, following these developments.
In line with falling bond yields worldwide, Türkiye’s CDS dropped 17 basis points to 268 basis points. The figure stood at 235 basis points before the U.S. and Israel attacked Iran at the end of February, and previously rose to 327 basis points in March.
Capital flows in emerging markets are expected to strengthen with the U.S. 10-Year Treasury bond yield declining, as it is one of the most critical indicators within the global financial system.
Global shares, from Asia to Europe, surged in Wednesday trading, as oil prices plunged below $100 on cautious optimism that the cease-fire could translate into lasting peace, although some analysts remain skeptical.
Global stock markets took a breather on Wednesday while oil dipped below $100 a barrel as a two-week Middle East cease-fire was agreed and all eyes turned to weighing the potential for a resumption of oil and gas flows through the Strait of Hormuz.
The news capped weeks of market volatility and geopolitical upheaval after U.S. and Israeli strikes on Iran at the end of February pushed tensions to the brink, with Tehran effectively choking off the strategic waterway that typically carries about 20% of the world’s energy supplies.
U.S. President Donald Trump on Tuesday agreed to the cease-fire less than two hours before his deadline for Iran to reopen the strait or face devastating attacks on its civilian infrastructure.
Market reaction was swift and dramatic, with U.S. crude futures down around 15% to $96.31 a barrel, while Brent futures also slid 13% to $94.71 per barrel.
S&P 500 futures rose 2.5%, while European futures leapt more than 5%. U.S. Treasuries rallied while futures for German bunds and French OATs surged.
The U.S. dollar fell broadly, having been the haven of choice during the tumult.
In Asia, Japan’s Nikkei jumped about 5% while South Korea’s KOSPI vaulted 6%, triggering a brief halt in trading. That left the MSCI’s broadest index of Asia-Pacific shares outside Japan up 4%.
“When you factor in that the two-week delay is longer than the original 10-day window set for the initial attack, it seems plausible that the worst of the conflict may now be behind us,” said Matt Simpson, a senior market analyst at StoneX.
“Markets can worry about the complexities later. For now, they’ve been given the green light to rally.”
Two weeks of relief
The six-week conflict had sent oil prices soaring, reignited inflation fears and thrown the global rates outlook into disarray, forcing governments and companies to scramble for cover against a sudden energy shock.
Trump’s social media announcement on the cease-fire marked an abrupt reversal from hours earlier, when he issued an extraordinary warning that “a whole civilization will die tonight” unless his demands were met.
Beyond the immediate relief, investors remain keen to see whether the cease-fire leads to a broader resolution before placing major bets.
“Does it mean people are going to take new risks? No, it doesn’t,” said Martin Whetton, head of financial markets strategy at Westpac. “It would have to actually be a lasting peace (to change things). People aren’t actually taking risk.”
Gold prices climbed 2.5% to $4,820 per ounce.
In currencies, the risk-sensitive Australian dollar rose 1.4% to $0.7074, and the euro gained 0.8% to $1.1687.
The dollar index eased to 98.835, hovering near a one-month low.
Meanwhile, New Zealand’s central bank kept its policy rate unchanged, as expected, buying time to assess the fallout from the war but signalling it would act decisively if inflation heats up.
The comments underscore the challenge facing global central banks as the energy price and supply chain shocks from the war take time to normalize, leaving price pressures intact.
Some analysts are also sceptical that the cease-fire will translate into lasting peace, warning of likely twists and turns ahead.
Carol Kong, a currency strategist at Commonwealth Bank of Australia, said the conflict’s root causes remain unresolved, keeping the risk of re-escalation firmly intact.
“We maintain our view that the war will run into June. The implication is dollar losses may prove short-lived.”
U.S. Treasuries surged after the announcement, with traders putting the prospect of rate cuts from the Federal Reserve later in the year back on the table, although doubts about whether oil prices will go back to pre-war levels kept enthusiasm in check.
The yield on the benchmark U.S. 10-year Treasury note dropped 10 basis points to 4.241%, the lowest since mid-March. The yield on monetary policy-sensitive U.S. two-year Treasury notes sank 10.7 bps to 3.725%.
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