The escalation after the U.S.-Israeli-Iranian conflict is causing collateral damage to the world economy as effects spread way beyond energy prices.

The conflict is driving up energy and fertilizer prices, threatening food shortages in poorer countries, destabilizing some states such as Pakistan, and complicating options for the inflation fighters at central banks like the U.S. Federal Reserve (Fed).

Causing much of the pain: the Strait of Hormuz – through which a fifth of the world’s oil passes – was effectively shut down after the U.S. and Israel launched missile strikes Feb. 28 that killed Iranian leader Ayatollah Ali Khamenei.

“For a long time, the nightmare scenario that deterred the U.S. from even thinking about an attack on Iran and which got them to urge restraint on Israel was that the Iranians would close the Strait of Hormuz,” said Maurice Obstfeld, a senior fellow at the Peterson Institute for International Economics and former chief economist at the International Monetary Fund (IMF).

“Now we’re in the nightmare scenario.”

With a key shipping route cut off, oil prices have surged – from less than $70 a barrel on Feb. 27 to a peak of nearly $120 early Monday before settling closer to $90. They’ve taken gasoline prices with them.

According to AAA, the average price of U.S. gasoline has shot up to $3.48 a gallon from just under $3 a week ago. Prices could be felt even more significantly in Asia and Europe, which are more dependent on Middle Eastern oil and gas than the United States.

Every 10% increase in oil prices – provided they persist for most of the year – will push up global inflation by 0.4 percentage points and reduce worldwide economic output by as much as 0.2%, said Kristalina Georgieva, managing director of the International Monetary Fund.

“The Strait of Hormuz has to be reopened,” said economist Simon Johnson of the Massachusetts Institute of Technology and recipient of the 2024 Nobel Memorial Prize in Economics.

“It’s 20 million barrels of oil a day going through there. There’s no excess capacity anywhere in the world that can fill that gap.”

The world economy has shown it can take a punch, absorbing blows from the Russian invasion of Ukraine four years ago and from U.S. President Donald Trump’s massive and unpredictable tariffs in 2025.

Latest crisis

Many economists express hope that global commerce can stagger through the latest crisis.

“The world economy has shown itself capable of shaking off significant shocks like broad U.S. tariffs, so there is room for optimism that it will prove resilient to the fallout of the war on Iran,” said Eswar Prasad, professor of trade policy at Cornell University.

Especially if oil prices can fall back to the $70-to-$80-a-barrel range, wrote economist Neil Shearing of Capital Economics, “the world economy may absorb the shock with less disruption than many fear.”

But a lot of ifs remain.

“The question is how long is it going to go on?” said Johnson, also a former IMF chief economist. “It’s hard to see Iran backing down now that it’s announced this new leader.”

Mojtaba Khamanei, the son of the slain ayatollah, is believed to be even more of a hardliner than his father.

Also muddying the outlook for an end to the crisis is uncertainty about what the United States is trying to achieve. “This is all about President Trump,” Johnson said. “It’s not clear when he’s going to declare victory.”

Winners and losers

For now, the war is likely to create economic winners and losers.

Energy importers – most of Europe, South Korea, Taiwan, Japan, India and China – will get clobbered by higher prices, Shearing wrote in a commentary for London’s Chatham House think tank.

Pakistan finds itself in an especially bleak position. The South Asian country imports 40% of its energy and relies especially heavily on liquified natural gas from Qatar, supplies of which have been cut off by the conflict. Higher energy prices will squeeze Pakistani families and damage their economy.

Far from cutting interest rates to provide some relief, though, the country’s central bank will probably have to raise them instead, say economists Gareth Leather and Mark Williams of Capital Economics. That is partly because inflation remains uncomfortably high in Pakistan, and higher energy prices threaten to make it worse.

But oil-producing countries outside the warzone – Norway, Russia, Canada – will benefit from high oil prices without the risk of missile and drone attacks.

Impact on food prices

Energy isn’t the only issue. Up to 30% of world fertilizer exports, including urea, ammonia, phosphates, and sulfur, pass through the Strait of Hormuz, according to Joseph Glauber of the International Food Policy Research Institute.

Disruption in the Strait has already cut off fertilizer shipments, raising costs for farmers, and is likely pushing food prices higher.

“Any countries with significant agriculture sectors, including the United States, would be vulnerable,” Obstfeld said.

“The effects are going to be most devastating in low-income countries where agricultural productivity may already be challenged. Add this extra cost component, and you get the prospect of significant food shortages.”

The United States, now a net exporter of energy, should gain slightly overall from higher oil and gas prices. But ordinary families will feel the pain at a time when Americans are already furious about high costs ahead of November’s midterm elections.

U.S. households pay an $2,500 a year, or nearly $50 a week, to fill up their cars, said Mark Mathews, chief economist at the National Retail Federation. A 20% increase in gasoline prices means an extra $10 a week out of their budgets, forcing them to cut back elsewhere. “If I have to pay more for an essential, then I would reduce a discretionary item,” Mathews said.

If oil prices remain around $100 a barrel, analysts at Evercore ISI calculated, the resulting higher gasoline prices will wipe out for most Americans the benefits of higher tax refunds this year arising from Trump’s 2025 tax cuts. Only the top 30% would still see a gain.

Dilemma for policymakers

The Iran crisis also puts the world’s central banks in a bind. Higher energy prices feed inflation. But they also hurt the economy. So should central bankers raise rates to curb inflation – or cut them to give the economy a lift?

The Fed is already divided between policymakers who think a weak American job market needs help from lower rates and those still worried that inflation remains stuck above the central bank’s 2% target.

“Their minds will easily go to the 1970s,” Johnson said, when conflict in the Middle East and an Arab oil embargo sent oil prices rocketing.

Central bankers are haunted by the memory that their predecessors “didn’t get it right in the 1970s. They thought it was a temporary shock. They thought they could accommodate with lower interest rates, and they ended up regretting that because inflation became much higher.”

Johnson predicted that higher energy prices ignited by the war with Iran are “going to massively intensify the debate inside the Fed” and make U.S. rate cuts less likely.

Türkiye’s industrial output decreased slightly on both an annual and monthly basis in January, opening a new year on a lower note, official data showed on Tuesday.

The industrial production index declined 1.8% on an annual basis in January, the Turkish Statistical Institute (TurkStat) said.

In the subsectors of the industry, the mining and quarrying index fell 2.8%, and the manufacturing index decreased 2.5% year-over-year, the data revealed.

On the other hand, the electricity, gas, steam and air conditioning supply and distribution index expanded 5.6% in January compared to the same month of 2025.

Monthly, the seasonally and calendar-adjusted industrial production index dropped by 2.8% in January compared to December 2025. The monthly index was up 1.2% in December and 2.5% in November.

Despite a broad decline in several categories, an annual increase in output was seen in energy, capital goods and high technology.

High technology surged the most, at 22% year-over-year and 5.8% monthly, as per TurkStat.

The Daily Sabah Newsletter

Keep up to date with what’s happening in Turkey,
it’s region and the world.

SIGN ME UP

You can unsubscribe at any time. By signing up you are agreeing to our Terms of Use and Privacy Policy.
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.

The two co-founders and top executives of ⁠Germany’s BioNTech will leave the COVID-19 ⁠vaccine maker by the end of 2026 to start again with a new company, the biotech firm announced on Tuesday.

CEO Uğur Şahin ​and Chief Medical Officer Özlem Türeci, the Turkish-German married couple ​behind ⁠the Western world’s most commonly used immunization shot during the pandemic, said in a statement they were “ready to become pioneers again.”

BioNTech said it had initiated a search for successors to ensure a smooth transition.

The new company will have distinct resources, operations and “funding options” to advance next-generation drugs based on mRNA, the same technology used for the COVID-19 vaccine.

Return to early discovery work

The departure marks a shift by the founders back toward exploration and early-stage development, breaking from Şahin’s repeated ambitions in recent years to build a major pharmaceutical company.

BioNTech ⁠said ⁠its current drug development pipeline, including cancer therapies and the COVID-19 vaccine franchise, would be unaffected by the founders’ plans to strike out on their own.

BioNTech, which developed and sold the COVID-19 shot with U.S. pharmaceutical giant Pfizer, said it plans to contribute certain rights and mRNA technologies to the new company on an arm’s-length basis in exchange for a minority stake and payments contingent on scientific and commercial achievements.

Founded in 2008, BioNTech has sought since ⁠the pandemic to emphasize its focus on experimental cancer treatments and show its success with Pfizer was not a one-off.

In a major step in those efforts, Bristol Myers Squibb last year agreed ​to pay up to $11.1 billion in a partnership to work on a next-generation ​cancer immunotherapy that could take on rival Merck & Co.’s best-selling drug Keytruda.

In a separate statement, BioNTech reported a net loss of 1.14 billion euros ($1.33 ⁠billion) ‌for last ‌year, compared with a loss of 665 euros in ⁠2024.

Still, despite continued spending on new drug ‌development, the commercial success of the coronavirus shot has left BioNTech with reserves of cash and financial ​securities of 17.2 billion euros as ⁠per the end of 2025.

The vaccine has also ⁠received the highest scientific recognition: Hungarian scientist Katalin Kariko in 2023 was among two ⁠winners of the ​Nobel Prize for Medicine for her work on mRNA and her contributions to BioNTech’s COVID vaccine.

The Daily Sabah Newsletter

Keep up to date with what’s happening in Turkey,
it’s region and the world.

SIGN ME UP

You can unsubscribe at any time. By signing up you are agreeing to our Terms of Use and Privacy Policy.
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.

China’s trade grew by a fifth in the first two months of the year, far exceeding forecasts as stronger exports to major markets balanced out a drop in shipments to the U.S., according to official data released on Tuesday.

The boost is a lifeline for the world’s second-largest economy as domestic consumer activity has slumped, and adds to the record surplus achieved last year.

Official figures for the first two months of the year – usually combined to account for distortions arising from the varying Lunar New Year holiday – showed a strong start to 2026, before war broke out in the Middle East.

Exports climbed 21.8% year-over-year, the General Administration of Customs said, beating the 7.2% predicted in a Bloomberg survey of economists.

“Exports are likely to remain robust given the recent decline in U.S. tariffs and strong demand for semiconductors,” said Zichun Huang of Capital Economics.

Many of China’s key trading partners have increasingly called on Beijing to reduce its soaring trade surplus owing to its impact on local competition.

Globally, China saw significant increases in exports of products including automobiles, clothing and household appliances during the two months, the customs data showed.

The reading comes as Chinese leaders gather for a closely watched annual political meeting, which last week saw the government announce its lowest economic growth target in decades.

Among the challenges is a years-long slump in domestic spending, which has failed to recover since the end of the pandemic.

But in a sign of rebounding activity, the latest figures showed imports soared 19.8% in January-February, smashing the 7% estimated in the Bloomberg survey.

Oil imports surge

The jump follows official data on Monday that revealed consumer prices rose last month at their fastest pace in three years.

Meanwhile, exports to the U.S. sank 11.0% as President Donald Trump pressed ahead with his tariff campaign.

Beijing and Washington were locked in a blistering trade war last year, which at one point saw reciprocal levies in the triple digits.

There are hopes that tensions could cool, with Trump set to travel to China at the end of the month.

Shipments to the U.S. totalled $67.24 billion in January-February, the figures showed, compared with $75.56 billion in the same period last year.

That was offset, though, by exports to the European Union, which jumped 27.8%, while those to the Association of Southeast Asian Nations (ASEAN) climbed 29.2%.

However, “events in the Middle East will increase China’s oil import bill but weigh on its import volumes,” Huang said in a note.

Worries about the global economy have intensified this month after the U.S.-Israel war on Iran sent oil prices soaring to their highest since Russia’s 2022 invasion of Ukraine.

The conflict has seen the crucial Strait of Hormuz – through which a fifth of global oil travels – effectively shut off.

With tensions already rising last month, imports of oil by China – the world’s largest importer of the commodity – jumped 16% in January-February combined, the customs data showed Tuesday.

The strong export growth will likely “reinforce” the argument of trading partners concerned about China’s ballooning trade imbalance, wrote Zhiwei Zhang, president and chief economist of Pinpoint Asset Management.

Commerce Minister Wang Wentao acknowledged that China’s trade needed balancing when he spoke at a news event on Friday on the sidelines of the “Two Sessions” political meeting in Beijing.

“Exports and imports are like the two wheels of a vehicle. If they are balanced, the vehicle runs smoothly and goes further,” Wang said.

Pinpoint’s Zhang added that strong exports and a lower official growth target “suggest that China is unlikely to launch stimulus any time soon.”

The Daily Sabah Newsletter

Keep up to date with what’s happening in Turkey,
it’s region and the world.

SIGN ME UP

You can unsubscribe at any time. By signing up you are agreeing to our Terms of Use and Privacy Policy.
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.

Türkiye’s Halkbank said it had reached an agreement with the U.S. Department of Justice to settle a yearslong case against the state-run bank over alleged violation of sanctions on Iran, in a move analysts said could pave the way to solving other diplomatic disputes.

Under the terms of a deferred prosecution agreement, the bank “will not admit to any criminal offenses, nor will it pay any judicial or administrative fines,” the bank said in a statement late on Monday.

The agreement, if approved by a judge, would relieve one of the main irritants between Türkiye and the U.S., as the NATO allies ‌experience their best ties in decades following Donald Trump’s return to the U.S. presidency last year.

Halkbank stock surged as much as 9% on Tuesday. The Istanbul-listed shares had already closed 10% higher on Monday, the exchange’s maximum permitted increase.

The stock was up 4.5% at TL 49.88 ($1.13) at 0805 GMT.

U.S. prosecutors charged Halkbank in 2019 ⁠for allegedly helping Iran evade American economic sanctions.

Halkbank pleaded not guilty.

President Recep Tayyip Erdoğan repeatedly rejected the charges against the bank, insisting that Ankara did not violate the U.S. embargo on Iran. Erdoğan once called the case unlawful and “ugly.”

Boon for Türkiye-U.S. ties

There had been signs that U.S. President Donald Trump was willing to end the long-running legal case, which was discussed in talks with Erdoğan at the White House in September.

Speaking to reporters a month later, Erdoğan said he had been assured by Trump that the complicated legal problem with Halkbank was “over.”

“Following the submission of a compliance report,” Halkbank and the U.S. attorney’s office in New York will submit a joint letter to the court “requesting the dismissal of the case,” the bank said in the statement.

“With the court’s approval, the criminal case against our bank in the US… will be concluded,” it added.

The bank said it had been informed by the U.S. Treasury’s Office of Foreign Assets Control (OFAC), which is responsible for enforcing sanctions, “that it has closed the administrative proceedings against Halkbank without taking any further action.”

No money will change hands, ​and the charges will likely be dismissed after the monitor reviews Halkbank’s compliance, according to the agreement.

Deferred prosecution agreements let defendants avoid charges if they meet various conditions, typically over several months or a few years. The government dismisses cases after the defendants comply.

The U.S. government said on Monday the deal to resolve the case ​furthers its interest in curbing support for Iran, with which it is engaged in an expanding air war ​alongside Israel.

Türkiye seeks F-35 jets

With the Halkbank charges settled, the sides could begin to make progress resolving U.S. sanctions that currently block Ankara from purchasing U.S. F-35 fighter jets, a key demand from Türkiye.

“Trump and Erdoğan appear to be steadily clearing major ​disputes from the U.S.-Türkiye​ agenda,” said Hakan Akbaş, ⁠managing director at consultancy Strategic Advisory Services, pointing to easing tensions over Syria and now the Halkbank case.

“It raises the question whether Washington might soon clear the way ​for Ankara to purchase F-35 fighter jets despite existing sanctions.”

During Trump’s first term, the U.S. imposed sanctions on Türkiye over its acquisition of Russian S-400 missile defense systems, and excluded it from the F-35 fighter jet manufacturing and procurement program.

Ever since, Ankara has repeatedly called the move unfair and voiced hope that the sides could overcome the issue during Trump’s second term.

Erdoğan raised the issue during the September meeting with Trump, who later said the U.S. was “very seriously” considering the sale of F-35s to Türkiye.

The sides have said they are ⁠seeking a ​workaround to lift the sanctions.

The Daily Sabah Newsletter

Keep up to date with what’s happening in Turkey,
it’s region and the world.

SIGN ME UP

You can unsubscribe at any time. By signing up you are agreeing to our Terms of Use and Privacy Policy.
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.

The export climate for Turkish manufacturers continued to improve moderately in February, a survey released on Monday showed.

The Manufacturing Export Climate Index, which tracks the performance of Türkiye’s top export markets, remained unchanged at 52.1 in February, the same level recorded in January, the Istanbul Chamber of Industry (ISO) said.

The index has now stayed above the 50 threshold for 26 consecutive months, signaling continued improvement in demand conditions across key export markets.

Any reading above 50 indicates improving export market conditions, while values below that level point to deterioration.

The latest data suggests that the export environment for manufacturers remained moderately supportive midway through the first quarter of the year, with demand conditions strengthening without interruption for more than two years.

Growth across key export markets

Economic activity increased in seven of the 10 largest export markets for Turkish manufacturers in February, the survey said.

All of the top four markets, together accounting for more than a quarter of Türkiye’s manufacturing exports, were among those posting growth.

Expansion remained strong in Germany and the United Kingdom, although the pace of growth in the U.K. slowed slightly compared with January. In Germany, growth accelerated to its fastest pace in four months.

In the United States, economic activity continued to increase, but the rate of expansion slowed to the weakest level in four months.

Strong growth in UAE, slowdown in some European markets

Outside Europe, non-oil economic activity in the United Arab Emirates (UAE) expanded strongly, with growth reaching its fastest pace in 22 months.

Among the economies tracked by the survey, the UAE recorded the second-fastest growth after Singapore.

However, production declined in several important export destinations, including France, Romania and Poland.

While the downturn in France and Poland eased compared with January, Romania saw a sharp contraction in manufacturing output. The decline was the steepest since the survey began in July 2023. Romania accounts for roughly 3% of Türkiye’s manufacturing exports.

Meanwhile, February data pointed to strong production growth in China, with the pace of expansion reaching its highest level since May 2023.

Andrew Harker, economics director at S&P Global Market Intelligence, said improving demand conditions in most key export markets could support new business opportunities for Turkish manufacturers in the coming months.

Harker added that it remains to be seen whether recently announced U.S. tariffs will affect these trends, but for now the overall tone of the global economy appears broadly positive.

The Daily Sabah Newsletter

Keep up to date with what’s happening in Turkey,
it’s region and the world.

SIGN ME UP

You can unsubscribe at any time. By signing up you are agreeing to our Terms of Use and Privacy Policy.
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.