Economy
World weathers historic oil shock, but depleted reserves bring risks
The world has coped unexpectedly well with the disappearance of over a billion barrels of oil since the start of the Iran war, yet the risk of sharp price increases still hangs as hopes for a durable peace fade and buffer stocks run low.
Tehran’s throttling of the Strait of Hormuz in response to the U.S. and Israeli attacks launched on Feb. 28 fed fears of a catastrophic global energy crunch.
The ensuing four-month conflict did, indeed, create the biggest energy disruption in history, according to the International Energy Agency (IEA). At its worst, the headline supply loss was 14 million barrels per day.
But worries that Asia and Europe would run out of gasoline, diesel or jet fuel never materialized. And after peaking around $126 per barrel in April – still some $20 below the 2008 record – benchmark Brent oil prices are now lower than they were when the conflict began.
“This suggests traders viewed the disruption as serious but manageable, reflecting confidence in today’s more resilient energy and economic systems,” said John Baffes, senior economist at the World Bank.
Since the oil crisis of the 1970s, World Bank data shows that oil intensity – a measure of the role oil plays in economic activity – has fallen by more than half in most advanced economies and roughly 20% in emerging and developing countries.
Beyond that structural shift, however, three specific factors have been responsible for forestalling the worst-case scenario during the Gulf crisis.
Saudi Arabia and the United Arab Emirates (UAE) found alternative routes to export. Asia, led by China, curtailed buying. And countries around the world likely pulled around 1 billion barrels of oil from their reserves, including via an IEA-led record stocks release.
China adjustments ease global pressure
When the war broke out, China had nearly 1.4 billion barrels of oil stored, according to the U.S. Energy Information Administration. That was more than the 1.2 billion barrels held by all the 32 members of the IEA combined, including the United States’ 413 million barrels.
China’s rapid electric vehicle adoption in recent years along with flexibility in oil and petrochemicals output also helped, said Ilia Bouchouev, of the Oxford Institute for Energy Studies.
“They are managing the market a lot better than (the Organization of the Petroleum Exporting Countries) used to,” said Bouchouev, a former head of derivatives trading at Koch Global Partners.
The adjustments by China, the world’s biggest oil importer, helped ease global demand pressure. And the IEA’s scheme to release 400 million barrels of reserves provided further breathing room at a time when U.S. President Donald Trump was repeatedly stating an end to the war was imminent.
“Traders always took the view this can’t go on much longer,” said Neil Atkinson, a former IEA official.
Washington’s narrative management, that more supply was coming, also made hedge funds reluctant to hold long positions that bet on prices rising, Societe Generale analysts noted.
With the signing last month of a preliminary agreement to end the war, there has been a rapid swing back towards business as usual.
“The market seems to have decided that this peace deal is for real,” Atkinson said.
Lost buffer risks more spikes
In reality, however, little is as it was before the war.
Even as Saudi Arabia, Kuwait, Qatar, Iraq and Bahrain resume production and exports, it will be years in some cases before they fully repair the damage to their energy infrastructure caused by Iranian attacks.
While prices may reflect expectations of a rapid return to pre-war supply levels, data on tanker traffic through the Strait of Hormuz tells a different, more pessimistic story.
And with the clock ticking on the 60-day cease-fire between Washington and Tehran, progress towards a final agreement to end the war has been achingly slow, with key questions – including the fate of Iran’s nuclear program – still unresolved.
Meanwhile, there’s the mammoth task of rebuilding global oil inventories.
The global economy weathered the shock by drawing down stocks at a record pace, according to IEA data, draining the very buffers designed to protect it from supply crises.
“It doesn’t mean we can’t operate without one, it just means that forward prices could be more prone to spikes,” Bouchouev said.
That kind of volatility is costly.
Every $5 increase in oil prices adds roughly $190 billion in annual costs to the global economy, according to Reuters calculations based on oil demand of 104 million barrels per day.
Replenishing oil stocks, never cheap, has likely been made more expensive by the war.
Before the conflict, the European Central Bank (ECB) had estimated 2027-2028 oil prices at $63 to $64 per barrel. That’s now risen to an average of $65 to $75, according to an ECB report published in June.
At current Brent prices, it would likely cost more than $70 billion to replace reserves drawn down to mitigate Iran war supply loss.
But until that is done, the world is operating without a safety net in an environment still fraught with uncertainty.
“The markets may be underestimating the risk of further oil flow disruptions,” said Saul Kavonic, head of research at MST Marquee. “Iran is likely to continue to find pretexts to stymie flows through the strait.”
Türkiye’s agricultural output exceeded the $80 billion mark for the first time last year, Agriculture and Forestry Minister Ibrahim Yumaklı announced on Saturday.
Sharing the milestone on social media, Yumaklı described it as a “historic record in agriculture” and said that “Türkiye is at the top of the global league.”
Citing the World Bank’s 2025 Agricultural Output Report, the minister said the country’s agricultural output had surpassed $80 billion for the first time in history, reaching $83.2 billion.
“We rank first in Europe and seventh in the world. I sincerely thank all our producers, farmers, exporters and industrialists who have brought life to our land and made us proud,” he said.
“The abundance of Anatolia will continue to be Türkiye’s strength,” he added.
An infographic shared by the minister also compared agricultural output figures across countries.
Türkiye ranked 12th globally with the agricultural output of $24.5 billion in 2002. By 2023, the year marking the hundred years of the republic, it had climbed to eighth place with $72.9 billion.
Continued growth in agricultural output in the following years enabled the country to reach a record $83.2 billion last year.
China topped the global ranking with agricultural output worth some $1.298 trillion.
Top Turkish and Pakistani officials reaffirmed on Saturday the close and brotherly relations between the two countries, emphasizing the potential to further strengthen economic cooperation in a number of fields.
Addressing the Pakistan-Türkiye Business Conference in Istanbul, officials, including Vice President Cevdet Yılmaz and Pakistani Prime Minister Shehbaz Sharif, reinstated their aim to elevate bilateral trade volume to $5 billion.
Speaking at the conference, Yılmaz said that the friendship between the two countries has always been built on “strong emotional bonds,” adding that “now we must make this friendship equally strong in trade, investment, technology and production.”
Starting his speech, the vice president said that they had come together on the occasion of the conference not only to review economic cooperation between the two countries, but also to open the doors to a new era of cooperation.
Yılmaz also praised Islamabad’s diplomatic role in recent months aimed at defusing tensions in the Middle East and its mediating role between the United States and Iran.
Pakistan is not only a leading country in South Asia, but “also a responsible actor that plays a constructive role in regional and global issues and effectively contributes to peace and stability,” he said.
Moreover, he said that the two nations aim to raise bilateral trade volume to $5 billion, a target agreed by President Recep Tayyip Erdoğan and Sharif.
President Erdoğan and Sharif also met later during the day for bilateral talks and a joint news conference.
On trade, Yılmaz said that the current level at around $1.2 billion last year remains below potential, and that the $5 billion target should be seen as “modest” and raised further.
He also informed that Turkish direct investments in Pakistan have exceeded $2 billion, while Turkish contractors have completed 74 projects worth about $3.5 billion in the country.
At the same time, he pointed out that Ankara and Islamabad could further expand cooperation in areas including automotive, agricultural technologies, food processing, medical devices, renewable energy, information technologies, e-commerce, defense industry, shipbuilding, tourism, and film and television production.
Yılmaz also welcomed a proposal to allocate a special zone for Turkish investors inside the Karachi Industrial Park, saying it could add a “new strategic dimension” to the economic partnership.
Sharif, for his part, has called for the ideas discussed at the forum to be turned into concrete results, saying the two countries should move quickly to transform their friendship into deeper economic cooperation that benefits both countries.
The conference was also attended by Industry and Technology Minister Mehmet Fatih Kacır, Trade Minister Ömer Bolat, Energy and Natural Resources Minister Alparslan Bayraktar, Pakistani ministers and businesspeople from both countries.
Pakistani officials, as part of the forum, have showcased the opportunities for cooperation in different sectors, including energy, electricity transmission, IT and emerging technologies, transportation and others.
They also sought to emphasize Pakistan’s recent macroeconomic stability efforts and reform agenda and lure Turkish investors.
In particular, the officials underscored robust legal protections, strategies toward a market-based economy, privatization push, while pointing out that Pakistan is a “re-emerging story.”
Türkiye-Pakistan cooperation
Türkiye and Pakistan enjoy close and friendly ties, which in recent years have further expanded to also include a new grouping – the Regional Four (R-4), a diplomatic partnership – also involving Egypt and Saudi Arabia.
Defense cooperation stands out as one of the strongest pillars of relations between the duo, particularly seen through projects such as MILGEM, through which Türkiye has already delivered two corvettes to Pakistan’s Navy.
Additionally, Ankara and Islamabad have strengthened energy cooperation as the countries have already signed an oil and gas exploration and production agreement covering Pakistan’s onshore and offshore areas.
Further scope of cooperation and potential includes work on transportation and connectivity, through links and projects such as a plan to revive the Islamabad-Tehran-Istanbul freight train route, alongside the Middle Corridor and the planned Development Road project.
Türkiye will gradually phase out its fuel tax adjustment mechanism by October, scaling back a measure introduced to cushion consumers from soaring oil prices during the Iran war.
The government activated the so-called sliding-scale system in March, allowing reductions in the special consumption tax (ÖTV) to offset increases in global oil prices and limit their impact on domestic fuel prices and inflation.
Under the scheme, the government absorbed up to 75% of fuel price increases by reducing the excise tax, helping to contain the inflationary effects of oil prices, which rose by more than 50% during the conflict.
According to a presidential decree published in the Official Gazette on Friday, the tax relief will be reduced in stages before the mechanism is fully abolished.
The forgone excise tax will be capped at 50% of fuel price increases through the end of July, before being lowered to 25% during August and September.
The decree also stipulates that if refinery prices decline, the government will fully restore the corresponding amount of excise tax, rather than restoring only 75% as under the previous system.
The revised rules took effect immediately, while the sliding-scale mechanism will be terminated on Oct. 1.
Türkiye’s exports grew by nearly 22% in a record-breaking June, as trade rebounded despite geopolitical tensions led by the Iran war and volatility in global commodities, Trade Minister Ömer Bolat said Friday.
Outbound shipments rose by 21.9% compared to the same month last year, reaching $24.94 billion (TL 1.17 trillion), Bolat told a press conference in Istanbul.
“June went down in the records as a spectacular month for exports. We reached almost $25 billion in monthly exports. This is a record for the month of June,” he said.
It also marked the third-highest monthly figure ever recorded after $26.4 billion in December 2025 and $25.4 billion this April, he added.
Imports rose 23.1% to $35.32 billion, meaning the foreign trade deficit was up by 26.3% from a year ago to $10.38 billion.
“Imports in June also marked the second-highest monthly import figure on record,” said Bolat.
Exports in the first six months rose 3.6% from a year earlier to $136.1 billion, while imports increased 4.6% to $189.2 billion, he noted. The trade deficit rose 7.4% to nearly $53.1 billion.
Türiye Exporters Assembly (TIM) head Mustafa Gültepe said, despite the challenges, the overall picture for the first six months showed “Turkish exporters are not giving up on producing, seeking new markets, and bringing foreign currency into the country.”
The war launched by the U.S. and Israel on Iran on Feb. 28 halted shipments and sent energy prices up sharply due to the closure of the strategic Strait of Hormuz.
The pressures have eased somewhat after the U.S. and Iran announced an interim agreement two weeks ago, but there are no signs yet that they have made headway toward a lasting peace.
Though traffic through the Strait of Hormuz has partially resumed, the status of the key waterway remains unclear.
Annualized record
Meanwhile, Türkiye’s rolling 12-month exports climbed to a record $278 billion. Imports climbed to $373.7 billion.
That took Türkiye’s total annual foreign trade volume to nearly $652 billion, an increase of $29 billion compared with the previous year.
Bolat said the annualized trade deficit stood at $95.8 billion as of the end of June, compared with $92.2 billion at the end of 2025.
He noted that exports performed strongly despite rising petrochemical and freight rates due to the U.S.-Iran conflict.
“We’ve had a very difficult year, and it’s still ongoing … The period from March to May, the spread of the U.S.-Iran conflict to Gulf countries and the resulting sharp increases in petrochemical and logistics costs; a grueling half-year is being left behind,” said the minister.
Bolat also said annualized goods and services exports exceeded $400 billion for the first time ever, reaching $400.3 billion.
“We have already increased annual exports by $4.7 billion in the first six months. Our year-end target is $282 billion, and we expect to exceed it,” he said.
Gulf shipments rebound
Friday’s data showed the automotive industry ranked first in exports with $3.8 billion, followed by the chemicals and chemical products with $3.3 billion, the steel industry with $1.75 billion, the electrical and electronics sector with $1.66 billion and the ready-to-wear and apparel products with $1.4 billion.
TIM’s Gültepe said the exchange rate had negatively impacted exports for the first time in more than a year.
“For the first time in exactly 14 months, we suffered an exchange rate-related loss of approximately $12 million.”
With growing hopes for peace, Gültepe said there is a positive trend in exports to Gulf countries.
“In June, our exports to these countries rose by 41% to $2.64 billion. The trend in our exports to all countries in the region has turned positive,” he said.
Exporters expect an even more positive trend in exports to the Gulf in the second half of the year if lasting peace is achieved, he added.
Belgian Defense Minister Theo Francken said Friday Türkiye is an important ally for NATO and Europe should benefit from Turkish technology in defense production.
Francken’s remarks come ahead of what many expect to be a historic NATO summit in Türkiye next week.
“I think it will be a very important summit,” Francken told Anadolu Agency (AA).
At the gathering in Ankara next Tuesday and Wednesday, Europeans aim to set aside strife with U.S. President Donald Trump over Iran and Greenland and show they are stepping up to defend the continent as Washington cuts back on its commitments to the alliance.
Arms deals worth tens of billions of dollars are expected to be signed during the summit.
Francken said NATO has faced difficult times recently, and therefore, unity is needed more than ever.
“There was discussion about the Middle East, about the war against the Iranian regime, we had some tensions on opening the military bases for American aircraft, we had some discussions about stepping up on defense spending,” Francken said. “So, yeah, of course, it was not the easiest year for NATO.”
He stressed the need to work together on defense investment, the NATO Force Model, increasing production, air defense and new technologies. “United we stand, divided we fall and I think that is the most important: show unity,” he said.
In The Hague last year, NATO leaders agreed to spend 3.5% of GDP on core defense items such as weapons and troops by 2035, up from a previous goal of 2%. They also agreed to invest a further 1.5% of GDP on broader defense-related investments such as boosting cybersecurity.
Francken also noted the NATO Summit Defense Industry Forum that is planned to be organized on the sidelines of the Ankara summit.
Among the priorities that should be stressed during the gathering, he cited technology, air defense and higher industrial production, as well as support for Ukraine.
‘NATO 3.0’ vision
About the “NATO 3.0” vision expected to take shape at the Ankara meeting, Francken said it means Belgium and European allies must assume more responsibility.
“It means that Belgium and European allies need to step up, invest highly in defense and be there to take the security architecture of the European continent into our own hands,” he said.
“That is actually the challenge, and that’s what we need to do,” he added.
The past 12 months have severely strained the alliance, with Trump threatening to take Greenland from fellow NATO member Denmark and then waging a war against Iran that roiled the global economy without consulting European allies.
The U.S. has also announced troop withdrawals from Europe, cut the forces it assigns to NATO’s defense plans – including an aircraft carrier, refuelling aircraft, fighter jets and drones – and launched a six-month review of its military presence on the continent.
On the possibility of the U.S. reducing its military contribution in Europe and Europe filling the gaps, Francken said NATO needs strong planning.
“What we need to do is have good planning, NATO planning. The SACEUR, Supreme Allied Commander, is doing this,” he said. “It’s important that we really get that going, have good plans and follow those plans.”
Francken said this means meeting targets and filling all capability gaps, because U.S. troops and capabilities will be withdrawn from Europe as Washington pivots toward Asia and the Pacific.
“That means that we have to step up and fulfil our challenges, fill those gaps and that’s what we need to do,” he said.
Regarding Belgium’s plans, Francken said his country would allocate air-to-air refueling aircraft, F-16 fighter jets, MQ-9B SkyGuardian drones and intelligence, surveillance and reconnaissance capabilities under the NATO Force Model.
“We are immediately ready to deploy more for NATO from the Belgian defense,” he said.
‘Can learn a lot’ from Türkiye’s tech
Francken also addressed the contributions of Türkiye to NATO.
“Türkiye is a very important ally. It’s a long-standing ally. It’s a country that is very important within NATO,” he said. “So, yes, we need Türkiye within NATO, and I hope that we can work very well together.”
Francken also stressed that Türkiye should be included in Europe’s defense programs aimed at strengthening its military as it steps up efforts to boost security amid heightened geopolitical risks.
“For me, Türkiye needs to be in SAFE-II,” he said, referring to the EU’s defense financing mechanism. “I think that it’s necessary to have a SAFE-II package on loans, European loans, and I think Türkiye needs to be in. The fact that Türkiye was not in SAFE-I, it is a mistake,” he said.
“We can learn a lot from your technology,” he added.
Noting that Belgium cooperates with Türkiye in many fields, Francken said the two countries carry out many training activities together under the NATO umbrella.
“I think that we can also look to do procurement together, industrial cooperation together,” he said.
The Belgian defense chief also spoke about his country’s extensive economic mission to Türkiye last month, saying cooperation continues and new contracts are still being signed.
“We had our economic mission to Türkiye, and now, still, there are contracts coming out,” he said. “So, even months after, you see that the economic mission gives really good results. So, that’s something positive, and we go with that flow; we continue.”
Türkiye’s defense and aerospace exports exceeded $11 billion (TL 514.86 billion) on a rolling 12-month basis for the first time ever, a top official said on Friday.
Haluk Görgün, head of the Presidency of Defense Industries (SSB), said defense and aerospace shipments rose 29.6% year-over-year in June to $802.8 million.
Exports in the January-June period increased 29.5% from a year earlier to $4.67 billion, he wrote on the social media platform X.
Görgün attributed the sector’s performance to the growing international recognition of Turkish defense products and the continued expansion of the country’s industrial ecosystem.
“Our systems have proven their success in the field, and with an ecosystem that continues to deepen, we are establishing lasting partnerships on a global scale,” he said.
Türkiye’s defense exports rose about 48% year-over-year in 2025 to a record of more than $10 billion.
The goal has been to lift this full-year figure to $11 billion in the near term, placing Türkiye among the world’s top 10 defense exporters.
In recent years, NATO member Türkiye has significantly ramped up its defense industry production.
It has injected billions of dollars to transform from a nation heavily reliant on equipment from abroad to one that is a major exporter and where homegrown systems now meet almost all of its defense industry needs.
For much of the past two decades, Ankara has expressed frustration over its Western allies’ failure to provide adequate defense systems against missile threats despite Türkiye being a major NATO member.
The country currently exports more than 230 defense systems to 185 countries.
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