The negative effects on the economy of the war initiated by Israel and the US attacking Iran are expected to arrive primarily through the energy bill, financing, and trade channels. The Turkish economy has been caught in this shock already vulnerable, with high inflation, a weakening industrial base, and dependence on foreign resources. Let us take a quick look at possible developments, starting with the inflation and growth data announced last week.

According to the latest data released by TurkStat (TÜİK), consumer prices increased by 2.96% in February. Thus, inflation reached 7.95% in the first two months of the year. Annual inflation rose again, reaching 31.53%. Consequently, the Central Bank's inflation target of 16% for 2026 has already become redundant in the second month of the year. Indeed, at the beginning of the year, the Central Bank had already raised its own forecast range to the 15-21% band. The dominant expectation in the market was that year-end inflation would materialise at around 25%. Considering the announced data and the effects of the regional war on energy prices, it would not be surprising if even a 25% inflation rate becomes an optimistic forecast. High inflation is felt much more severely, particularly by wage earners and pensioners. The wage increases made at the beginning of 2026 were already far from compensating for the 2025 inflation. With the high inflation emerging in the first two months of the year, a significant portion of these increases has already eroded.

Another important data set announced last week was the growth statistics. According to TurkStat data, the economy grew by 3.6% in 2025, reaching a size of 63 trillion TL. Although this rate is below Turkey’s long-term average growth rate, it can be seen as a relatively strong growth performance during a period when a high interest rate policy is being implemented. However, when we look at the composition of growth, the picture is much more thought-provoking. It is observed that the fastest-growing sector is construction. Although earthquake expenditures have a major impact on this, the situation also points to a recurring feature of the Turkish economy over the last twenty years: the high share of construction and real estate in growth. Perhaps the most striking indicator of this is the sharp decline in the share of the manufacturing industry within GDP. This share, which fell to 15.6% in the late 2000s, had risen again from the mid-2010s and reached 23.6% in 2022. However, this trend seems to have reversed thereafter. The share of manufacturing in GDP fell to 21% in 2023, 18.5% in 2024, and as low as 15.9% in 2025. Thus, this ratio has returned to the levels of 2009-2010. This brings another long-discussed structural problem of the Turkish economy back to the agenda: premature deindustrialisation. An economic structure where the share of industry in national income declines, while growth is increasingly driven by the construction, real estate, and service sectors, means a structure that limits productivity increases and increases external dependency in the long run.

To this picture, one must add the effects created by the war in the region. The first and most direct impact will come through energy prices. Due to Turkey's dependence on energy imports, every serious increase in oil and natural gas prices creates direct pressure on the current account balance. The rise in oil and natural gas prices will both enlarge the current account deficit through the energy bill and accelerate inflation through production and transport costs.

The problem is not limited to energy prices alone. The Turkish economy's dependence on foreign financing makes such shocks much more significant. In periods when global risk perception rises, international capital flows generally move away from Turkey and similar economies. Especially considering that the current model relies heavily on short-term capital movements (carry trade) attracted by high interest rates, the risk of a potential "sudden stop" carries much more destructive potential. At this point, interest rate policy will be decisive. By keeping interest rates high, attempts may be made to maintain capital inflows; however, such a choice will make the situation increasingly difficult for companies experiencing financing problems. The combination of high interest rates, weak domestic demand, and rising costs could create a very constricting environment for many companies.

In the event that the war is prolonged, serious problems may also arise in foreign trade channels. Contractions in export markets, disruptions in maritime transport, and problems in the supply of imported inputs could have a direct impact on production. A similar risk exists regarding tourism revenues. The escalation of geopolitical tensions in the region could weaken demand in tourism—one of Turkey's most important sources of foreign currency—and increase pressure on the current account balance.

In short, all these effects coming through energy prices, external financing conditions, foreign trade, and tourism revenues point to the same thing: the fragile structure of the Turkish economy. We shall observe to what extent an economy suffering from structural problems and vulnerabilities such as energy dependency, growth based on external financing, a weakening industrial base, and persistent high inflation can withstand such shocks. Another dimension of this economic picture that should not be ignored is fiscal policy and upon whom the costs created by the war's possible macroeconomic effects will be placed. It would not be surprising if the state mind, focused on protecting the capital sector and corporate balance sheets, tries once again to impose this cost on the broad masses through increased taxes and/or cuts in basic public spending.

At the same time, one must not forget how war and geopolitical tensions function as a disciplinary tool domestically. Social objections, struggles for rights, or strike tendencies rising against deepening poverty and rapidly eroding wages can be much more easily suppressed under the rhetoric of "national security" and "survival" (beka) created by the increasing conflict environment. One must keep in mind that the climate of war will not only affect foreign trade or energy costs; it will also provide a very useful ideological shield to take labour under control and render class-based demands invisible.