Dr. Shiva Bayatlou
The “Operation Epic Fury,” launched on February 28, 2026, by the coalition of the United States and Israel against Iran’s military and nuclear facilities, has fundamentally reshaped the political-economic map of the Middle East. This conflict is not merely a regional military engagement; it also represents a systemic rupture point in which global energy supply security, international trade routes, and regional capital flows have been reconfigured. The process that began with Iran’s declaration on March 4, 2026, that it would close the Strait of Hormuz has dragged the global economy into a stagflationary spiral reminiscent of the oil shocks of the 1970s. Consequently, the nature of bilateral economic relations between Türkiye and Iran has evolved into a security-oriented model of mutual interdependence.
Fracture in the Global Energy Paradigm and the Strait of Hormuz Crisis
The closure of the Strait of Hormuz effectively means the disruption of the main artery through which approximately 25 percent of global seaborne oil trade and 20 percent of liquefied natural gas (LNG) trade passes. This abrupt disruption in energy markets has led to dramatic volatility in commodity prices. Brent crude oil prices, which stood at $78 in January 2026 before the war, exceeded $125 in March at the peak of the crisis; however, they are projected to decline to the $85–90 range by the end of the year if the crisis eases. A similar shock occurred in natural gas markets, where TTF prices surged from €32/MWh to €150/MWh, while LNG spot prices in Asian markets recorded a 140 percent increase.
These rising energy costs have also shaken global macroeconomic balances. Global GDP growth, initially projected at 3.1 percent, was revised downward to 2.1 percent following the crisis. Although investors’ search for safe havens pushed gold prices from $2,100 to $2,400, liquidity pressures in financial markets may pull prices back down to $1,900 by the end of the year. This volatility has amplified the twin-deficit risk (current account and budget deficit) for energy-import-dependent economies such as Türkiye. Given that every $10 increase in oil prices raises Türkiye’s annual energy bill by more than $5 billion, energy costs have emerged as the greatest obstacle to the country’s macroeconomic stabilization program.
Türkiye’s Macroeconomic Stress Test and Monetary Policy Response
With the outbreak of the war, Türkiye faced severe capital outflows driven by both heightened geopolitical risk premiums and surging energy costs. During the first three weeks of March 2026 alone, approximately $15 billion in portfolio investments exited Türkiye. As foreign investors fled Turkish assets in favor of the U.S. dollar, the Central Bank of the Republic of Türkiye (CBRT) was forced to utilize its reserves to preserve market stability. Estimates suggest that nearly $25 billion in reserves were spent during the initial phase of the crisis to prevent excessive volatility in exchange rates.
The crisis has necessitated substantial revisions to Türkiye’s 2026 macroeconomic targets. The year-end inflation target, initially set at 16 percent, has been revised upward to a range between 24 and 30 percent due to external shocks. The current account deficit-to-GDP ratio is expected to rise from 2.5 percent to between 4.5 and 5.0 percent, while the budget deficit is projected to reach 4.0 percent. Particularly in the tourism sector, revenues initially targeted at $68 billion are now expected to decline to between $55 and $60 billion due to regional instability. The CBRT has suspended its interest rate cut cycle, tightened liquidity management, and effectively raised overnight lending rates to around 40 percent. Fitch and other rating agencies have stated that Türkiye’s current outlook (BB-/Positive) will depend heavily on the duration of the crisis and the extent of the blockage in the Strait of Hormuz.
Iran–Türkiye Natural Gas Diplomacy: The July 2026 Threshold
Natural gas trade, the most concrete and strategic component of economic relations between Iran and Türkiye, has entered a historic phase of uncertainty in 2026. The long-term contract signed between the two countries in 1996, which envisaged annual gas deliveries of 9.6 billion cubic meters (bcm), is set to expire in July 2026, complicating Türkiye’s energy security equation.
As of April 2026, Minister of Energy and Natural Resources Alparslan Bayraktar confirmed that official negotiations had not yet begun due to the ongoing regional war conditions and turbulence within Iran’s domestic dynamics. This situation has created a twofold strategic necessity for Türkiye:
- Strengthening Supply Security:
To mitigate the risk of losing Iranian gas imports—which accounted for 13 percent of Türkiye’s total gas imports in 2025—Türkiye has signed a new 10-year LNG procurement license agreement with Russia and moved toward diversifying its energy portfolio. - Increasing Bargaining Power:
Technical failures and winter disruptions on the Iranian pipeline in recent years have prevented the pipeline from operating at full capacity. As a result, Türkiye is expected to demand more flexible pricing mechanisms and stronger supply continuity guarantees in the new contract period.
Capital Flows and Corporate Dynamics: Iranian Investors’ Türkiye Strategy
The paralysis of economic activity inside Iran due to the war has accelerated the tendency of Iranian capital owners to use Türkiye as a geo-economic platform. Data from the fourth quarter of 2025 indicate that Iranian-partnered enterprises ranked first among newly established foreign-capital companies in Türkiye, with 76 firms. Iran was followed by Germany with 45 companies and Iraq and China with 36 companies each.
The sectoral distribution of Iranian capital in Türkiye demonstrates that asset protection motives have become dominant during the crisis period. While “computer programming” emerged as the leading sector among joint-stock companies, “wholesale trade” and “logistics” ranked first among limited liability companies. This reveals that Iranian businesspeople increasingly view Türkiye not merely as a refuge but also as a transit hub for bypassing sanctions and integrating into global trade networks. Furthermore, the fact that total foreign direct investment inflows into Türkiye increased by 12.2 percent in 2025 to reach $13.1 billion indicates that Türkiye has sought to preserve its image as a “safe island” amid regional instability.
The Logistics Revolution: The Rising Strategic Value of the Middle Corridor
The closure of the Strait of Hormuz and security crises in the Red Sea have rendered traditional maritime routes between China and Europe increasingly unviable, transforming the “Middle Corridor” project from an alternative into a strategic necessity. Türkiye, as the western gateway of this corridor, is consolidating its geopolitical weight.
The 34.4 percent increase in container train traffic through Kazakhstan at the beginning of 2026 is the clearest indicator that trade routes are shifting northward. Following the crisis, the Organization of Turkic States (OTS) approved its 2026 action plan aimed at digitalizing customs procedures and increasing transit capacity across the Caspian Sea. Nevertheless, structural obstacles such as falling water levels in the Caspian Sea and infrastructure bottlenecks continue to persist.
Financial Warfare and the “Economic Fury” Sanctions Regime
The United States’ “Economic Fury” campaign against Iran aims to fully isolate Iran from the global financial system. Under this campaign, 35 entities and individuals accused of laundering Iran’s oil revenues have been added to sanctions lists. For Türkiye, this poses serious compliance and sanctions risks. The U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) has reportedly prepared an indictment alleging that certain exchange offices and intermediary financial institutions in Türkiye were used to finance Iran’s weapons programs. In particular, the inclusion of “transit fees” paid to Iran for passages through the Strait of Hormuz within the sanctions framework has exposed all regional maritime trade operators to the threat of secondary sanctions.
Human Mobility and Border Security: Balancing Migration and Trade
Following the outbreak of the war, Türkiye raised security measures along its Iranian border to “Level 4” alert status. The Gürbulak, Kapıköy, and Esendere border gates were placed under strict supervision against the possibility of a humanitarian crisis. Although approximately 72,000 Iranians reportedly departed Türkiye in March 2026, around 64,000 Iranians fleeing the conflict entered Türkiye during the same period. While this mobility caused declines in retail trade and tourism revenues in provinces such as Van and Ağrı, the arrival of a qualified middle-class population also carries the potential to contribute to Türkiye’s human capital pool.
Future Scenarios and Strategic Forecasts from a Political Economy Perspective
The consequences of the 2026 Iran War have transformed Türkiye-Iran relations from a model of “cooperation amid competition” into one of “crisis-oriented pragmatism.” From the perspective of political economy specialists, three main scenarios stand out for the coming period:
- Prolonged Conflict and Stagflationary Pressure (Probability: 35%)
If the Strait of Hormuz remains closed for more than six months, oil prices could exceed $150 per barrel, pushing inflation in Türkiye above 40 percent. - Negotiated De-escalation and Energy Hub Transformation (Probability: 50%)
If the war remains limited in scope and the July 2026 gas contract is renewed, Türkiye’s role as a regional energy hub will be further consolidated. - Regional Chaos and Regime Change Pressure (Probability: 15%)
The emergence of a governance vacuum in Iran could create a security crisis for Türkiye, yet it may also provide long-term opportunities for greater influence over regional energy resources.
Conclusion: From Crisis Management to Strategic Opportunity
Although the 2026 Iran War constitutes a highly costly external shock for the Turkish economy in the short term, Türkiye’s geopolitical position gives it the potential to transform this crisis into a strategic opportunity. The closure of the Strait of Hormuz has placed the Middle Corridor at the center of global trade, while capital flight from Iran has strengthened Türkiye’s ambition to become a regional operational hub. Nevertheless, vulnerabilities related to inflation control and the financing of the current account deficit make strict fiscal discipline and proactive energy diplomacy indispensable for successfully managing this process.
