Iran war hits Turkey's fragile economy as investors flee following oil shock

The US-Israeli war on Iran is starting to weigh on Turkey's economy, as inflation continues to exceed expectations and Ankara faces both an outflow of foreign investors and a widening current account deficit.

Inflation was already on an unfavourable path before the conflict escalated. In February, consumer prices rose by 2.96 percent, pushing the 12-month average to 33.39 percent - far above the official year-end target of 16 percent.

An international banker, speaking on condition of anonymity, told Middle East Eye that foreign investors had rapidly pulled out of Turkey, selling an estimated $25bn to $30bn in assets since the start of the war in late February. 

According to the banker, investors have preferred to hold cash in US dollars rather than remain exposed to Turkish assets, prompting the central bank to burn through foreign exchange reserves to preserve market stability.

Under governor Fatih Karahan, the bank has moved swiftly to intervene in the markets through several mechanisms.

Read more: Iran war hits Turkey's fragile economy as investors flee following oil shock