Turkey's Inflation Hit by Israel-Iran Conflict, Minister Says

Turkish Finance Minister Mehmet Şimşek has attributed at least a 5-percentage-point increase in the country's inflation to the ongoing conflict between Israel and Iran.

Speaking on CNN Türk, Şimşek described the geopolitical tensions as a major global supply shock, affecting the production and availability of essential raw materials, from fertilizers to chip manufacturing components. He noted that this shock has lasted longer than initially anticipated and is larger in scale than previous global supply disruptions.

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There is at least a 5-percentage-point additional inflationary pressure, considering the direct and indirect effects of the war and the oil price levels factored in by markets for the full year.

"The global growth is negatively affected, financial conditions are tightening," Şimşek explained. He highlighted that rising inflation expectations worldwide are influencing global interest rates and impacting economic growth. For import-dependent nations like Turkey, the conflict exacerbates external balance issues, increasing the need for foreign currency and potentially depleting reserves.

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I am not looking for excuses. We experienced multiple shocks in 2025. It would not be correct to say these do not affect us. But I will not take refuge in them when we fail to meet inflation targets. Because there are structural issues as well.

Şimşek projected that without the external shock, Turkey's inflation would likely have been slightly below or around 20% this year. However, considering the war's direct and indirect effects, particularly on oil prices, he estimates an additional inflationary pressure of at least 5 points, pushing the forecast towards 26%. He confirmed that the Central Bank's policies reflect this revised outlook.

Despite acknowledging the significant impact of the war, Şimşek asserted that Turkey is managing the situation. "This is a manageable shock. We are managing it," he stated, emphasizing that the government is not seeking excuses but is actively addressing the economic challenges. He also mentioned that Turkey has approximately $160 billion in reserves and that the Medium-Term Program was designed with extreme risks in mind.

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This is a manageable shock. We are managing it.