Energy shock tests Türkiye’s economic path

ISTANBUL

Rising oil prices have become an external threat to Türkiye’s economic program, confronting policymakers on how to protect disinflation, the budget balance and the current account at the same time when a regional war is feeding fresh volatility into global energy markets.

The shock is not yet a supply crisis for Türkiye. But it is already a pricing shock and that alone is enough to complicate the country’s outlook as officials try to preserve the gains made since the disinflation process began in mid-2024.

That is why Ankara’s recent messaging has focused on two tracks at once.

On one side, Treasury and Finance Minister Mehmet Şimşek has acknowledged the economic risk, warning that higher energy prices could push the current account deficit above program forecasts and weigh on the inflation path.

On the other hand, Energy and Natural Resources Minister Alparslan Bayraktar has stressed that Türkiye does not face an immediate supply problem in either natural gas or petroleum products, saying the country is sourcing energy through diversified routes and remains operationally secure for now.

For Türkiye, the first hit from the latest crisis is not a sudden physical shortage, but the renewed cost of importing energy at a time when the economy is still sensitive to price pass-through.

The government has already moved to soften the blow by temporarily reintroducing a sliding-scale fuel pricing system, under which part of an increase in global fuel costs is absorbed through tax adjustments rather than passed directly to consumers.

However, it also highlights the difficulty of shielding a large energy importer from a prolonged external shock without creating pressure elsewhere in the economy.

Since the Iran conflict escalated on Feb. 28, oil prices have swung sharply, at times climbing above $100 a barrel and briefly approaching $120 as traders priced in the risk of disrupted flows through the Gulf.

Even when prices retreat, such volatility is enough to unsettle inflation expectations and keep central banks cautious.

For Türkiye, that volatility lands at a delicate moment. The country posted a current account deficit of $6.8 billion in January.

Excluding gold and energy, the deficit was far smaller, which only reinforces the point: Imported energy remains one of the biggest pressure points in Türkiye’s macro picture.

The inflation side is just as sensitive.

Rising oil prices were already dimming expectations for near-term rate cuts globally and in Türkiye, as markets began to reassess how long central banks may need to stay cautious.

For Ankara, that means the external environment is becoming less forgiving just as it is trying to anchor expectations more firmly at home. Imported energy costs do not stay neatly in one category; they spill into transportation, production, logistics and, eventually, consumer prices.

Still, Türkiye is not entering this period without buffers. The central government budget posted a 24.4 billion Turkish Liras of surplus in February, reversing a deficit of 310 billion liras in the same month last year.

That does not eliminate the risk from higher oil prices, but it gives policymakers more room than they would have had in a weaker fiscal position.

The real test is whether the current shock proves temporary, as Şimşek has suggested, or whether high energy prices remain in place long enough to strain both the fuel-buffer system and the broader disinflation strategy.

If supply stays secure and prices stabilize, the damage may be limited to a temporary worsening in expectations and the current account. But if the energy shock deepens, Ankara may find itself forced to defend growth, inflation and fiscal discipline all at once.

For now, the government’s message is that Türkiye is prepared.