Lower oil prices, rate-cut expectations boost outlook for Turkish stocks

Gamze Bal-ISTANBUL

Falling oil prices and improving inflation expectations in Türkiye have increased optimism that the country’s stock market could recover in the second half of the year.

Market experts said a recovery led by the banking, holding, aviation, telecommunications and mining sectors could emerge if geopolitical tensions do not escalate and domestic inflation and interest rates continue to decline.

Although tensions in the Middle East have eased, elevated oil prices over the past several months have contributed to inflationary pressures, prompting central banks to maintain tight monetary policies and weighing on stock markets. In Türkiye, expectations for interest rate cuts were postponed because of the inflationary effects of the conflict involving Iran, while monetary measures pushed funding costs above the policy rate of 37 percent.

The United States and Iran reaching a temporary agreement, together with the gradual normalization of tanker traffic through the Strait of Hormuz, has renewed optimism among stock market investors and improved market sentiment.

The acceleration in oil price declines, improving domestic inflation expectations and forecasts of future rate cuts by the Turkish Central Bank have strengthened expectations for a recovery in Borsa Istanbul during the second half of the year.

Onur Can Bal, deputy head at Gedik Investment, said geopolitical risks had eased but had not completely disappeared. He said the market would be closely watching whether a lasting peace could be achieved, adding that in the absence of new geopolitical risks the central bank could lower its one-week repo rate back to 37 percent over the next one to two months. He also said rate cuts of 100 to 200 basis points are expected in the final quarter of the year.

Bal said those developments would likely support equities and could lead to stronger performance in sectors that came under pressure between March and June 2026, including banking, holdings, telecommunications, mining and aviation.

He advised investors to remain selective in stock picking and to review model portfolios carefully. According to Bal, a suggested portfolio allocation would consist of 30 percent equities, 50 percent fixed-income Turkish Lira instruments, 10 percent gold and 10 percent international equities.

Ata Investment Deputy Research Director Cemal Demirtaş said continued declines in oil prices could pave the way for a renewed interest-rate-cutting cycle in Türkiye and support the stock market.

Demirtaş noted that while the shares of many companies that play a significant role in Türkiye’s economy and capital markets continue to trade at attractive valuations, price bubbles have emerged in a number of stocks.

He said he found it difficult to justify the rally in some BIST 30 shares and added:“The economy is showing signs of recovery and I believe conditions can improve further. However, seeing such anomalies in certain stocks is concerning for the future of the market.”