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Turkey’s stock market tumbled on Wednesday after President Recep Tayyip Erdoğan stepped up his criticism of Israel and its allies at a time when Ankara is desperate to secure western investment to fuel its economic overhaul.
The benchmark Bist 100 index dropped more than 7 per cent in its biggest slide since early February, according to FactSet data. The steep drop triggered multiple trading curbs known as “circuit breakers”, which are designed to soothe panicky markets.
Wednesday’s stock rout came after Erdoğan in the afternoon said: “Israel’s attacks on Gaza are a situation that attests to both murder and a state of mental illness, both for those who carry them out and for those who support them.”
The Turkish president also said Hamas, whose militants killed at least 1,400 people in a brutal attack on Israel on October 7, is not a terrorist organisation but rather a “group for liberation”. Heavy Israeli bombardment of Gaza from land, sea and air has killed more than 6,500 people.
Erdoğan had initially taken a more balanced approach to the Middle East crisis, but he has stepped up his criticism of Israel in recent days, saying that its strikes on Gaza were “amounting to genocide”. He has also criticised the US for sending military assets to the Middle East and for its backing of Israel more broadly.
The Israel-Hamas conflict has come at a time when Turkey is attempting to extinguish a long-running economic crisis and lure back investors who abandoned the market after years of unorthodox policymaking stoked runaway inflation and other severe imbalances.
Finance minister Mehmet Şimşek has in recent weeks pitched to investors in the US and Europe and said improving relations with the west was a key pillar of Turkey’s revamped economic programme, which began after Erdoğan’s re-election in May.
Turkey’s stock market began falling on Wednesday as Erdoğan addressed a meeting of his Justice and Development party in parliament. A Turkish capital markets banker said the remarks dented sentiment, and then once the fall began, high-speed trading firms that followed market momentum amplified the selling pressure.
The banker added that the market had risen sharply the previous two trading days, meaning there were fewer “marginal buyers” ready to swoop in when stocks fell. The Bist 100 is still up nearly 35 per cent this year in Turkish lira terms as residents have rushed into stocks in an attempt to shield their savings from inflation that is running at nearly 60 per cent.
Turkey’s international assets were more muted on Wednesday: yields on Turkey’s dollar-denominated bonds ticked slightly higher while the cost to protect against a default using credit default swaps was little changed. The lira was also steady at TL28.12 against the US dollar.
