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Türkiye’s five-year credit default swap (CDS) premium rose above 262 basis points on Monday, reaching its highest level since October 2025 as geopolitical tensions and rising energy prices increased market caution.
The increase in CDS reflects greater caution among foreign investors toward Turkish assets, reflecting heightened risk perception in markets as inflation pressures intensified in January and February due to rising food prices, while soaring energy costs after the Iran war weighed on the outlook.
However, it still stands at its lowest level since 2018, despite rising by nearly 30% from its 2026 low of 203 points.
As the Central Bank of the Republic of Türkiye (CBRT) effectively raised the funding rate to 40% by suspending one-week repo auctions to address risks in financial markets following the outbreak of the war, monetary conditions in Türkiye tightened further.
Both TLREF, which reflects Turkish lira overnight reference funding costs, and two-year Treasury yields rose to 40% for the first time since October.
To stabilize the Turkish lira, the central bank is estimated to have sold around $13 billion from its reserves on a net basis, while the U.S. dollar exchange rate remained stable at around 44.08.
Türkiye’s benchmark BIST 100 index fell more than 2% on Monday, extending its losses to around 8.4% since the conflict began on Feb. 28, with the banking index leading the decline, dropping nearly 20%.
Responding to concerns over oil prices approaching $120 per barrel on Monday, Türkiye’s Treasury and Finance Minister Mehmet Simsek urged citizens, investors and companies to assess recent global market volatility calmly.
"It is important for our citizens, investors and companies to assess this process rationally," Simsek said, adding that authorities are closely monitoring global uncertainty and sharp swings in energy prices while taking necessary measures.
Simsek said similar shocks in the past did not have lasting effects on the global economy. "Past experience shows that shocks of this kind are not permanent," he said, noting that pricing in oil futures markets also suggests the current movement may be temporary.
He added that economies with strong underlying fundamentals, including Türkiye, typically have the capacity to rebalance and recover quickly after external shocks.
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