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Türkiye's benchmark stock index, the Borsa Istanbul (BIST) 100, jumped more than 3% at Monday's open, while the banking index surged 6.4%, as investors welcomed a U.S.-Iran peace agreement that lifted risk appetite and fueled gains across global markets.
Banking stocks led the rally as easing regional tensions and the reopening of energy trade routes raised expectations of lower inflationary pressures, strengthening hopes that the Central Bank of the Republic of Türkiye (CBRT) could move funding costs closer to its 37% policy rate in the coming weeks.
Improving inflation expectations, falling risk premiums and growing expectations of monetary easing helped drive gains in Turkish banking stocks.
Brokerage firm Tacirler Yatirim said declining credit default swap (CDS) levels and expectations for inflation close to 1% in June could allow the Central Bank of the Republic of Türkiye (CBRT) to bring its weighted average funding cost closer to the 37% policy rate before its July 23 Monetary Policy Committee meeting.
The brokerage also expects the banking index to continue outperforming the broader BIST 100 in the near term.
Türkiye's monthly inflation slowed to 1.7% in May, while annual inflation stood at 32.6%. The central bank left its benchmark policy rate unchanged at 37% last week and continued funding the market through its overnight lending rate of 40%.
Alongside the stock rally, Türkiye's benchmark two-year government bond yield fell by 1 percentage point to 41.7% from 42.8%, while the country's five-year credit default swap (CDS) spread dropped to 225 basis points, its lowest level since Feb. 26, reflecting improving investor sentiment toward Turkish assets.
The positive mood spread across international markets. The pan-European STOXX 600 index gained 0.55%, reaching a record high for the first time since Feb. 27. Germany's DAX rose 1.7%, France's CAC 40 added 1.02%, Britain's FTSE 100 climbed 0.6%, and Spain's IBEX 35 advanced 1.8%.
Earlier in the day, Japan's Nikkei surged 5% to a record closing high, while South Korea's Kospi jumped 5.2%.
The rally followed announcements that the United States and Iran had reached a peace agreement. Pakistan Prime Minister Shehbaz Sharif first disclosed the deal, while U.S. President Donald Trump later stated that the agreement had been finalized and that the Strait of Hormuz would reopen immediately, ending the U.S. naval blockade.
Iranian Deputy Foreign Minister Kazem Gharibabadi also confirmed the agreement, saying a memorandum of understanding would be signed in Switzerland on June 19.
The deal is expected to ease inflationary pressures linked to energy prices and reduce the need for prolonged high interest rates by restoring energy flows through the Strait of Hormuz, which normally carries about one-fifth of global oil shipments.
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