Global tension, local vulnerability: Risks extending from the Strait of Hormuz to Turkey

The escalating Israel-Iran tension in the Middle East and the rising risks in the Strait of Hormuz are driving up oil prices, dragging the global economy into a new wave of uncertainty. Following the operations by the US and Israel against Iran, the risk of the strait closing has deepened concerns regarding energy supply, while Brent crude oil prices have also begun to rise. However, for Turkey, these developments represent much more than a temporary external shock: the structural vulnerabilities created by a growth model based on energy imports create a chain reaction of pressure on the current account deficit, inflation, and growth with every price increase. This picture emerges not so much from global crises, but as a result of an economic structure that cannot generate resilience.

What we are experiencing today shows that the global economy, which had already become fragile during the post-pandemic recovery process, is undergoing a new stress test. For Turkey, these developments make the vulnerability created by chronic energy dependency visible once again, while power balances and trade routes are being reshaped on a global scale.

NARROWING ARTERIES OF GLOBAL TRADE: Rising Risks in the Strait of Hormuz

The increasing risks in the Strait of Hormuz, through which approximately 20% of the world's oil supply passes, have strengthened expectations of a supply shock in global energy markets. The rise of Brent crude oil prices above $90 is pushing up energy costs on a global scale, triggering cost-push inflation across all value chains, from freight and insurance costs to logistics expenses.

This picture represents a new shock wave for global trade, which has been trying to recover since the pandemic.

USA: Energy Power and Strategic Flexibility

The United States is in a relatively advantageous position in terms of energy supply thanks to its shale oil and natural gas production. The rise in oil prices poses a more limited risk to the US economy compared to other developed countries. On the other hand, the tension in the Middle East is reshaping the US's regional strategies; energy prices sometimes cease to be a cost factor and become a strategic tool.

CHINA: Energy Dependency and Growth Risk

China, one of the world's largest energy importers, is directly affected by the tensions in the Middle East. Rising oil and natural gas costs increase production expenses and suppress export competitiveness. For the Chinese economy, which is already showing signs of slowing down, this situation strengthens the risk of downward revisions to growth forecasts. It is becoming inevitable for China to place more emphasis on strategic reserve policies and alternative supply routes to ensure energy supply security.

EUROPE: In the Shadow of Stagflation

Europe, which is still trying to overcome the energy crisis that deepened after the Russia-Ukraine war, is now facing a new energy shock originating from the Middle East. The increase in oil and natural gas prices could re-trigger inflationary pressures across the continent. Rising costs in industrial production weaken competitiveness, especially in export-oriented economies. As industrial giants like Germany lose their production advantages due to rising energy costs, the European economy is facing the risk of low growth and high inflation (stagflation).

RUSSIA: Temporary Advantage from Price Increases

As an energy-exporting country, Russia is benefiting in the short term from the rise in oil and natural gas prices. This situation, which partially offsets the impact of the sanctions imposed, gives Moscow breathing room. The volatility in global energy markets strengthens Russia's strategies to turn toward alternative markets. However, a potential contraction in global demand in the long term poses a serious risk for Russia.

MIDDLE EAST: A Spiral of Risk and Uncertainty

The Middle East is at the very center of the Israel-Iran tension. Although oil-exporting countries may generate revenue from price increases in the short term, rising geopolitical risks reduce investments in the region and deepen economic uncertainty. Any large-scale conflict in the region could reach dimensions that threaten not only energy markets but also the security of global trade.

TURKEY: The Hormuz Shock and the Deepening Anatomy of Vulnerability

For Turkey, the picture is much more fragile. The growth model based on energy imports creates a chain reaction of pressure on the current account deficit, inflation, and growth with every increase in oil prices. The rising risks in the Strait of Hormuz are pushing Brent crude oil prices above $90, shaking the delicate balances of the Turkish economy.

For the Turkish economy, these developments are much more than a temporary external shock: they are the re-emergence of structural vulnerabilities.

According to estimates, every $10 increase in oil prices increases Turkey's current account deficit by approximately $2.5 billion and inflation by 1 point. If prices rise to $100, the current account deficit could rise to $10–12 billion, and inflation could rise by around 3.5–4 points. This picture clearly reveals how highly sensitive the Turkish economy is to energy prices.

At the same time, the increase in energy prices: Creates an additional burden on the budget balance, increases public expenditures, and strains the balance between monetary and fiscal policy.

The increase in energy costs directly affects food prices through transportation and logistics, the general price level through industrial production, and the demand structure through household budgets. While rising costs put pressure on production, rising inflation weakens household demand; the result is a two-way squeeze and a slowdown in growth.

Turkey's growth model has long exhibited a structure based on energy imports. The economy enters the same cycle with every energy shock:

Energy price ^ › Import cost ^ › Current account deficit ^ › Foreign exchange demand ^ › Exchange rate ^ › Inflation ^ › Growth slows down

POLICY OPTIONS: The Necessity of Structural Transformation

Temporary measures are no longer sufficient to change this vulnerability. Turkey needs a multi-dimensional transformation strategy:

• Reducing energy dependency: Increasing investments in renewable energy and energy efficiency,

• Transforming the production structure: Transitioning to high value-added and low energy-intensive sectors,

• Strengthening macroeconomic stability: Establishing institutional trust with predictable monetary and fiscal policies,

• Reducing dependence on external financing: Increasing the quality of exports and attracting direct investments.

CONCLUSION: Not a Global Shock, but a Structural Reality

While the Israel-Iran tension and the rising risks in the Strait of Hormuz serve as a new stress test for the global economy, for Turkey, these developments represent much more than a temporary external shock. As long as the growth model based on energy imports continues, every increase in oil prices continues to reproduce the same vulnerabilities regarding the current account deficit, inflation, and growth. Therefore, the issue is not just managing external shocks; it is transforming the economic structure that remains constantly vulnerable to these shocks.

Without reducing energy dependency, moving the production structure to a higher value-added ground, and permanently reducing the need for external financing, the Turkish economy will face a similar cycle with every global fluctuation. Therefore, what is happening today is not an exception, but a natural consequence of the economic model that has been maintained for a long time.

Turkey now has a clear choice before it: Either it will continue to manage its vulnerability, or it will realize structural transformation and make its economy more resilient. Otherwise, the unchanging question will arise again: Is the Turkish economy really growing, or is it just growing its vulnerabilities?

In the shadow of these uncertainties and global tensions, the value of peace and stability is felt more than ever. The principle of “Peace at home, peace in the world” by the founder of our Republic, our great leader Gazi Mustafa Kemal Atatürk, stands before us today not just as a wish, but as the fundamental condition for global peace and sustainable development.

With this understanding, I sincerely celebrate the holiday of our country and the entire Islamic world, and I wish that the holiday brings peace, tranquility, health, and well-being.