Borsa İstanbul caught in the crosshairs of interest rate cuts, geopolitical storms, and the fund law

Borsa İstanbul entered the final week of October under pressure from three different fronts. The Central Bank's interest rate cut, renewed geopolitical tension in the Middle East, and the fund law passed by Parliament have influenced investor decision-making, while the BIST 100 index has technically fallen below the critical 11,250 support band.

Interest rate cut arrived as expected, but the market remains unconvinced

The CBRT cut the policy rate by 100 basis points to 36 percent. The inclusion of the phrase "the magnitude of the steps" in the decision text signals that the easing cycle will continue. However, the market did not react positively to this signal. On the day the interest rate decision was announced, the BIST 100 index closed at 11,220 points with a loss exceeding 3 percent; the decline in the banking index reached 3.62 percent. The index's return to its 2025 year-end level shows that the interest rate cut alone is not enough.

Oil prices fuel inflation concerns

The picture on the geopolitical front is even more pessimistic. Reports of attacks on Saudi Arabia and potential US preparations for an operation against Iran have pushed Brent crude above 112 dollars. The US State Department's instruction for personnel and their families in Saudi Arabia to leave the country has strengthened expectations that the tension will not subside in the short term. This rise in energy costs is an additional risk factor for Turkey, which is trying to make progress in its fight against inflation. While the Fed is expected to keep interest rates steady at its meeting next week, the continued pricing in of a potential interest rate hike in December, should energy-related pressures persist, is also limiting global risk appetite.

Fund law: Not uncertainty, but limited scope

The fund law passed by Parliament only covers funds whose liquidation was decided by the CMB's decision dated September 17, 2026. The law allows for interim payments to investors of these funds of up to the full amount if the net investment is below 1 million liras, and up to a maximum of 1 million liras if it is above that amount. If distributable resources are insufficient, the CMB may decide to make payments starting from the investor with the lowest amount. The law is not a reform for the market in general; on the contrary, it is an urgent intervention aimed at limiting grievances during the liquidation process. However, the indirect contribution of the loss of confidence in the fund market to the selling pressure in the stock market should not be ignored.

Cracks in inflation expectations

The sectoral inflation expectations for October announced by the CBRT show that the disinflation process has not yet established a solid foundation. While the 12-month-ahead inflation expectation of market participants rose by 0.19 points to 23.89 percent, household expectations fell by 1.85 points to 43.75 percent, and real sector expectations decreased by 0.70 points to 31.80 percent. This clear divergence between households and the market reveals how critical expectation management is. The rise in market participants' expectations may require the CBRT to be cautious in its easing cycle.

Technical outlook: Support broken, direction uncertain

The BIST 100's drop below the 11,250-11,300 band has damaged the short-term technical outlook. Analysts are watching the 10,800 and 10,700 levels as support, and 11,000 and 11,100 as resistance. The loss exceeding 5 percent in the banking index shows that selling pressure is deepening on a sectoral basis. At this point, three thresholds stand out for the investor: the course of geopolitical tension, the stance of the CBRT at its December meeting, and the impact of the fund liquidation process on market confidence. It is difficult to speak of a lasting recovery in Borsa İstanbul without clarity on these three issues.