A state of significant intervention was documented within the Turkish financial markets on Monday, February 23, 2026, as it was reported that approximately $8 billion in foreign exchange was sold by the central bank in a strategic effort to maintain stability. This action was initiated as regional geopolitical risks were observed to have intensified, threatening the progress of a previously established rate-cutting cycle and the ongoing trend of falling inflation. While reports were initially received that $5 billion had been offloaded during the morning session, it was subsequently confirmed by market observers that the total volume of foreign exchange support reached between $7 billion and $8 billion by the close of business. It was noted by traders that while an initial surge in demand and subsequent sales by domestic banks occurred at the market opening, the intensity of this movement was later observed to have slowed without being entirely halted.
The turmoil within the financial markets was triggered by a dramatic escalation of military hostilities within the Middle East. It was reported that attacks were launched against Iran by the United States and Israel, resulting in the death of Supreme Leader Ali Khamenei, to which an immediate retaliatory response was initiated by Iranian forces against targets across the region. Although NATO member Turkey was not directly targeted, the broader instability was felt acutely within its borders, particularly as energy prices were observed to have climbed by 8%. Given that Turkey is characterized as an import-heavy economy, this price appreciation was perceived as a major alarm bell for macroeconomic stability.
The domestic equity and bond markets were subjected to significant downward pressure as a direct consequence of these events. The BIST-100 stock index was recorded to have lost 2.6% of its value, while the banking index—a critical component of the financial system—was observed to have tumbled by nearly 5%. Simultaneously, Turkish international bonds were reported to have skidded, with the 2045 maturity dipping to 90.5 cents and the 2043 maturity experiencing a loss of 1 cent to trade at just over 75 cents.
The stability of the Turkish lira was also compromised, with the currency being pushed to an all-time low of 43.9950 against the dollar during the session, before an edge back to 43.9635 was recorded by the afternoon. This devaluation was noted to be consistent with a long-term trend observed for more than a year. Furthermore, in response to liquidity steps taken by the central bank at the weekend—including the suspension of one-week repo auctions—the Turkish lira overnight reference rate (TLREF) was observed to have risen by 300 basis points to nearly 40%, up from approximately 37% on Friday.
It has been suggested by analysts that this regional volatility may necessitate a formal halt to the easing cycle that was initiated in late 2024. Although the policy interest rate had been trimmed to 37% as recently as January, revised expectations were presented by institutions such as JPMorgan. Having previously predicted further rate reductions at the upcoming policy meeting on March 12, it was subsequently revised by JPMorgan that a hold on rates is now expected. Additionally, year-end rate forecasts were revised to 31% from 30%, while year-end inflation expectations were adjusted upward to 25% from 24%. It was noted that annual consumer price inflation was measured at 30.6% in January.
While no immediate comment was issued by the central bank regarding the foreign exchange sales, the availability of reserves for future interventions was analyzed by Goldman Sachs. It was indicated that $78 billion remains available within the central bank’s reserves should further defensive actions be required. This level of intervention was historically observed a year ago, when a more aggressive stance was adopted by the central bank following market fallout from the jailing of Istanbul Mayor Ekrem Imamoglu; during that period, approximately $50 billion was sold by the bank over the course of several weeks. As the regional situation remains fluid, the focus of the global financial community continues to be fixed on whether the current monetary defensive posture will be sufficient to prevent the derailment of Turkey’s broader economic objectives.
