Turkey's Foreign Reserves Plunge Record $43.4 Billion in March Amid Iran War

Turkey experienced its largest monthly decline in foreign reserves on record in March, dropping by $43.4 billion as the ongoing Iran war triggered global selloffs in emerging market assets and severely strained the Turkish lira. The Central Bank of Turkey intervened to offset significant portfolio outflows, contributing to the historic drop. Concurrently, the country's current-account deficit widened to $9.7 billion, up from $7.3 billion in February, driven by soaring energy costs following the effective closure of the Strait of Hormuz. As a major energy importer, Turkey faces heightened inflationary pressures, with annual price growth reaching 32.4% in April. Global banks are revising their outlooks on the lira downward due to these expanding deficits and supply chain disruptions. Although the central bank has maintained a benchmark rate of 37%, it has effectively tightened liquidity through costlier lending rates near 40%. Economists anticipate an upward revision to the year-end inflation target, currently set at 16%, citing persistent risks from regional tensions and higher oil price forecasts for 2026.