Fitch Ratings sees risks to Türkiye's sovereign rating and banking sector as remaining limited and manageable if tensions in the Middle East prove short-lived, while it warns a prolonged period of high energy prices could increase vulnerabilities.
The U.S.-Israel war on Iran is in its third week and no end in sight. The Strait of Hormuz remains largely closed off, with U.S. allies rebuffing U.S. President Donald Trump's request for help to reopen the critical waterway, raising energy prices and fears of inflation.
Fitch said on Monday that its baseline scenario assumes the conflict will be temporary, in which case the impact on Türkiye's credit profile and financial system would be contained.
However, the credit rating agency cautioned that persistently high oil prices could add to inflationary pressures and widen the country's current account deficit.
It said the impact of the conflict on Türkiye and its banking sector would depend on policy response.
Fitch said measures introduced by the Central Bank of the Republic of Türkiye (CBRT) since the start of this month signal a continued commitment to bringing down inflation.
Responding to the volatility amid the conflict, the CBRT took liquidity measures that lifted overnight rates to around 40%, up 300 basis points from prewar levels.
Fitch expects monetary policy to remain relatively tight, forecasting a real policy rate of around 4.5% by year-end, which underpins its projection that inflation will decline to 25% by the end of 2026.
Annual inflation slowed from over 40% at the beginning of last year to just over 30% this January. But a rise to 31.5% last month signaled a slowdown in disinflation.
Encouraged by the downward trend, the CBRT had slashed interest rates by 900 basis points since mid-2025 to 37%. But it halted its easing cycle last week due to fallout from the Iran war that it said could impact inflation.
Fitch noted that Türkiye has reactivated a fuel price adjustment mechanism to help contain domestic price pressures amid rising global energy costs.
The sliding scale system adjusts the special consumption tax (ÖTV) on fuel products and prevents higher oil prices from being fully passed through to consumers.
Fitch said the fiscal burden of such measures could be absorbed thanks to available budget space, supported by a roughly 2 percentage point decline in the budget deficit-to-GDP ratio last year.
Fitch said Turkish banks are generally well-positioned to withstand potential shocks, citing adequate liquidity and capital buffers across the sector.
These buffers, it said, should help mitigate risks to operating conditions even in the face of heightened geopolitical uncertainty.
While the baseline outlook remains stable, Fitch warned that a longer-lasting conflict and sustained increases in energy prices would pose more significant challenges for Türkiye's macroeconomic outlook.
Such a scenario could complicate the disinflation process and put additional pressure on external balances, the agency said.
