Inflation expectations among market participants in Türkiye worsened in May, with forecasts rising for both year-end inflation and the 12-month outlook, a survey showed on Friday.

The deterioration comes amid pricing pressures from the Iran war, which has shut the key Strait of Hormuz, causing what the International Energy Agency (IEA) has described as the biggest energy supply crisis ever.

The higher energy prices and transportation prices were among the main drivers behind an increase in Türkiye's inflation in April, when it reached 32.37%, compared to 30.9% in March.

Market participants see inflation in 12 months time at 23.82%, a May survey by the Central Bank of the Republic of Türkiye (CBRT) said on Friday. That's up from 23.39% in the previous survey period.

Participants also raised their year-end forecast to 28.94%, compared with 27.53% in the previous month.

On Thursday, CBRT raised its year-end inflation forecast to 26% from 16% and warned of risks linked to the Middle East conflict, sparked by the U.S. and Israeli strikes on Iran.

The central bank policymakers said there would be no compromise on their determination to bring down inflation and it will continue to use all available tools for disinflation.

The bank kept its key interest rate at 37% last month, holding steady for the second successive policy meeting due to war-related disruptions.

Market participants see the bank keeping the benchmark policy rate unchanged again in June.

Participants also slightly increased their expectations regarding the foreign exchange rate. The year-end U.S. dollar/Turkish lira forecast rose to 51.57, up from 51.23 in the previous survey period.

The 12-month expectation increased more sharply, reaching 54.69, compared with 53.62 previously.

The survey also showed a modest deterioration in growth expectations.

Türkiye's GDP growth forecast for 2026 fell to 3.3%, down from 3.5% in the previous survey. The 2027 expectation remained unchanged at 4.1%.