Türkiye's five-year credit default swap (CDS), a key gauge of the country's sovereign risk, fell to 225 basis points on Monday, marking its lowest level since Feb. 26, as easing Middle East tensions lifted investor sentiment and boosted appetite for risk assets.
The decline coincided with a broad rally across global markets following the agreement between Washington and Tehran, which is expected to end months of conflict and pave the way for the reopening of the Strait of Hormuz, one of the world's most important energy transit routes.
On Sunday, U.S. President Donald Trump announced that an agreement with Iran had been finalized and said he was authorizing the reopening of the Strait of Hormuz and the removal of a U.S. naval blockade.
"The Deal with the Islamic Republic of Iran is now complete. Congratulations to all!" Trump said in a post on his Truth Social platform.
The easing of Middle East tensions supported emerging-market assets, while lower oil prices improved sentiment toward energy-importing economies such as Türkiye.
CDS contracts are widely used by investors to insure against the risk of default on sovereign or corporate debt. A lower CDS level generally indicates reduced perceived credit risk and can support more favorable external borrowing conditions.
Türkiye's risk premium had come under pressure earlier this year amid heightened regional tensions and concerns over potential energy supply disruptions.
The latest decline signals an improvement in market sentiment, supported by expectations that reduced energy-related risks could ease inflationary pressures and encourage capital flows into emerging markets.
Oil prices fell sharply following the U.S.-Iran agreement, as investors priced in the potential normalization of shipping through the Strait of Hormuz.
The decline in crude prices is particularly significant for Türkiye, which relies heavily on energy imports and is sensitive to movements in global oil and natural gas costs.
The improvement in Türkiye's CDS also reflected broader optimism across international markets, as investors returned to risk assets following the de-escalation of tensions in the Middle East.
