Bombs that are going off one after another in the Middle East and the situation in Ukraine are hitting the Turkish economy
Turkey has been struggling through the crisis in Europe, which accounts for 60 percent of Turkey’s exports, but it had managed to do well in exports by opening up to new markets in different regions. However, the longstanding conflict in Syria and the latest developments in Iraq, and the addition of the Ukrainian -Russian conflict to this and most recently, the Israeli assault on Gaza, is pushing Turkey into a ring of fire, both economically and politically. Turkey’s exports to Europe had gone to as low as 37 percent of the country’s total exports volume, while exports to Middle Eastern countries had risen significantly as of 2013. Even trade with Israel has increased by 50 percent over the past five years reaching over 5 billion dollars, in spite of the “one minute” incident in 2009 — a stand-off between Prime Minister Recep Tayyip Erdogan and Israeli President Shimon Peres at the Davos forum in that year — and the Israeli raid of a Turkish-led flotilla bringing aid to Gaza which resulted in the death of eight Turkish citizens in 2010. However, the situation in Syria and Iraq and the added tension in Israel and Ukraine are putting at risk a trade volume of 60 billion dollars. The business world, primarily the Turkish Council of Exporters, have been worried, yet they also call for calm. Recent indications that the US will push for new sanctions against Russia is another cause of concern for Turkey, which imports a significant amount of energy from Russia-a prominent exports partner of Turkey.
More sanctions on Russia to affect everyone’s business
Turkey’s total exports to the countries of Middle East and the Caucasus reached 60 billion dollars in 2013. These two regions account for 18 percent of the country’s total exports and 13 percent of the country’s imports. Turkey is likely to be one of the countries that will be worst affected unless tension in these regions eases down. Ruset Cetin, head of the Turkish-Ukrainian Business Council, has said if the US expands the sanctions targeting Russia, all businesses in Turkey will be affected.
Oil price will likely exceed 116 dollars
Markets have also been unnerved by the recent developments in the Middle East and Ukraine. The price of Brent crude has once again surpassed 108 dollars per barrel. Economists warn that oil prices will likely go up further to 113 – 115 dollars per barrel but then go down from here if the conflict between Russia and Ukraine doesn’t turn into a full-blown war. However, if things get worse, the price of oil will likely exceed 115 dollars in a short period of time. The price of gold, usually seen as a safe haven by investors, has reached 1,320 dollars within less than 24 hours on the day Israel started its Gaza operations. But how do exchange markets and markets view these developments?
Recent research conducted by Deutsche Bank and S&P Capital IQ show that US markets plunged when the Israeli army first attacked Gaza, but the fall didn’t last long. The S&P 500, which had reached a record peak over the past three months, registered a 5.9 percent loss after the Gaza strike. US Investors remain wary because of the situation in Ukraine and Gaza. On July 17, the S&P 500 posted its biggest one-day drop since April, a selloff that was followed by a 1 percent rally on July 19.
