Get your free copy of Editor’s Digest
FT editor Roula Khalaf picks her favourite stories in this weekly newsletter.
Turkish stock markets plummeted on Wednesday after President Recep Tayyip Erdogan stepped up his criticism of Israel and its allies as Turkey desperately tries to secure Western investment to push through economic reforms.
The benchmark Visto 100 index tumbled more than 7%, its biggest drop since early February, according to FactSet data. The sharp drop triggered several trading restrictions known as “circuit breakers” designed to calm panicked markets.
Wednesday’s stock market crash came after Erdogan said in the afternoon that “Israeli attacks on Gaza are a circumstance that proves both murder and insanity on the part of those who carry them out and those who support them.”
The Turkish president also said Hamas, which killed at least 1,400 people in a brutal attack on Israel on October 7, was not a terrorist organisation but a “liberation group”. Intense Israeli bombardment of Gaza from land, sea and air has left more than 6,500 people dead.
While Erdogan had initially taken a more balanced approach to the Middle East crisis, he has stepped up his criticism of Israel in recent days, describing attacks on Gaza as “tantamount to genocide” and criticizing US military assets in the region and support for Israel more broadly.
The clashes between Israel and Hamas come at a time when Turkey is trying to quell a long-running economic crisis and lure back investors who fled the market after years of unorthodox policymaking led to runaway inflation and other serious imbalances.
Finance Minister Mehmet Simsek has made a pitch to U.S. and European investors in recent weeks, saying improved ties with the West are a key pillar of Turkey’s revised economic plan, which began after President Erdogan’s re-election in May.
Turkey’s stock market began to fall on Wednesday when President Erdogan addressed a meeting of his Justice and Development Party in parliament. Turkish capital markets bankers said his remarks soured sentiment and that high-speed trading firms that track market momentum amplified selling pressure as the decline began.
The banker added that the market’s sharp rally over the past two trading days has reduced the number of “marginal buyers” willing to jump in when stocks fall.The Visto 100 index, denominated in the Turkish lira, is still up nearly 35 percent this year as residents flock to stocks to protect their savings against inflation that has soared to nearly 60 percent.
Turkey’s international assets were more subdued on Wednesday. Yields on Turkish dollar-denominated bonds rose slightly, while the cost of protecting against default using credit default swaps remained little changed. The Turkish lira also held steady at 28.12 against the US dollar.
