In its analysis examining the effects of geopolitical developments on foreign trade, the Central Bank of the Republic of Türkiye (CBRT) revealed that, despite the sharp rise in energy prices, Türkiye managed to maintain its foreign trade balance in the second quarter. According to the analysis, this performance was driven by strong export trends, shifts in global supply chains, and the defense industry’s growing contribution to exports. In the study titled “How Have Geopolitical Developments Shaped Foreign Trade?”, published on the TCMB’s Merkezin Güncesi blog, it was emphasized that geopolitical risks exerted pressure on the foreign trade balance through energy prices and global supply chains. Consequently, while the U.S./Israel-Iran war that began in late February 2026 was expected to impact Türkiye’s foreign trade outlook negatively, second-quarter data painted a different picture. According to the analysis, despite a significant increase in energy imports, exports maintained their strong performance and the foreign trade balance improved.

ENERGY COSTS ROSE 

The war’s first impact was felt in the energy markets. Based on second- quarter averages, the price of Brent crude oil rose by 55.2 percent year-over-year, while the price of natural gas increased by 28.2 percent. In line with this development, seasonally adjusted energy imports also rose by 32.4 percent year-over-year. The CBRT noted that this increase was driven not only by prices but also by the composition of energy imports, existing supply agreements, spot market purchases, and delivery times. The analysis stated that the recent normalization in energy prices could slow the pace of growth in energy imports; however, short-term risks have not been eliminated due to the lagged effects of price movements.

ENERGY IS NOT THE SOLE DETERMINANT OF THE EXTERNAL BALANCE

 The analysis emphasized that while the rise in energy prices might initially give the impression of disrupting the external trade balance, the current account balance is not shaped solely by the energy bill. It was noted that many factors—such as export performance, service revenues, and domestic demand—play a decisive role in the external balance, and that the current period presents a different picture from the Russia-Ukraine war in 2022. It was stated that the primary reason for this difference is the strong performance on the export side.

CHANGES IN THE GLOBAL SUPPLY CHAIN HAVE PUT TÜRKIYE IN THE SPOTLIGHT

 Although there was a temporary decline in exports to Middle Eastern countries in March following the outbreak of the war, exports to the region rebounded in the second quarter. According to the Central Bank of the Republic of Türkiye (CBRT), the restructuring of global supply chains due to geopolitical developments played a key role in the acceleration of exports. Uncertainties surrounding the Strait of Hormuz extended delivery times for shipments from the Far East while increasing freight and insurance costs. These developments contributed to many buyers, particularly in Europe, redirecting their orders to Türkiye. Company interviews also indicated that precautionary purchases, particularly from Europe, were prominent during this period, noting that demand in the chemical and primary metals sectors, along with a trend toward supplier diversification in textiles and ready-towear apparel, supported exports.

THE DEFENSE INDUSTRY’S CONTRIBUTION IS GROWING

 One of the key points highlighted in the analysis was the defense industry’s growing contribution to exports. Thanks to capacity and technology investments made in recent years, the sector’s share of total exports has increased by approximately 2.3 percentage points over the past four years, reaching 4 percent. It was assessed that geopolitical developments, which have boosted global demand for defense products, have also made the impact of this structural transformation more visible.

DECLINE IN NON-ENERGY IMPORT CATEGORIES

 The second pillar of the improvement in the foreign trade balance was the composition of imports. While nearly the entire increase in imports during the second quarter was driven by energy, non-energy imports declined. It was noted that the decline in imports of investment and consumer goods, in particular, was consistent with the weak outlook for domestic demand due to tight monetary policy. While credit card spending and PMI data also supported this picture, it was emphasized that, despite a slowdown in production, expectations regarding export demand had strengthened.

RISKS TO THE CURRENT ACCOUNT DEFICIT HAVE DECREASED 

The CBRT noted that the negative impact of rising energy prices on foreign trade in the second quarter was largely offset by strong export performance. It was noted that the slowdown in domestic demand had a positive effect on the composition of imports, thereby supporting the trade balance, and it was assessed that the normalization of energy prices—driven by a reduction in geopolitical risks—had significantly reduced the upward risks to the current account deficit compared to previous months.