Energy shock at the door: is the world drifting toward stagflation?

A New Era: From Limited War to Global Impact

We have entered a period where the global effects of the Iran war are now becoming unavoidable. Compared to the previous 12-day period of limited conflict, today we are faced with a situation that is producing far broader and multi-dimensional consequences.

This new equation has the potential to shake global balances not only in terms of regional security, but across a wide spectrum ranging from energy markets to financial flows. This is no longer a matter of a regional crisis, but rather the possibility of a systemic breakdown.

Türkiye's Financial Resilience

From Türkiye's perspective, the first question is clear: Is our financial stability at risk? The current situation allows us to answer this question with cautious optimism: no. Unlike two years ago, when reserves had fallen to as low as -70 billion dollars, a significant buffer zone has now been established thanks to the improved reserve structure. This framework provides a critical safety net for managing sudden volatility in the foreign exchange market, meeting liquidity needs, and fulfilling short-term external obligations. The response time to exchange rate shocks has shortened, while intervention capacity has clearly increased.

Financial Security: A Domain Beyond Economics

More importantly, we have sufficient capacity to cover all short-term external payments, particularly energy imports. This holds critical importance not only for keeping the economic wheels turning, but also for the sustainability of strategic and military capabilities. This is because financial security is the foundation not only of fiscal strength, but also of political will and military maneuverability. However, the point that must be emphasized here is this: financial security is a necessary condition, but it is not sufficient on its own.

Global Rupture: The Energy Supply Shock

On the global front, the main point of rupture is the shock occurring in energy supply. This shock should not be understood solely as a price increase; the issue is now transforming into a direct physical supply risk. Indeed, the formation of fuel queues in India, the declaration of a state of emergency in the energy sector in the Philippines, and the onset of serious disruptions in fuel supply across Asia show that the problem is turning into a tangible crisis, not merely a theoretical one. These developments point to a new era in the energy market, where even those with money may not be able to access the product.

Risk of Supply Chain Disruption

This disruption in energy access directly threatens global supply chains. In today’s world, where production is spread across different geographies, the lack of even a single component can bring the entire production process to a halt. During the pandemic, we witnessed the severe consequences of this across many sectors, from the semiconductor crisis to automotive manufacturing. Today, a similar risk is emerging again, this time through energy, a far more critical element. For this reason, the issue is not merely about cost increases; it is about production grinding to a halt and capacity loss.

The Stagflation Threat

At this very point, the global economy is facing the risk of stagflation, one of the most difficult types of crises to manage. In other words, we are confronted with an equation where, on one hand, growth is slowing or even stalling, while on the other, prices are rising rapidly and unemployment is increasing. Sharp increases in energy costs push production costs higher, while supply constraints drive prices up on a permanent basis; at the same time, weakening demand suppresses economic activity. This fragile balance creates a situation that also limits the effectiveness of conventional economic policies.

We Must Not Lose Production While Curbing Demand

In conclusion, although Türkiye appears relatively prepared to weather this storm in the short term thanks to its financial buffers, the deepening global energy and supply crisis represents a serious test for all economies in the medium term. The main issue in this process is not just controlling prices, but also preserving production capacity, supply continuity, and economic resilience.

Because curbing demand can be a choice, but losing production brings consequences that are far more difficult to remedy. The critical question for the coming period is clear: Can we manage the energy crisis while maintaining growth, or will the world economy be dragged into a long and painful period of stagflation?