Rising inflation in Turkey and escalating tensions over Iran are expected to stall global central bank rate cut cycles, increasing demand for safe-haven assets. Energy and defense equities see gains amid geopolitical volatility.
- Turkey’s inflation rose to 67.3% YoY in February 2026
- VIX index reached 38.5 by March 2, 2026
- Brent crude (CL=F) climbed to $92.60 per barrel
- Energy sector (XLE) gained 3.7% in one week
- Defense sector indices rose 5.1% amid escalation fears
- Rate cut delays expected across major central banks
Persistent inflation in Turkey, with the annual rate reaching 67.3% in February 2026, has undermined expectations for imminent monetary easing. This resurgence, driven by currency depreciation and food price spikes, signals the central bank may maintain elevated policy rates well beyond earlier projections. Simultaneously, heightened risks of military escalation involving Iran have triggered a sharp rise in market anxiety. The VIX index surged to 38.5 by March 2, its highest level since late 2023, reflecting increased flight-to-safety behavior among investors. Geopolitical stress has also tightened supply concerns in the Middle East, a key energy corridor. As a result, energy markets reacted strongly: Brent crude futures (CL=F) climbed 4.2% to $92.60 per barrel, while U.S. energy stocks (XLE) rose 3.7% over the week. Defense sector indices gained 5.1%, with major players like Lockheed Martin and Raytheon Technologies posting double-digit gains on increased defense spending speculation. The confluence of domestic inflation pressures and international conflict threats is likely to defer rate cuts by major central banks, including the Federal Reserve and European Central Bank. Prolonged higher interest rates are expected to support the U.S. dollar and pressure risk assets, while reinforcing demand for commodities and defense-related equities.