Turkey's Stock Market Plunges 8.7 Percent as Political Crisis Unfolds

Turkey’s Financial Markets in Freefall as Political Crisis Deepens

BIST-100 Plunges 8.7%—Largest Drop Since 2021 Amid Political Turmoil

On March 19, 2025, Turkey’s financial markets were rattled by an unprecedented political shakeup, sending stocks, bonds, and the lira into a downward spiral. The country’s benchmark BIST-100 index plummeted by 8.7%, marking its worst single-day loss since 2021, as investors reacted to the arrest of Istanbul Mayor Ekrem İmamoğlu, a key opposition figure and potential presidential candidate.

Political Upheaval and Market Fallout

The turmoil erupted early Wednesday morning when Turkish authorities detained İmamoğlu on charges of corruption and alleged ties to terrorist organizations. The arrest, seen as a politically motivated move, coincided with Istanbul University’s announcement that it had revoked İmamoğlu’s bachelor's degree, potentially disqualifying him from running for president.

Adding to the crisis, more than 100 individuals—including politicians, journalists, and business leaders—were also detained. The sweeping crackdown ignited protests across Istanbul, with thousands taking to the streets, only to be met with police force, pepper spray, and rubber bullets. The Erdogan government swiftly imposed a four-day ban on demonstrations, restricted social media access, and shut down several streets and subway lines.

Investor Panic: A “Triple Kill” Across Stocks, Bonds, and Currency

The political instability triggered panic selling in financial markets. The Turkish lira plunged by more than 10%, reaching an all-time low against the U.S. dollar, while government bond yields spiked as investors fled Turkish assets. According to market data:

• BIST-100 fell 8.7%, wiping out billions in market capitalization.
• The lira-dollar exchange rate dropped by 12.7%, marking its sharpest single-day decline in years.
• Turkey’s 10-year government bond yield soared by 60 basis points, reflecting increased risk perception.
• Reports indicated a mass exodus of foreign capital, further exacerbating the financial strain.

Implications for Foreign Investors

The latest developments underscore the growing risks for investors in Turkey, which has already been grappling with high inflation, a volatile currency, and a struggling economy. The BIST-100, primarily dominated by domestic investors, saw a particularly sharp selloff as retail traders reacted to the crisis.

For international investors, the key concerns include:

• Political risk escalation: The detention of İmamoğlu signals a potential increase in government intervention in both politics and markets.
• Currency volatility: The lira’s steep decline may deter further investment, especially given the government’s history of unconventional economic policies.
• Market liquidity risks: The circuit breakers triggered on the stock exchange point to heightened instability, making it difficult for institutional investors to manage exposure.
• Potential for early elections: With Turkey’s next scheduled election set for 2028, speculation is rising about whether President Erdogan might call for an early vote, a move that could further unsettle markets.

Crisis Management or Deeper Market Strain?

The Turkish government’s response in the coming days will be crucial in determining market stability. A prolonged political crisis could push the BIST-100 further into bear territory, weaken the lira further, and amplify concerns over capital flight.

For investors still engaged in Turkish markets, a cautious approach is warranted. Monitoring government statements, central bank interventions, and international diplomatic reactions will be key to assessing the potential for a market rebound—or further declines.

With Turkey’s financial system already under stress, the latest political developments could mark a turning point, setting the stage for either aggressive stabilization efforts or deeper economic uncertainty. For now, investors remain on edge as the country navigates one of its most volatile moments in recent history.