Global Economy Shows Signs of Recovery After US-Iran War

Following the end of the war between the US and Iran, the global economy has entered a recovery phase. The decline in energy prices and the achievement of peace before inflationary effects became permanent limited economic damage.

Scraper SystemJune 21, 2026, 10:33 AM

Global Economy Shows Signs of Recovery After US-Iran War

The US-Iran war has ended. While the impact on the global economy was not as severe as feared, recovery is now showing initial signals, primarily in energy and inflation. The long-awaited peace has finally been approached. A memorandum of understanding was signed. The next step is the signing of the official peace agreement. Although not as devastating as feared, the war affected the global economy. Not only energy prices but also interest rates rose.

Nevertheless, at least the economic damage did not reach a scale that would trigger serious stagflation. After the peace, markets are attempting to normalize. Oil prices had already begun to decline with the ceasefires some time ago, and following official statements about peace, this decline became even more pronounced. Oil prices, which rose to around $120 during the war period, have now retreated to $80.

Natural gas prices are also trending downwards. Prices are unlikely to return to pre-war levels immediately. Many facilities in Gulf countries were hit, or production was halted due to the closure of the Strait of Hormuz. Repairs and returning to full capacity production will take time.

Qatar announced this week that LNG production could reach 50% of capacity within one month and 80% within two months. The time to approach capacity will vary from country to country. A period of 6-9 months may be needed for countries to near their full production capacities.

The end of the war before supply problems and price increases in energy excessively spilled over to other sectors was a major plus for the economy. Of course, inflation rates increased and expectations deteriorated, but peace was achieved before the war's inflationary effects fully transitioned from a temporary status to a permanent one.

As Treasury and Finance Minister Mehmet Şimşek noted, the war had an impact of approximately 5 percentage points on inflation in Turkey. HIGH DEBT, HIGH RISK After peace, interest rates have not yet shown a reaction as strong as energy prices on a global scale. Budget deficits increased since the pandemic are raising risk premiums. Public debt ratios have risen significantly in many countries.

Bond investors, under these conditions, demand higher interest rates to finance budget deficits. Over the past five years, 10-year bond yields rose from 1% to 4% in the US, and from negative levels to 3% in Germany. Compared to Turkey's high double-digit figures, nominal interest rates in these countries are still much lower.

However, the unusually high public debt ratios and the speed of interest rate increases in these countries pose a significant risk. Economies need to grow for the ratio of public debt to national income to decline. But there isn't a strong story on the growth side. Developed countries have been trying to grow with the fuel of AI investments for the last two years.

AI undoubtedly is a technology with high potential. But AI companies are currently not developing this technology in a way that would ensure permanent and inclusive growth in the real economy. Meanwhile, technology companies are seeking approximately $6 trillion in financing for data center investments, which AI most needs. Of this, $1.2 trillion is expected to be covered from the bond market.

Financial markets have largely directed their resources towards AI. Given this situation, very little financial resources remain for the real economy, growth does not increase sufficiently, and debt ratios continue to remain at risky levels.

TURKEY HAS AN ADVANTAGE It is predicted that the next global financial crisis could stem from high public debt ratios. Therefore, in the post-war period, debt ratios will be among the indicators markets will focus on most. Turkey's strongest aspect in macroeconomics being its debt level is critical in this respect.

Household and public debt ratios are at quite low levels compared to peer countries. While the ratio of public debt stock to GDP globally is nearing triple-digit levels, in Turkey the ratio is below 30%. This situation could create a significant advantage for Turkey in the coming period.

To benefit from this advantage in a long-term manner, we need low inflation, political stability, and a new growth story. Specifically regarding the war, we should assess the damage in inflation and proceed with structural solutions. May inflation had shown that the effects of the war shock were easing. If June inflation comes around 1% on a monthly basis, it would be a serious morale boost for disinflation.

In such a scenario, the Central Bank could first return to weekly repo auctions, lowering the weighted funding cost from 40% to the policy rate level of 37%. Credit growth limits tightened during the war could be pulled back to previous levels. Afterwards, opportunities for gradual policy rate cuts could be evaluated based on maturing conditions.

The real economy needs this.

Global Economy Shows Signs of Recovery After US-Iran War