Global Markets Under Geopolitical Shadow and Soft US Data: Is the Fed Shifting Stance?

Global financial markets kicked off the new week with a cautious risk appetite as escalating Middle East geopolitical tensions and weaker-than-expected US macroeconomic data reignited growth concerns. While the diplomatic stalemate between the US and Iran supports commodity prices, the sharp drop in consumer confidence is forcing a reassessment of global monetary policy trajectories.

Waning US Consumer Confidence and the Fed's Recalibrated Path

Signals of a slowdown in consumer spending, the primary engine of the US economy, are becoming more pronounced. A 0.6 percent drop in July retail sales and the Michigan consumer sentiment index falling to 51 have cast a shadow over third-quarter growth prospects.

■US retail sales recorded their first contraction since October 2025.

■With inflation showing signs of cooling, the probability of a Fed rate hike in September has plummeted to 30 percent, weakening expectations for any further hikes this year.

■The US 10-year Treasury yield eased to 4.68 percent, while the US Dollar Index slipped to 99.5.

Geopolitical Premium in Energy and Safe Havens

Military maneuvers in the Middle East and the threat of new sanctions continue to fuel supply concerns, driving commodity prices upward.

■Brent crude rose 0.1 percent to $88.7 per barrel on supply disruption fears.

■Gold, the traditional safe haven, appreciated 0.5 percent to trade at $4,396 per ounce.

■While major Wall Street indices posted minor losses, Reddit shares surged nearly 13 percent following news of its upcoming inclusion in the S&P 500.

Borsa Istanbul Navigates Global Headwinds Ahead of Budget Data

Domestically, Borsa Istanbul demonstrated relative resilience against global volatility and is starting the week with a focus on key domestic indicators.

■The BIST 100 index closed Friday up 0.28 percent at 14,172.26 points.

■The USD/TRY pair started the day flat at 47.8990.

■Market participants will closely monitor today's release of the July budget balance and the commercial property price index.

This cautious stance in global markets presents a double-edged sword for emerging economies, particularly those like Turkey with high external funding requirements. While the rising probability of the Fed halting its rate-hiking cycle is positive for global liquidity, elevated geopolitical risks keep risk premiums (CDS) elevated. Domestically, the Central Bank's tight monetary stance and macroprudential measures continue to constrain the banking sector through strict commercial loan growth limits. The contraction in SME lending and the deceleration in commercial credit growth are intensifying the working capital pressures on the real sector, making it harder for banks to maintain asset quality. Going forward, managing the delicate balance between global rate-cut signals and domestic credit tightening will be critical.