Despite economic shocks from the Israeli-American war on Iran, Erdogan is positioning Turkey as the region's next energy hub and trading center.
Writing for Haaretz, analyst Zvi Bar'el reports that Turkish President Recep Tayyip Erdogan finds himself navigating a precarious but potentially lucrative moment. The Israeli-American war on Iran caught Ankara off guard — but with the worst-feared scenarios now seemingly off the table, Turkey is pivoting from damage control to opportunity.
Turkish intelligence had warned that an Iranian collapse could trigger civil war, mass Kurdish mobilization, or a refugee surge across Turkey's border. None of those scenarios materialized. NATO's anti-aircraft batteries intercepted the Iranian missiles aimed at U.S. bases on Turkish soil, and Turkey was spared the physical devastation that hit the United Arab Emirates hardest. Even so, the economic toll was severe.
The war sent Turkey's finances into a tailspin. Ankara was forced to sell $26 billion in March alone to defend the Turkish lira, offloading 56 tons of gold reserves in the process. Inflation, which Finance Minister Mehmet Simsek had targeted at 13–19 percent by year's end, has surged toward 40 percent. The government's budget was built around oil at $65 per barrel; prices are now closer to $110. The resulting deficit is projected to reach $45 billion — $15 billion over forecast. The state subsidy for gas firm BOTAS will need to triple, and a planned gas tax has been shelved.
Yet Turkey is already rebranding the crisis as a proof of concept. Last Friday, Erdogan hosted an investment conference at the Dolmabahce Palace in Istanbul, unveiling sweeping incentives: tax exemptions for companies operating from Istanbul's financial center, tax-free foreign earnings for returning Turkish citizens, and discounts for transit traders and exporters. The pitch was unmistakable — Turkey wants to replace Dubai as the region's premier trading house.
"Turkey isn't only a corridor but a vital base for trade and energy routes in the entire region," Erdogan declared. The war, he argued, exposed a dangerous over-reliance on the Persian Gulf — a single waterway controlled by the Hormuz Strait, feeding into the Bab el-Mandeb near Yemen and then the Suez Canal. Turkey, in his vision, offers the alternative.
The centerpiece of that alternative is the Iraq Development Road — a 1,200-kilometer land corridor under construction since 2023, linking Iraq's Al Faw Grand Port to Turkey at an estimated cost of $17 billion. Its first phase is due in 2028. Critics note it won't solve the immediate energy crisis and could be vulnerable to terrorist attack. Strategically, it is also designed to undercut the rival India-UAE-Saudi-Israel-Mediterranean trade corridor.
Turkey's ambitions extend beyond pipelines. Erdogan has spent three years deepening military ties with Gulf states — selling Bayraktar Akinci drones to Saudi Arabia in a record deal, maintaining a military base in Qatar, rebuilding Syria's army, and signing an intelligence-sharing pact with Iraq. With Trump signaling a possible NATO exit, Ankara is positioning itself as an alternative security anchor for both the Gulf and a newly self-reliant Europe.
Both audiences are skeptical. EU Commission President Ursula von der Leyen recently warned against European dependence on "Russia, Turkey or China." Saudi Arabia, after signing a bilateral defense pact with Pakistan, quietly told Turkey there was no room for a third partner. Erdogan's bet, Bar'el notes, is that the war's unfinished business — and Iran's demonstrated willingness to strike its neighbors — will eventually force both Europe and the Gulf to reconsider.
Illustration: Perplexity