Will Turkey Inherit Iran?

Turkey is not inheriting Iran. It is inheriting Iran's problems. The war has not made Turkey stronger. It has made Turkey more consequential.

Turkey is being positioned as the war’s biggest winner before the war has even ended. The logic is seductive. Iran is degraded. Israel is overstretched. The Gulf is paralysed. And Turkey, the region’s largest NATO power, sits outside the blast radius with a booming defence sector But the assumption that Ankara will simply absorb Iran’s regional weight mistakes proximity for inheritance. Turkey’s strategic position has improved. Its structural vulnerabilities have deepened at the same time. The net outcome is far less certain than either triumphalists or catastrophists suggest.

The short-term damage is real and measurable. The Borsa Istanbul dropped 7% on the morning of the strikes. Foreign investors liquidated between $25 billion and $30 billion in Turkish assets in the first weeks of the conflict, moving into dollars as emerging market risk appetite collapsed. The central bank burned through more than $40 billion in reserves in a matter of weeks to stabilise the lira. Inflation remains above 30%, well beyond the government’s 16% year-end target. Every $10 increase in oil prices adds roughly $5 billion to Turkey’s current account deficit. The roughly $30-per-barrel rise since the start of the year, if sustained, would add $15 billion to the gap. Turkey’s 3-month trade deficit through March hit nearly $29 billion, suggesting the 2026 total could eclipse last year’s $92 billion. Industrial capacity usage fell to its lowest level since August 2020. This is not the profile of a country coasting to victory.

Tourism, a critical hard-currency earner that brought in $65 billion in 2025 on 53 million visitors, is under direct pressure. Bookings from Germany are down. Iranian tourist flows to the eastern border city of Van have stopped. Turkish Airlines and Pegasus have halted flights to Iran, the UAE, Jordan, Lebanon, Syria, and several Gulf destinations. Jet fuel prices have surged over 100% compared to a month before the war began. Estimates suggest Middle Eastern tourism could decline 11% to 27% in 2026. The government’s $68 billion revenue target for the sector now looks unreachable. Three Iranian missiles have entered Turkish airspace since February 28, all intercepted by NATO systems. The US closed its consulate in Adana and advised citizens to leave southeastern Turkey. For a tourism sector that depends on perceived safety as much as actual safety, these are not trivial signals.

The strategic upside

And yet the structural opportunity is undeniable. A weakened Iran removes the single most capable non-Arab Muslim power from the regional chessboard. What remains is Turkey. By geography, by military capacity, by NATO membership, and by industrial base, Ankara becomes the dominant actor adjacent to the Levant, the Caucasus, the Black Sea, the Gulf, and North Africa simultaneously. No other state in the region holds that combination.

The defence sector is the clearest expression of this positioning. Turkey’s domestic defence production rate now exceeds 80%, up from roughly 20% two decades ago. Defence and aerospace exports surpassed $10 billion in 2025, a 48% year-on-year increase. 5 Turkish companies sit in the global top 100 defence firms. The KAAN 5th-generation fighter programme is moving toward serial production with 48 units already contracted to Indonesia and serious interest from Egypt and Saudi Arabia. The Steel Dome multilayer air defence system, led by Aselsan with Roketsan and other national firms, has already delivered over 100 components to the Turkish armed forces. A further $1.92 billion package secures deliveries through 2031. The 2026 defence budget stands at $27.3 billion, a 33.9% increase over 2025, with more than 1,000 active projects worth nearly $100 billion. Ammunition production capacity has been scaled from 4,000 units to 65,000 annually, targeting 1 million by 2028. Turkey is not merely arming itself. It is building the industrial capacity to arm others in a region that has just witnessed its existing security architecture shattered.