On Friday, the world was in for a shock as eyewitness reports began to surface detailing strange movements of tanks and military aircraft in Turkey. Shortly thereafter, in the dead of night, factions within the Turkish military said that they were in control of the country and declared martial law.
Just like that, a seemingly normal Friday in the country straddling Eastern Europe and Western Asia turned into chaos as a full blown military coup was underway. Turkish President Recep Tayyip Erdogan, who was away on vacation at the time, promptly returned home and promised to quell the coup with whatever force necessary.
In short, the coup appeared to be rather disorganized and was squashed quickly. Although some coup plotters were able to take political hostages and gain control of a broadcasting center, Turkish police restored order and Erdogan declared that the coup was over before the end of the night.
As of right now, not much about who organized the coup, or for what reason it was attempted, are clear to the public. Erdogan has taken over 6,000 people into custody, including many major military officials and judges.
Based on its unique geographical location, Turkey is an important hub for a lot of European and Asian economic activity, and it would come to no surprise that investors would react to the type of uncertainty and instability that results from a failed military coup. After the weekend’s events played out, we were able to see this picture a lot more clearly on Monday morning.
Oil Not Affected
In the major Turkish city of Istanbul is the Bosphorus Strait, a shipping chokepoint that deals with about 3% of global oil shipments. The Strait was briefly closed on Friday, and these types of chaotic events tend to send oil prices higher as investors are uncertain about the movement of supplies.
Nevertheless, it looks like the oil market is, for the most part, overlooking the coup attempt as oil prices fell on Monday. Both U.S. oil and Brent, the global benchmark, fell about 2% in early morning trading.
Instead, investors seem to be focusing on the increasing glut of refined oil products. The market is simply oversupplied, which means that demand from refiners will slump as the fall maintenance season approaches.
Turkish Stocks Hammered
Of course, investors around the world were not ready to simply ignore the coup attempt all together. The iShares MSCI Turkey ETF
TUR is down over 6.4% on Monday, while the Turkish Investment Fund TKF is down about 5.5%.
TKC Quick Quote TKC - Free Report) , the leading provider of mobile communications services in Turkey, has also taken a beating. Shares of the company are down over 5.3% today.
Even still, these stocks and funds all remain comfortably above their 52-week lows, and the reaction to the coup appears to be less drastic than with other coups and revolutions we have seen in the past.
While any military coup is concerning and any loss of life is always tragic, it seems that the failed coup in Turkey over the weekend was squashed quick enough to not significantly interfere with the day-to-day economic operations of the country. Of course, there will be a period of uncertainty and major political change in Turkey, and investors everywhere will need to keep a keen eye on that. For now, however, it looks like much of the market is looking past these events.
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