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[Turkey Prepares for Protracted War, Finance Minister Hints at Additional Tools] ⑴ Turkish Finance Minister Şimşek stated on Thursday that if the ceasefire agreement reached this week between the US and Iran fails to be effectively maintained, the government is prepared to utilize a different set of policy tools to address the ongoing impact of the Middle East conflict. ⑵ In an interview with Haberturk TV, Şimşek stated that the government's primary scenario is a one-month war, and a three-month extension would severely damage the economy, but he did not elaborate on the details of potential countermeasures. ⑶ Among the measures already taken, the Central Bank of Turkey has suspended its easing cycle at the policy interest rate level of 37%, and has supported the lira by raising the overnight interest rate by nearly 300 basis points to approximately 40%, and by selling and swapping hundreds of billions of dollars in foreign exchange and gold reserves. ⑷ Şimşek acknowledged that the severe shock has led to a deterioration in the inflation outlook, challenging the target of bringing the inflation rate below 20% by the end of the year, and also widening the expected current account deficit. (5) He disclosed that the central bank's reserves have decreased by $48.7 billion since the outbreak of the war, but still have a reserve balance of approximately $162 billion, and expects the reserve size to return to pre-crisis levels once the war ends. (6) If the ceasefire breaks down, the risk scenario will encompass a global economic recession and stagflation, and even if the conflict ends, the disrupted global supply chains will take months to recover to pre-war levels. (7) Shymşek also revealed that after weeks of capital outflows, capital flows have shown a very strong positive reversal since Wednesday, indicating that Turkey's sound macroeconomic fundamentals are regaining international investor recognition.