Turkish court rules to "overturn" the largest opposition party, stock index plunges 6%, state-owned banks urgently sell $6 billion to defend the lira.

Turkish court rules to "overturn" the largest opposition party, stock index plunges 6%, state-owned banks urgently sell $6 billion to defend the lira.

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A Turkish court has announced the removal of the leader of the country’s largest opposition party. This milestone verdict has not only stirred up a political storm domestically, but also dealt a heavy blow to the financial markets.

On Thursday local time, an appeals court in Ankara announced that the 2023 national congress election results of the country’s largest opposition Republican People's Party (CHP) were invalid, meaning the current party chairman Ozgur Ozel is dismissed from his post, and the leadership team of former leader Kemal Kilicdaroglu is reinstated.

This verdict is seen as President Erdogan’s latest move to further weaken opposition forces. Following the announcement, Turkish financial assets were sold off across the board: the country’s benchmark Borsa Istanbul 100 Index dropped more than 6% intraday and triggered a trading halt due to excessive volatility; the Turkish lira hit an all-time low, with the USD/TRY exchange rate surpassing 45.60.

The lira briefly rebounded against the dollar intraday. During the U.S. trading session, citing informed traders, media reported that Turkish state-owned banks sold about $6 billion in foreign exchange on Thursday in an emergency bid to stabilize the lira. About half of the sales occurred shortly after the court's ruling was announced.

Court Overturns Opposition Party’s 2023 Congress Results

According to Reuters, Bloomberg and other outlets, the Ankara appeals court ruled that there were procedural issues in the CHP’s 2023 congress, and thus declared the results invalid.

This decision directly resulted in:

  • Ozel losing his position as party chairman;
  • Kilicdaroglu’s leadership being restored;
  • All decisions made by the CHP since 2023 being theoretically nullified.

CHP Vice Chair Gul Ciftci stated the party would appeal the decision.

Ozel is considered an important ally of imprisoned Istanbul mayor Ekrem Imamoglu, long regarded as Erdogan's most threatening political opponent.

In the 2024 local elections, under Ozel’s leadership, the CHP handed the ruling Justice and Development Party (AKP) a major defeat, which was seen as the most significant victory for Turkey’s opposition in years.

This court decision has been widely interpreted as a new round of "systematic crackdown" on the opposition by Turkey's ruling authorities.

Market Collapse: Trading Halt, Lira Hits Record Low

After the verdict, Turkish assets faced panic selling, hitting stocks, bonds, and currency:

  • The Borsa Istanbul 100 Index closed down 6.05%;
  • Market declines triggered a halt on all trading;
  • The Turkish five-year CDS risk premium rose to 261 basis points;
  • The lira’s exchange rate against the dollar fell near historic lows.

Citing informed traders, media outlets reported that Turkish state banks sold a total of about $6 billion in foreign currency on Thursday to intervene in the market, with about half happening shortly after the court’s ruling.

This was Turkey’s largest foreign exchange intervention since March this year. According to the traders, there was “large-scale, concentrated dollar selling” at the start, and the intensity of intervention later subsided.

Previously, due to pressure on emerging market assets triggered by the Iran war, Turkey’s central bank had already depleted much of its forex reserves. Media data shows that in March alone, Turkey’s reserves shrank by $43.4 billion, the biggest monthly drop on record.

In order to support the lira, the Turkish government had previously: massively sold U.S. Treasuries; sold gold reserves; raised lira financing costs; and ordered state banks to intervene in the market.

David Austerweil, deputy portfolio manager of VanEck Emerging Markets, stated: “Although the central bank currently still has enough reserves to maintain the present framework, the buffer is thinning rapidly.”

Is Erdogan Tightening Political Control Further?

The core background of this incident is the ongoing escalation of political pressure in Turkey in recent years.

Imamoglu has been imprisoned since March 2025. Although the CHP has nominated him as the presidential candidate for 2028, because his university diploma was revoked, he may even lose eligibility to run.

Media reports point out that the court ruling further weakens the opposition's efforts to secure Imamoglu’s release, and strengthens Erdogan’s control over Turkey’s political system.

In the past year, many opposition figures have been investigated or detained:

  • Mayors of several large cities have been investigated;
  • Ankara’s mayor Mansur Yavas also faces charges of “misusing public resources”;
  • In September last year, the Istanbul local branch of CHP was also taken over by the courts.

Concerns about the stability of Turkey’s system are rising rapidly in the market.

Guillaume Tresca, emerging market strategist at Generali Asset Management, stated: “This verdict will further weaken investors’ risk appetite for Turkish lira carry trades.”

And when news of the court ruling broke, Turkish Finance Minister Mehmet Simsek and Central Bank Governor Fatih Karahan happened to be attending a BBVA investor conference in London, trying to woo back international capital.

One attendee described on social media: “Everyone’s phones went off simultaneously, and people immediately left for their offices.”

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