Istanbul: Turkish markets fell on Friday as rising geopolitical risks pushed oil prices higher after US President Barack Obama said he was prepared to make "targeted" military strikes in Iraq to combat an extremist insurgency.
Market optimism after the Federal Reserve committed to keeping monetary policy loose soured after Obama said on Thursday he would send up to 300 US military advisers to Iraq.
He nevertheless stressed the need for a political solution to the crisis as government forces battled Sunni rebels for control of Iraq's biggest refinery.
"The lira is the worst-performing emerging market foreign exchange after Obama's speech on Iraq last night. Turkey's vulnerability in the most unstable region in the world is clashing with a great environment for emerging market assets," said Isik Okte, a strategist at TEB-BNP Paribas.
The lira had weakened to 2.1400 against the dollar by 0722 GMT from 2.1290 late on Thursday, while the yield on Turkey's 10-year benchmark government bond rose to 8.91 percent compared with 8.81 percent at Thursday's close.
Oil prices rose close to a nine-month high above $115 a barrel on Friday on concerns that heavy fighting could limit oil supply from OPEC's second-biggest producer.
Turkey purchases 98 percent of its natural gas needs and more than 90 percent of its crude oil from foreign producers.
Those imports help swell a current account deficit, considered Turkey's main economic weakness, that hit $65 billion in 2013.
Turkish Finance Minister Mehmet Simsek said earlier this month that he expected the country's energy import bill to reach $61 billion in 2014, compared with $56 billion last year.
Turkish markets will also eye the central bank's monthly survey of inflation expectations among businessmen and economists.
Governor Erdem Basci said on Monday the central bank could cut rates as soon as its June 24 policy meeting if it is convinced that the outlook for inflation is improving significantly.
A Reuters survey of 20 economists forecast a 50 basis point cut in rates next week.
The main Istanbul share index fell 0.54 percent to 78,630.86 points, underperforming the broader MSCI index of emerging markets, which fell 0.36 percent.
