PKK Leader's Call May Boost Investor Sentiment

A previous peace process between 2013-2015 ultimately collapsed, leading to one of the conflict's most intense phases and costing the Turkish economy an estimated $300 to $450 billion, primarily in military expenses. While the government at the time anticipated an investment boom, particularly in the underdeveloped southeast, it never materialized, with local businesses citing a lack of economic activity and high unemployment. A lasting resolution this time could significantly alter this dynamic, potentially unlocking investment and tourism. This renewed prospect of stability aligns with a pivotal moment for Turkey's energy sector. The country is embarking on a massive grid modernization program, backed by an initial $70 million from the Climate Investment Funds as part of a $1 billion initiative. The goal is to prepare the grid for an additional 60 GW of wind and solar capacity by 2035, a project requiring an estimated $75 to $100 billion in total investment for energy transition. For international LPs, geopolitical uncertainty remains a primary concern, with 62% citing it as a top factor likely to impact private equity returns. Turkish fund managers often face questions from foreign LPs about local capital commitment, a challenge given the historically low participation of domestic pension funds in private equity. A tangible de-escalation of the conflict could directly address this core risk, improving the country's profile for institutional investors who have been wary of regional instability. The push for peace coincides with growing maturity in Turkey's deeptech ecosystem. There are now 653 deeptech startups in the country, 117 of which are funded. The commercialization of university research is accelerating through initiatives like Istanbul Technical University's ITU ARI Teknokent, which fosters international partnerships to help scale-ups in sectors like AI, life sciences, and cybersecurity. Progress is also visible in specific deeptech verticals. In late 2024, Turkey launched its first 5-qubit quantum computer, a collaboration between defense firm Aselsan and TOBB University of Economics and Technology, signaling a strategic push to reduce foreign dependence on critical technologies. In robotics, Ankara-based Milvus Robotics, which develops autonomous mobile robots for global clients like Nissan and Unilever, secured a $4.5 million investment round in May 2025 to fuel its global expansion. The macroeconomic backdrop remains challenging, complicating the fundraising environment for startups. To combat high inflation, the central bank has maintained elevated interest rates, making borrowing expensive. This policy has weighed on new business formation, with company registrations falling 13.1% in January 2026 compared to the previous month. Venture capital investment in Turkish startups saw a 45% decrease in 2025, reflecting a broader European trend and domestic economic volatility. Despite the funding slowdown, the Turkish startup scene has shown resilience, with investor focus shifting from AI towards deeptech domains like robotics, defense tech, and biotech in the latter half of 2025. Foreign capital continues to play a decisive role in later-stage deals, with a common model involving local VCs for early-stage funding followed by international investors for global scaling. A more stable political environment could significantly strengthen this pipeline.