Turkey formally arrested President Recep Tayyip Erdogan’s main political rival, a decision likely to trigger more market turmoil and protests across the country.

Ekrem Imamoglu, Istanbul’s mayor, was jailed on corruption charges Sunday morning, days after being detained by police.

The case has the potential to keep Imamoglu, who denies the charges, behind bars for years and prevent him from running against Erdogan in the next elections. He is the most prominent person to be ensnared in a recent wave of detentions and investigations against opposition figures.

His arrest suggests that Turkish authorities won’t be deterred by mass protests that have broken out in cities including Istanbul, Ankara and Izmir. Erdogan and his officials have accused the main opposition party of trying to sow chaos by calling people onto the streets.

Social media platform X’s Global Affairs Government account said they’d received court orders from Turkish authorities to block “over 700 accounts of news organizations, journalists, political figures, students and others” within the country.

“We believe this decision from the Turkish government is not only unlawful, it hinders millions of Turkish users from news and political discourse in their country,” X said.

Turkish assets plunged last week. The country’s stocks and currency experienced the biggest drops globally, according to data compiled by Bloomberg, while the government’s local-currency bond yields surged. That was despite state lenders selling at least $9 billion to try to calm markets.

The central bank hiked a key interest rate in an unscheduled meeting on Thursday. It convened executives from the nation’s top lenders on Sunday in another attempt to stem the fallout, people with direct knowledge of the matter said, asking not to be identified as the gathering is private.

The impact on the $1.4 trillion economy will be critical for Erdogan as he navigates the latest of the many political crises during his 22 years in power. Inflation of almost 40% is denting his party’s popularity.

The risk of any blowback from Turkey’s Western allies is low. Europe is distracted by Russia’s war on Ukraine, a conflict that’s making the continent increasingly reliant on Turkey — which has NATO’s second-largest army — for security. And US President Donald Trump is unlikely to weigh in.

“Turkish assets will be under renewed pressure in the aftermath of Imamoglu’s arrest but Erdogan is likely betting that this won’t last long,” said Wolfango Piccoli, the co-president of consulting firm Teneo. “Turkey’s foreign partners are unlikely to exercise meaningful pressure.”

Ultra-Popular Mayor

Imamoglu’s detention on Wednesday came a day after authorities revoked his university diploma, which Turks need to run for the highest political office. The Istanbul court hearing the allegations on Sunday decided against a formal arrest on separate terror charges, but Imamoglu will remain in jail over the corruption probe.

The 54-year-old mayor’s popularity has risen nationally since 2019, when he defeated Erdogan’s handpicked candidate in local elections. He repeated his success at the ballot box against another Erdogan ally last year, helping the main opposition Republican People’s Party, known as the CHP, inflict an unprecedented defeat on Erdogan’s AK Party.

Imamoglu was scheduled to be declared his party’s candidate on Sunday for the next presidential vote, scheduled for 2028. The cancellation of his university degree and decision by Turkish authorities to put him behind bars leave his political future unclear.

“We’ll together remove this black stain put on our democracy,” Imamoglu said in a statement shortly after his arrest. “I stand tall, I will never bow.”

He repeated the popular campaign slogan he used in municipal elections: “All will be good.”

Why Now

Some of Erdogan’s critics say he’s simply trying to weaken the opposition — a charge the government has denied, saying that Imamoglu’s detention has nothing to do with the president or his party.

Others argue Erdogan is using the shifts in the global balance of power to maximize his gains at home: he has a good rapport with Trump, who he hopes to visit at the White House next month, and enjoys close ties with Russia’s President Vladimir Putin. Turkey’s expanding military footprint makes Erdogan a key power broker in regional conflicts from Ukraine to Syria, and a useful ally for the European Union as the bloc frets about a possible US retreat.

Markets Nosedive

The most significant blowback from Imamoglu’s detention has been in financial markets. The unfolding volatility could undo many of the economic gains made since Turkey pivoted to more orthodox monetary policies in mid-2023.

Erdogan, who had long championed low interest rates to boost economic growth, swallowed his pride and brought back former ally Mehmet Simsek as finance minister.

Simsek, who used to be a Merrill Lynch bond strategist, oversaw a period in which the central bank raised interest rates to 50% — the highest since Erdogan began ruling Turkey in 2003 — and kept them there long enough to attract billions of dollars of inflows from foreign investors.

Inflation, still as high as 75% last May, was finally showing signs of slowing after years of runaway price increases pushed many Turks into poverty and pushed them away from Erdogan’s ruling party.

“Dead-end Street”

The Turks taking to the streets over the past four days have defied various bans on protests. Istanbul’s governor placed restrictions on travel into and out of the city to stop the rallies from spreading.

Erdogan — the main focus of the anti-government protesters’ ire — appears unfazed. As was the case in 2013 during months of anti-government protests that began in Istanbul and spread throughout much of Turkey, the president has gradually become more confrontational.

“It’s a dead-end street,” Erdogan said after the main opposition party called on followers to organize mass protests. “The days when street terror set the direction for politics is now in the past, just like the old Turkey.”

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—With assistance from Inci Ozbek, Firat Kozok and Tugce Ozsoy.

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