Istanbul stock market investors have this week shrugged off worries about the course the Turkish military offensive in northwest Syria might take. As trading came to a close on January 25, the Borsa Istanbul's BIST-100 index had gained 4.4% in the week and was heading for its best week since July last year.

That was despite the fact that a week ago volatility in Turkish equities climbed to a 13-month high in anticipation of the advance on Kurdish People's Protection Units (YPG) fighters in the Afrin enclave, according to Bloomberg. Part of the reason for the resilience among investors seems to be a firm appetite for emerging market assets in general and attractive valuations in Turkish stocks in particular. Added to that, the battle with the YPG—armed by Washington for its fight against Islamic State but regarded as “terrorist” by Istanbul due to its links to Kurdistan Workers' Party (PKK) guerillas who have fought in Turkey for autonomy—poses little immediate threat to Turkey's economy.

Nevertheless, the dangers of the fighting spiralling out of control were brought home on January 25 when Kurdish authorities in Afrin called on Damascus to send Syrian troops to defend the regional border with Turkey. They issued a statement saying the Turkish operation "threatens Syria and the security and life of the civilian population residing in the area". It added: "We call upon the Syrian state to carry out its sovereign duties towards Afrin and protect its borders with Turkey from attacks by the Turkish occupier." There was no immediate response from the Syrian government.

There is also the worry that Turkish and US forces could potentially be drawn into hostilities should Turkish President Recep Tayyip Erdogan pursue his plan to extend the operation to Manbij, a separate Kurdish-held enclave some 100 km (60 miles) east of Afrin. US forces which are located there might be put at risk by the move as might a US plan to stabilise a swathe of Syria.

The YPG denies any links to the PKK, a stance backed by the US.

Forty-eight Turkish-backed rebels and 42 YPG fighters have been killed in the fighting since January 20, according to the Syrian Observatory for Human Rights, a UK-based monitoring group.

The BBC reported that Turkish-backed fighters seemed to be making slow progress.

In a related development, the German government said on January 25 that it has put plans on hold to upgrade German-made Leopard tanks sold to Turkey. There has been a public outcry over German arms sales to Ankara and various regimes around the world since Leopard tanks were pictured in footage of the Turkish offensive in northern Syria.
German Foreign Minister Sigmar Gabriel said a decision on the upgrade would be taken once a new coalition government had been formed in Berlin.