"The big fear in the market is that we are headed for a full-blown emerging market crisis", said Ulrich Leuchtmann, a strategist at Commerzbank, citing the 1997 Asian financial crisis. Instead of taking drastic action to shore up confidence, such as raising interest rates or going to the International Monetary Fund (IMF), the government is couching itself in nationalistic rhetoric of sacrifice.
In an address to Turkish ambassadors gathered for an annual meeting in Ankara, the Turkish leader said that "attacks on the economy are likely to continue for a while", but Turkey will take steps to respond.
Investors are anxious about a confluence of factors: the country's reliance on foreign loans that may stop flowing in as interest rates rise in other economies, like the U.S.; Erdogan's insistence that the central bank not raise interest rates, as most independent analysts say it should; and a spat with the U.S. that has led to sanctions and the fear of greater isolation from longtime allies in the West.
"We (also) have our Venus and Vestel", he said about homegrown Turkish electronics brands.
His call met a mixed response on Istanbul streets. "What do you want to achieve", he added, referring to the US. "Turkey will be stronger at the end of this process".
But shopkeeper Umit Yilmaz scoffed.
The Associated Press reported that Turkish President Recep Tayyip Erdogan did not clarify how the boycott would be enforced in an announcement of the measure.
Erdogan said his government would offer further incentives to companies planning to invest in Turkey and said firms should not be put off by economic uncertainty.More news: Saudi-Led Air Strike On A Bus In Yemen Kills 29 Children
On the recent tension between Turkey and the US, Cavusoglu said, "Recently, our relations with the US have unfortunately come to a point we did not desire".
Dollar-denominated bonds issued by selected Turkish banks continued to fall on Tuesday, although sovereign bonds steadied.
US national security adviser John Bolton on Monday met Turkey's ambassador to the United States to discuss Brunson's detention.
Actress Ebru Özkan was released the next day, while the pastor was moved from prison to house arrest.
Bayer plunged 11 percent in Frankfurt after a shock USA ruling against its subsidiary Monsanto.
He had been in jail for nearly 20 months when a court in July ordered him moved to house arrest.
The euro zone has also been hit by Turkish woes, particularly after a report by the Financial Times last week suggested the European Central Bank is increasingly concerned about euro zone banks with exposure to Turkey.
U.S. State Department spokesperson Heather Nauert said on Thursday that although the two sides "had wide-ranging meetings at the State Department and with other departments here in Washington", the U.S. side "would define progress as Pastor Brunson being brought home".
Turkish Foreign Minister Mevlut Cavusoglu said the U.S. embassy charge d´affaires was due to visit Brunson on Tuesday, and also adding that talks were under way to come out of the crisis.