Turkey's President Recep Tayyip Erdogan who returned to the country in the early hours of Friday sounded more defiant than ever, telling cheering supporters that opposition protests must end.
Speaking from an open-top bus to thousands of protesters who had waited late into the night for his return from Tunisia, Erdogan said: "These protests that are bordering on illegality must come to an end immediately."
His comments are likely to further inflame protesters who have staked out the leafy park at Taksim square in Istanbul to protest against the government's heavy-handed tactics and the construction of a shopping mall on the site. Those protests are now in their eleventh day.
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There was one bright spot on Friday. Ratings agency Fitch said the protests weren't a threat to the country's investment-grade credit rating.
Turkey's stock market rebounded strongly on Friday, rising 3.6 percent after falling 4.7 percent on Thursday.The Turkish lira also strengthened against the dollar to 1.874 from 1.8960.
But according to Timothy Ash, head of emerging markets research at Standard Bank, this may be the calm before the storm.
He said markets may be in a wait and watch mode after the recent sell-off, which saw Turkish stocks drop around 19 percent between May 22 and Thursday's close.
One reason analysts are especially worried is because Turkey depends heavily on foreign investment inflows to fund its current account deficit, which is running at 6 percent of gross domestic product (GDP).
Of those inflows, nearly 90 percent are short-term in nature, with just 10 percent coming from foreign direct investment (FDI) according to Capital Economics, a firm which had been warning about hot money flows and a credit bubble in the country since before the crisis.
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"Although political developments are very difficult to predict, if we are headed for a prolonged period of uncertainty, Turkey is more vulnerable than other emerging markets," Neil Shearing, chief emerging markets economist at Capital Economics told CNBC.
In a report issued on Thursday, Credit Suisse Private Bank said it had turned negative on the Turkish lira, forecasting the currency would fall to 1.97 against the dollar from 1.874 on Friday.
The bank cited the reliance of Turkish banks on short-term foreign borrowing, the risk of a credit contraction in the event of an abrupt disruption to capital inflows and the need for a higher domestic savings rate in order to reduce the dependence on foreign capital.
Still, most analysts think it's too premature to draw parallels between Turkey's protests and the Arab Spring, which affected several countries in the middle east and North Africa in 2011.
According to financial data provider Markit, the behavior of Turkey's credit default spreads – which allow investors to make bets on the likelihood of a sovereign default – have been quite different from that seen in Egypt at the height of its crisis.
"Although there is an increase in the number of quotes on Turkey CDS, it is nowhere near the increase observed for Egypt back in January 2011, at the start of the so-called Arab Spring."
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