Is the use of “the” before people appropriate here?
"What will the people do without water?" an elderly lady asks, looking concerned. She has reason to be so. With the city's fresh water sources under threat by the Canal Istanbul project, the people of #Istanbul may lose the lifeblood of their livelihoods.

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The usage of 'the' in the context is correct because it is relating to a specific demographic. If you had said 'what will people do without water', it would be generalized and your statement would simply fall apart.

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Yes. This is definite article for them as which people they are instead of just general or random people.
The prepositional phrase "of Istanbul" helps to show that you need "the" because it also defines that these are defined.

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