The escalating conflict between the US and Israel against Iran is beginning to inflict significant financial damage on companies worldwide, with businesses already reporting losses of at least $25 billion. This figure stems from rising oil prices, disrupted trade routes, and higher operating costs, according to an analysis of company statements from firms in the United States, Europe, and Asia.
Strait of Hormuz Blockade Disrupts Global Trade
At the heart of the disruption is Iran's blockade of the Strait of Hormuz, one of the world's most critical energy routes. This blockade has pushed oil prices above $100 per barrel, representing a more than 50% increase compared to pre-conflict levels. The surge in crude prices has raised transport and production costs, while shipping delays and supply shortages are affecting industries across the globe.
Companies Respond by Cutting Costs and Raising Prices
According to the analysis, at least 279 companies have taken steps to mitigate the financial impact of the war. These measures include raising prices, cutting production, adding fuel surcharges, and reducing overall spending. Some firms have also suspended dividends and share buybacks, furloughed workers, and sought emergency government support. One in five companies reviewed stated that the conflict had already caused a direct financial hit. The affected businesses span a wide range of sectors, including airlines, car manufacturers, detergent producers, cosmetics companies, and cruise operators.
Airlines Bear the Brunt of the Impact
Airlines have suffered the largest losses so far, accounting for nearly $15 billion in war-related costs, as jet fuel prices have almost doubled. However, the pressure is now spreading to other industries. Toyota warned that the conflict could cost it $4.3 billion, while Procter & Gamble estimated a $1 billion hit to post-tax profit. Whirlpool also slashed its full-year forecast by half and suspended its dividend. Whirlpool CEO Marc Bitzer noted, "This level of industry decline is similar to what we have observed during the global financial crisis and even higher than during other recessionary periods." He added that consumers were delaying purchases due to rising costs, opting to repair products rather than replace them.
Rising Fuel Prices Hurt Consumers
McDonald's stated that continuing supply-chain disruptions were likely to increase long-term costs. CEO Chris Kempczinski highlighted that higher fuel prices were disproportionately affecting lower-income consumers, saying, "Elevated gas prices are the core issue we're seeing right now." Nearly 40 companies in the chemicals, industrials, and materials sectors said they planned to raise prices due to their exposure to Middle Eastern petrochemical supplies. Newell Brands Chief Financial Officer Mark Erceg noted that every $5 rise in oil prices adds about $5 million in costs for the company. German tire maker Continental expected at least a 100 million euro ($117 million) hit from the second quarter due to higher raw material costs linked to rising oil prices. Continental executive Roland Welzbacher commented, "It probably hits us late in Q2, and then it will come in full-blown in the second half."
Europe and Asia Most Exposed
Most of the affected companies are based in Europe and the UK, where energy prices were already elevated before the conflict began. Nearly a third of the companies identified in the analysis are from Asia, reflecting the region's dependence on Middle Eastern oil and fuel supplies. The disruption has also affected supplies of fertilizers, helium, aluminum, and polyethylene.
Bigger Impact May Still Lie Ahead
Analysts cited by Reuters suggest that the full impact of the conflict has not yet appeared in company earnings. FactSet data shows that forecasts for second-quarter profit margins have already been cut for industrial, consumer discretionary, and consumer staples companies in the S&P 500 since March 31. Goldman Sachs analysts stated that companies listed on Europe's STOXX 600 index are likely to face more pressure from the second quarter onwards, as passing on higher costs becomes more challenging. UBS head of European equity strategy Gerry Fowler noted that sectors such as autos, telecoms, and household products are already seeing earnings downgrades of more than 5% for the next 12 months. In Japan, analysts have cut second-quarter earnings growth estimates to 11.8%, nearly half the level forecast at the end of March.
