TAIWAN/MILAN/FRANKFURT: The U.S.-Israeli war with Iran is rattling businesses worldwide, driving up energy prices, squeezing supplies of critical raw materials and raising questions about the reliability of trade routes critical to the flow of goods from food to car parts.
The widening conflict has choked major air and sea transport corridors through the Middle East. Shipping through the Strait of Hormuz, a conduit for one-fifth of the world’s oil, slowed to a near-halt as Iran retaliated with drone strikes against U.S. and Israeli attacks. Busy air transit routes in the Gulf have gone dark.
Soaring oil and gas prices have pushed up costs for companies, threatening their margins, and raised the spectre for policymakers and investors of a fresh bout of inflation.
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“If these effects last longer, everyone will start to feel them,” Young Liu, chairman of Foxconn, the world’s largest electronics maker and a key partner to Nvidia, said on Friday.
A Knock-on effect on every company
Even before last Saturday’s strikes, companies were struggling with U.S. President Donald Trump’s trade war, after hefty U.S. import tariffs drove up costs, upended supply chains and hurt consumer confidence.
A spike in gas pump prices is another blow to U.S. consumers: a gallon of regular gasoline cost an average $3.32 nationwide on Friday, up from $2.98 a week ago. Brent crude futures have spiked to $90 per barrel but remain below levels of 2022 when Russia invaded Ukraine.
“Any time you see an increase in oil price or gas price, it’s got a knock-on effect further down on every company, on every industry,” Simon Hunt, CEO of Italian drinks maker Campari, told Reuters after the firm’s results this week.
Pain in Europe still recovering from 2022 crisis
In Europe, still recovering from 2022’s energy crisis, the pain is acute for energy-intensive industries like chemicals.
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The IW German Economic Institute said on Thursday that oil at $100 per barrel could cost Germany’s economy 0.3% of GDP this year and 0.6% next year – a loss of economic output amounting to around 40 billion euros ($46 billion) over two years.
Campari’s Hunt said the firm has some long-term contracts in place to protect against big energy price increases. Reckitt Benckiser, CFO Shannon Eisenhardt told analysts the consumer goods firm has hedged about 55% of its oil and gas price exposure for 2026.
But Uniden, which represents energy-intensive French industries including chemicals, autos and agriculture, warned some companies were already cutting back.
“The impact on gas prices in Europe has been immediate, with an 80% increase in the spot price and considerable uncertainty about its future,” it said in a statement. “Some production has therefore been halted or slowed down.”
Airline stocks have also been hammered. European budget carrier Wizz Air, which is hedged, warned that the war would dent its net profit for fiscal year 2026 by about 50 million euros ($58 million).
Aluminium, helium and sulphur
The disruption to sea freight affected specialised industrial inputs like sulphur and led major aluminium producers to invoke force majeure clauses. Shippers and insurers have hiked some prices dramatically in response to the conflict.
Qatari smelter Qatalum began shutting down operations this week, while Aluminium Bahrain said it had halted shipments and declared force majeure because it could not move metal through the Strait of Hormuz. The Gulf region accounts for about 8% of global aluminium supply.
Aluminium prices on the London Metal Exchange jumped sharply on the news, while physical premiums in Europe and the United States climbed to multi‑year highs.
South Korean officials warned that a prolonged conflict could disrupt supplies of key semiconductor manufacturing materials sourced from the Middle East, including helium, which is essential for chip production and has no viable substitute.
Drone strikes that damaged some of Amazon’s (AMZN.O) data centres in the United Arab Emirates and Bahrain raised questions about technology supply chains and Big Tech’s pace of expansion in the region.
Recession Playbook
A prolonged energy shock could call for the “recession playbook”, Morgan Stanley warned, while Goldman Sachs analysts said a temporary surge in oil prices to $100 per barrel could slow global growth by 0.4 of a percentage point.
Much depends on the length of the conflict, highly uncertain even if many feel that Trump doesn’t want a protracted and costly war ahead of November’s U.S. midterm elections.
“You don’t really want this to last for too long,” said Emmanuel Cau, Head of European Equity Strategy at Barclays. “If it is a few weeks or months, of course you’re going to have earnings expectations starting to be cut.”
British auto distributor Inchcape said the conflict could delay some Japan-Europe shipments by weeks, while online travel agent Loveholidays is preparing to delay its London IPO because of market turmoil and travel chaos.
Markus Krebber, CEO of RWE, Germany’s biggest power producer, said that energy was “once again dominating headlines all over the world”.
“Gas and oil prices are volatile, key shipping routes face geopolitical pressure, and policymakers are concerned about supply risks,” Krebber said.
“The renewed uncertainty is a reminder of an uncomfortable reality: the next energy crisis isn’t an if – it’s a when, and a question of how prepared we are.”
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