The ongoing conflict between the United States, Israel, and Iran has sent shockwaves through global commerce, severely unsettling markets and supply chains across multiple sectors. This escalating war has triggered a sharp rise in energy prices, created shortages of essential raw materials, and cast serious doubts over the reliability of vital trade corridors that facilitate the movement of goods ranging from food products to automotive components. The widening hostilities have effectively choked off major air and maritime transport routes throughout the Middle East, a region that serves as a crucial hub for international trade.
One of the most critical chokepoints affected is the Strait of Hormuz, a narrow waterway through which approximately one-fifth of the world’s oil supply passes. Recent drone attacks launched by Iran in retaliation to US and Israeli strikes have brought shipping activity in this strategic passage to a near standstill. Meanwhile, key air transit routes over the Gulf have gone largely silent, further complicating logistics and transport operations. The resulting surge in oil and gas prices has placed immense pressure on companies worldwide, squeezing profit margins and sparking concerns among policymakers and investors about the potential for renewed inflationary pressures.
Young Liu, chairman of Foxconn—the world’s largest electronics manufacturer and a major partner to Nvidia—emphasized the far-reaching consequences of the conflict, warning that if these disruptions persist, their impact will be felt globally across industries. This sentiment echoes the growing anxiety among businesses already grappling with the fallout from previous trade tensions and economic uncertainties.
Even before the recent escalation, companies were contending with the repercussions of US President Donald Trump’s trade war, which had already driven up costs through hefty import tariffs, disrupted supply chains, and dampened consumer confidence. The current spike in gasoline prices adds another layer of difficulty for consumers, with the national average price for a gallon of regular gasoline rising from $2.98 to $3.32 within a week. Although Brent crude futures have climbed to $90 per barrel, they remain below the peaks seen in 2022 following Russia’s invasion of Ukraine. Simon Hunt, CEO of Italian beverage company Campari, highlighted how any increase in oil or gas prices inevitably cascades through every sector, affecting companies and industries across the board.
Europe, still recovering from the severe energy crisis of 2022, is feeling the strain acutely, particularly in energy-intensive sectors such as chemicals manufacturing. The German Economic Institute (IW) recently projected that sustained oil prices at $100 per barrel could reduce Germany’s GDP by 0.3% this year and 0.6% next year, translating into an economic loss of approximately 40 billion euros ($46 billion) over two years. Companies like Campari have secured some long-term contracts to shield themselves from drastic energy price hikes, while Reckitt Benckiser’s CFO Shannon Eisenhardt revealed that the consumer goods giant has hedged about 55% of its oil and gas exposure through 2026. Nonetheless, industry groups such as Uniden, representing French sectors including chemicals, automotive, and agriculture, have reported that some firms are already scaling back production due to soaring gas prices and the uncertainty surrounding future costs.
The airline industry has also been hit hard by the conflict’s economic ripple effects. European budget carrier Wizz Air, which has hedged its fuel costs, warned that the war could reduce its net profit for the fiscal year 2026 by roughly 50 million euros ($58 million), underscoring the widespread financial strain across transportation sectors.
Beyond energy and transportation, the disruption to maritime freight has impacted specialized industrial inputs such as sulphur and aluminium. Several major aluminium producers have declared force majeure, citing their inability to ship metal through the Strait of Hormuz. For instance, Qatalum in Qatar has begun shutting down operations, while Aluminium Bahrain has halted shipments altogether. The Gulf region supplies about 8% of the world’s aluminium, and these interruptions have caused prices on the London Metal Exchange to surge sharply, with physical premiums in Europe and the United States reaching multi-year highs. Additionally, South Korean officials have expressed concerns that a prolonged conflict could jeopardize supplies of critical semiconductor manufacturing materials like helium, which is indispensable for chip production and lacks viable substitutes.
Compounding these challenges, drone strikes targeting Amazon’s data centers in the United Arab Emirates and Bahrain have raised alarms about the vulnerability of technology supply chains and the pace at which major tech companies are expanding in the region. This adds a new dimension to the conflict’s impact, extending beyond traditional commodities to digital infrastructure and cloud services.
Financial institutions are already contemplating the broader economic consequences of a sustained energy shock. Morgan Stanley cautioned that a prolonged crisis might necessitate invoking the “recession playbook,” while Goldman Sachs analysts forecast that a temporary rise in oil prices to $100 per barrel could slow global economic growth by 0.4 percentage points. Much hinges on the duration of the conflict, which remains uncertain, though many analysts believe that US President Trump is unlikely to engage in a prolonged and costly war ahead of the November midterm elections.
Emmanuel Cau, Head of European Equity Strategy at Barclays, noted that while a short-term conflict lasting weeks or a few months would likely lead to downward revisions in corporate earnings expectations, a longer confrontation could have far more severe economic repercussions. The conflict is already causing logistical delays, with British auto distributor Inchcape warning that shipments from Japan to Europe could be postponed by several weeks. Similarly, online travel agency Loveholidays is preparing to delay its planned London IPO due to market instability and travel disruptions.
Markus Krebber, CEO of RWE, Germany’s largest power producer, summed up the current climate by stating that energy issues are once again dominating global headlines. He highlighted the volatility of gas and oil prices, the geopolitical pressures on key shipping lanes, and the growing concerns among policymakers about supply security. Krebber’s remarks serve as a stark reminder that the next energy crisis is not a matter of if but when, underscoring the urgent need for preparedness in the face of ongoing geopolitical tensions.
