The US-Israeli war with Iran is beginning to hit companies across the world, with businesses already reporting losses of at least $25 billion due to rising oil prices, disrupted trade routes and higher operating costs.Company statements from firms in the United States, Europe and Asia showed that businesses across sectors are struggling with the fallout from the conflict, according to Reuters.At the centre of the disruption is Iran’s blockade of the Strait of Hormuz, one of the world’s most important energy routes. The blockade has pushed oil prices above $100 a barrel, more than 50% higher than levels before the war.The jump in crude prices has increased transport and production costs, while shipping delays and supply shortages are affecting industries worldwide.
Companies cut costs, raise prices
According to the analysis, at least 279 companies have taken steps to reduce the financial impact of the war. These include raising prices, cutting production, adding fuel surcharges and reducing spending.Some firms have also suspended dividends and buybacks, furloughed workers and sought emergency government support.One in five companies reviewed said the conflict had already caused a direct financial hit. The affected businesses range from airlines and carmakers to detergent makers, cosmetics firms and cruise operators.
Airlines take the biggest hit
Airlines have suffered the largest losses so far, accounting for nearly $15 billion in war-related costs as jet fuel prices have almost doubled.But pressure is now spreading to other industries as well, according to the Reuters analysis.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.“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,” Whirlpool CEO Marc Bitzer said.He added that consumers were delaying purchases because of rising costs.“Consumers are holding back on replacing products and rather repairing them,” Bitzer said.
Rising fuel prices hurt consumers
McDonald’s said continuing supply-chain disruptions were likely to increase long-term costs.CEO Chris Kempczinski said higher fuel prices were hurting lower-income consumers the most.“Elevated gas prices are the core issue we’re seeing right now,” he said.Nearly 40 companies in the chemicals, industrials and materials sectors said they planned to raise prices because of their exposure to Middle Eastern petrochemical supplies.Newell Brands Chief Financial Officer Mark Erceg said every $5 rise in oil prices adds about $5 million in costs for the company.German tyre maker Continental said it expected at least a 100 million euro ($117 million) hit from the second quarter because of higher raw material costs linked to rising oil prices.“It probably hits us late in Q2, and then it will come in full-blown in the second half,” Continental executive Roland Welzbacher said.
Europe and Asia most exposed
Most of the affected companies are based in Europe and the UK, where energy prices were already high 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 fertilisers, helium, aluminium and polyethylene.
Bigger impact may still lie ahead
Analysts cited by Reuters said that the full impact of the conflict has not yet appeared in company earnings.FactSet data showed 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 said companies listed on Europe’s STOXX 600 index were likely to face more pressure from the second quarter onwards as passing on higher costs becomes harder.UBS head of European equity strategy Gerry Fowler said sectors such as autos, telecoms and household products were 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.
