According to The New Arab, citing an analysis by Reuters, a review of data on companies listed in the United States, Europe, and Asia since the outbreak of the war reveals a bleak economic picture, as companies face a sharp rise in energy prices, disintegration in supply chains, and disruption of trade routes due to Iran’s control of the Strait of Hormuz.
According to the analysis, at least 279 companies cited the war as a reason for taking defensive measures to limit losses, including raising prices, reducing production, suspending dividends or stock buybacks, granting temporary leaves to employees, imposing additional fees on fuel, or requesting emergency government support.
This shock comes a few years after major turmoil afflicted the global economy, from the Corona pandemic to the Ukraine war, which makes companies more cautious in their expectations for the remainder of the year, especially in the absence of any serious indications of an imminent agreement ending the war.
Whirlpool CEO Mark Bitzer said, after the company cut its annual forecasts in half and suspended dividends, that the level of current industrial decline is similar to what the world witnessed during the global financial crisis, and sometimes even exceeds other recessions.
The crisis does not stop at one company. Companies such as Procter & Gamble, the Malaysian condom maker Karex, and Toyota have warned of the increasing cost of the war as it enters its third month.
Energy remains the center of the storm. The closure of the Strait of Hormuz pushed oil prices above $100 per barrel, more than 50 percent higher than before the war. This was reflected in shipping costs, prices of raw materials, and basic supplies such as fertiliser, helium, aluminum and polyethylene.
The review notes that a fifth of the companies included, from cosmetics and tire manufacturers to cruise and airline companies, reported war-related financial harm. The majority of these companies were from Britain and Europe, where energy prices were already high, while about a third of them came from Asia, a reflection of those regions’ heavy dependence on Middle Eastern oil and fuel.
Airlines bear the largest share of the calculated cost, approximately $15 billion, after aviation fuel prices nearly doubled. Toyota also warned of a financial hit of about $4.3 billion, while P&G estimated an after-tax loss of about $1 billion.
Even the fast food sector did not stay away from the crisis. McDonald’s said it expects higher cost inflation in the long term due to continued supply chain disruptions, noting that rising fuel prices are pressuring the spending of low-income consumers.
In the industrial, chemical and manufacturing materials sectors, about 40 companies announced that they would raise prices due to their exposure to petrochemical supplies from the Middle East. Newell Brands’ CFO said that every $5 increase in the price of a barrel of oil adds about $5 million to costs.
As for the German tire company Continental, it expects a hit of no less than 100 million euros in the second quarter due to the rise in oil prices and the accompanying increase in the cost of raw materials, with the greatest impact likely to appear in the second half of the year.
Although corporate profits remained strong in the first quarter, which helped major indices such as the S&P 500 to record high levels, analysts warn that the real losses have not yet fully appeared in the financial results. As growth slows, companies’ ability to pass on prices to consumers may weaken, putting pressure on margins in the second quarter and beyond.
FactSet data indicates a decline in expectations for net profit margins for the second quarter in the industrial, basic and discretionary consumer goods sectors within the S&P 500 index. Goldman Sachs analysts also expect that European STOXX 600 index companies will face greater pressure on margins starting from the second quarter, as the companies’ ability to pass on costs to the consumer declines and the effect of financial hedging ends.
In conclusion, the Iran war is no longer a regional crisis limited to the Strait or oil prices. It is turning into a global earnings shock, hitting companies across energy, shipping, raw materials and consumption. The longer the war lasts, the less containable the cost becomes, and the more present it is in prices, jobs, and financial margins.
