From paint to planes, Iran war lifts costs, darkens outlooks

Companies from consumer goods to travel and mining warned on Wednesday that the US-Israeli war with Iran is driving up costs, disrupting supply chains and ‌hurting consumer confidence, clouding financial outlooks.

The cautious tone so far in the earnings season highlights the pressure on businesses already hit by US tariffs, higher input costs and weak demand before the conflict erupted in late February.

While some companies stuck to their full‑year forecasts, executives flagged rising transport and raw material costs, particularly linked to disruption in the Strait of Hormuz, and sharply reduced visibility.

Dulux paint maker AkzoNobel said the conflict was pushing up ​supply costs, though higher pricing and cost savings helped it beat market expectations.

“Our raw material basket is going to go up by something like the high teens (percentage), given ​the disruption of the Strait of Hormuz,” CEO Greg Poux‑Guillaume told Reuters, saying the full impact would be felt over the next two ⁠quarters.

AkzoNobel’s branded products used on cargo ships and Formula 1 cars give it greater scope to pass on price increases than more commodity chemical‑exposed peers.

Investors and economists are watching to see whether companies ​can absorb the shock, or if prolonged uncertainty over energy, transport and geopolitics forces more firms to raise prices further or rein in forecasts.

Much hinges on how long the conflict lasts ​and whether the Strait of Hormuz — a conduit for about a fifth of global oil and LNG flows — fully reopens, easing supply constraints.

U.S. stock futures rose and oil prices were up slightly on Wednesday after reports of attacks on container ships in the Strait.

“The longer this war lasts, the more we’ll see these companies with less pricing power reduce guidance,” Brian Madden, chief investment officer at First Avenue Investment Counsel, said.

“And the more we’ll ​see companies that do have pricing power pass on the price increase to consumers and businesses, resulting in potentially higher inflation.”

SHIPMENTS OF BABY FORMULA DISRUPTED

According to a Reuters review of ​company statements since the start of the war, 21 companies have withdrawn or cut financial guidance, 32 have signalled price hikes and 31 have warned of a financial hit from the conflict.

TE Connectivity will have ‌to pass ⁠on higher freight and prices of oil-based products like resin to customers if the war is prolonged, Chief Executive Terrence Curtin told Reuters.

French food group Danone  highlighted how pressures are filtering through supply chains, reporting first-quarter sales growth that topped expectations but slowed sharply from late last year, citing war-related disruption to baby formula shipments alongside a baby-formula recall in Europe.

Elevator maker Otis Worldwide tab said its new equipment sales were hurt by war-related shipment delays and tariffs.

Dettol soap maker Reckitt warned of lower first‑half margins, citing high oil prices, sending its shares to October 2024 lows.

Travel companies have been among ​the hardest hit, as higher jet fuel prices ​force airlines and tour operators to hike ⁠fares, add fuel surcharges or ground aircraft, while geopolitical tension dents consumer confidence.

German tourism group TUI cut its full‑year underlying operating profit forecast and suspended its revenue guidance.

“The ongoing conflict in the Middle East and the uncertainty surrounding its duration continue to limit near-term visibility and drive consumer ​caution,” the group said in a statement.

U.S. carrier United Airlines also flagged pressure on demand, forecasting second-quarter and full-year profits below Wall Street ​estimates on Tuesday.

Resource companies are feeling ⁠the strain too. Diversified miner South32, hit by higher freight rates and raw materials prices, said it had implemented measures to mitigate potential supply chain impacts arising from the conflict, and while it was not currently experiencing diesel fuel shortages, it was closely monitoring the situation.

GE WOULD HAVE RAISED ITS OUTLOOK BUT FOR UNCERTAINTY

The Iran war is adding a fresh layer of uncertainty even for companies which started ⁠the year ​with solid order books and pricing power.

On Tuesday, GE Aerospace’s CEO Larry Culp said the company would have raised its ​forecast were it not for the current uncertainty, and 3M warned that higher oil prices could result in a 50-basis-point increase in product prices.