Iran War Saddles Global Companies With at Least $25 Billion in Costs

The war involving the US, Israel and Iran has saddled companies worldwide with at least $25 billion in costs, according to an analysis.

Reuters reported on May 18 that at least 279 listed companies in the US, Europe and Asia had taken steps to cushion the financial blow from the Middle East conflict, based on a review of corporate filings and earnings reports.

Those measures ranged from raising prices and cutting output to suspending dividends and share buybacks, placing employees on unpaid leave and seeking government support.

Companies have been hit by surging energy prices, supply-chain disruptions and blocked trade routes caused by the closure of the Strait of Hormuz.

Reuters said the war had become another major risk factor for global companies, after the Covid-19 pandemic and Russia's invasion of Ukraine.

It said the scale was comparable to the $35 billion hit absorbed by hundreds of companies from President Donald Trump's tariff policies last year.

The closure of the Strait of Hormuz pushed oil prices above $100 a barrel, directly raising costs for companies.

With jet fuel prices nearly doubling, airlines' war-related costs were estimated at about $15 billion.

The fallout is spreading to other industries as well. Toyota Motor expects a $4.3 billion hit from the war, while Procter & Gamble said after-tax profit would fall by $1 billion.

McDonald's said earlier in May that continued supply-chain disruptions would worsen long-term cost inflation.

"High gasoline prices are the key issue we are seeing right now," McDonald's Chief Executive Officer Chris Kempczinski said. Surging fuel costs are weighing on demand from lower-income consumers, he added.

Whirlpool Chief Executive Officer Marc Bitzer told analysts after the company's earnings release that current industry conditions were "similar to the global financial crisis and more severe than other downturns."

Markets expect the impact of the Iran war to be reflected more fully starting in second-quarter earnings. FactSet data show the forecast for second-quarter net profit margins at S&P 500 industrial companies has been cut by 0.38 percentage point since the end of March.

Goldman Sachs said European companies would come under more pronounced margin pressure from the second quarter. UBS said earnings forecasts for the next 12 months have been cut by more than 5% for consumer-facing sectors including autos, telecommunications and household goods.

Ko Jeong-sam, Hankyung.com reporter, jsk@hankyung.com