The Iran war could soon lead to higher prices in stores for consumers.
Iran’s de facto blockade of the Strait of Hormuz has severely disrupted global supply chains, affecting goods ranging from fertilizers to metals, gas and fuel. The route is one of the most important shipping routes in the world, with tens of millions of barrels of oil being transported every day along with other exports.
And tensions with the Strait show no signs of changing. On Thursday, Iran’s new supreme leader Mojtaba Khamenei said in his first public statement since taking office that the shutdown should continue as a “means to put pressure on our enemies.” Defense Secretary Pete Hegseth downplayed concerns about the strait Friday at a Pentagon news conference, saying, “We’re dealing with this strait and there’s no need to worry.”
In a statement Friday, the logistics company said CH Robinson said it continues to monitor updates and urged shippers to plan for continued fluctuations.
“While cargo is in transit, carriers are managing limited volumes, selective acceptance, and fuel-related cost impacts, resulting in price fluctuations and varying terms of service,” the statement said.
Although it is still too early to determine the exact impact on retail, Max Kahn, president of Coresight Research, said the industry may already be nearing its breaking point due to disruptions to global supply chains.
“Retailers are getting much better at building supply chain flexibility, and last year’s tariffs really accelerated that,” Khan told CNBC. “The bigger concern is whether this situation will continue.”
Khan said grocery stores tend to have less flexible supply chains, so prices at grocery stores may take a hit first, but apparel retailers could afford to slow production and mass produce again later without disrupting inventory.
Khan said retailers are likely to face two factors as they navigate the geopolitical landscape: input cost pressures and demand pressures.
“Retailers are going to have to work on that,” he says. “One of the reasons retail remained resilient in 2022 and 2023 was the ability to raise prices, and the price increases offset some of the unit weakness, so our sense is that it could be very similar this time around.”
Retail businesses aren’t the only ones affected by changes to shipping rates. Clothing shipments to Zara owner Inditex and other clothing retailers were held up last week due to flight cancellations in the Middle East, Reuters reported.
Khan said potential struggles for retailers could have broader economic implications. While businesses have been able to adapt to some extent to changes in the macroeconomic environment over the past few years, he noted that overall retail growth is “fair” and that while the industry continues to weather the war, that uncertainty will begin to impact GDP growth as well.
Still, amidst the turmoil, Khan said he’s looking to value retailers: walmart and kroger And a dollar store like dollar general and dollar tree Shoppers are looking for better value, so they can spend more easily.
In addition to impacting global supply chains, consumer confidence has already been hit by the war. Wednesday’s consumer price index was in line with expectations, but industry experts say higher gas prices are likely to impact discretionary spending as consumers pull back to cover pump costs, potentially impacting retailers who may already be reeling from the impact on their supply chains.
Analysts at Wolf Research wrote in a note Sunday that retailers that carry a lot of discretionary goods are likely to be among the biggest losers from the war.
“Retailers with larger discretionary configurations Five Below and target“The economy is also facing headwinds as consumer confidence comes under pressure and disruption ensues,” they wrote.
Still, there may be other factors that keep some retailers out of the war’s aftermath. Retailers that appeal to high-income consumers or offer specialty products such as: costcoyou may be able to escape the pressure.
“Costco should benefit as its gasoline price leadership becomes more important and consumers are willing to wait longer than 20 minutes to buy gasoline,” the analysts added.
Analysts at UBS wrote in a note on Monday that the war adds uncertainty to an already weakened consumer grappling with a changing macro environment and a K-shaped economy in which the wealthy continue to do well while lower-income consumers struggle.
“Higher oil prices will place a significant strain on household budgets and should exacerbate the strains already felt across consumers,” the researchers wrote.
Some retailers are Ulta Costco and Costco are companies that have historically experienced increased same-store sales with oil inflation and serve lower-income shoppers. Ollie’s Bargain Outlet Dollar General and Dollar General’s sales are likely to decline as consumers face budget constraints, UBS analysts said.
“Overall, rising oil prices may pose multilayered and persistent pressures on consumer health,” the researchers wrote. “This will increase fixed household spending, put upward pressure on food prices, reshape retail distribution patterns and pose operational challenges for retailers across multiple segments.”
