The longer this war lasts, the more inflation spreads
As earnings season unfolded in late April 2026, global companies found themselves navigating a convergence of crises — tariffs, softening demand, and the sudden disruption of the Strait of Hormuz following the U.S.-Israeli conflict with Iran. The narrow waterway, through which a fifth of the world's oil and gas flows, became a fault line separating firms with pricing power from those without. What began as a geopolitical shock is now threading itself into the fabric of everyday prices and corporate futures, raising the oldest of economic questions: who bears the cost when the world is unsettled?
- The U.S.-Israeli conflict with Iran, erupting in late February, sent freight rates surging and raw material costs climbing 15–20% for some sectors, striking businesses already weakened by tariffs and cautious consumers.
- By mid-April, 21 companies had cut or withdrawn financial guidance, 32 had announced price hikes, and 31 had warned investors of direct hits to their bottom lines — a corporate alarm sounding across industries.
- Airlines and tour operators face the sharpest pain: United Airlines flagged missed profit targets while TUI suspended guidance entirely, caught between soaring jet fuel costs and travelers too anxious to book.
- Companies with strong brands and pricing power — like AkzoNobel and TE Connectivity — are passing costs downstream to consumers and clients, raising the specter of a new inflation wave just as central banks sought calmer waters.
- The resolution hinges on two unknowns — the conflict's duration and the Strait's reopening — leaving executives, investors, and policymakers in a holding pattern, unable to commit to growth or absorb further shocks.
The earnings season that opened in late April 2026 revealed companies caught between two colliding forces. Tariffs, stubborn input costs, and retreating consumers had already worn down margins through the year's early months. Then came the U.S.-Israeli conflict with Iran, erupting in late February and throwing one of the world's most vital shipping corridors into uncertainty. The Strait of Hormuz — a narrow passage carrying roughly a fifth of global oil and liquefied natural gas — became a chokepoint, sending freight rates and energy prices climbing at the worst possible moment.
A Reuters review of corporate statements found the damage spreading visibly: 21 firms had cut or withdrawn guidance, 32 had announced price increases, and 31 had warned investors of direct financial harm. AkzoNobel's chief executive described raw material costs rising by as much as 20% over the next two quarters, driven almost entirely by the Strait disruption — yet the Dutch paint maker's brand strength gave it room to raise prices and still beat market expectations. Others were less fortunate.
The divide between companies with and without pricing power sharpened into the defining story of the season. Travel firms bore the heaviest burden: United Airlines warned of missed profit targets while Germany's TUI suspended revenue guidance entirely, squeezed by jet fuel costs and consumers too anxious about the conflict to book holidays. Danone's first-quarter growth slowed sharply amid war-related baby formula disruptions. Reckitt flagged margin pressure from elevated oil prices, sending its shares to a multi-year low. Even elevator maker Otis Worldwide saw new equipment sales slip due to shipping delays.
For those with pricing power, the path forward existed — but carried its own risk. Passing costs to consumers could feed a fresh round of inflation just as central banks were trying to hold price growth in check. GE Aerospace's chief executive acknowledged the company would have raised its full-year forecast had the uncertainty not made commitment impossible. The world, in short, was waiting — on the conflict's duration, on the Strait's reopening, and on whether corporate resilience would hold long enough for clarity to arrive.
The earnings season that began in late April told a story of companies caught between two colliding crises. On one side lay the familiar pressures that had already worn down corporate margins through the early months of 2026: tariffs imposed by the U.S. government, stubborn input costs, and consumers pulling back on spending. On the other side, arriving suddenly in late February, came the U.S.-Israeli conflict with Iran—a geopolitical shock that disrupted one of the world's most critical shipping lanes and sent energy prices climbing just when businesses could least afford it.
The Strait of Hormuz, a narrow waterway between Iran and Oman, carries roughly one-fifth of all global oil and liquefied natural gas. When the conflict erupted, shipping routes became uncertain, freight rates spiked, and companies across industries began recalculating their costs. By mid-April, the damage was visible in corporate statements. A Reuters review found that 21 companies had withdrawn or reduced their financial guidance. Another 32 had announced price increases. A third group of 31 had warned investors that the conflict would hit their bottom line. The pattern was unmistakable: businesses were no longer absorbing the shock quietly.
AkzoNobel, the Dutch paint manufacturer whose products coat everything from cargo ships to Formula 1 racing cars, offered one of the starkest assessments. Chief Executive Greg Poux-Guillaume told Reuters that the company's raw material costs would climb by somewhere in the high teens—meaning 15 to 20 percent—over the next two quarters, driven almost entirely by the disruption in the Strait. Yet AkzoNobel had an advantage many competitors lacked: its branded products gave it room to raise prices without losing customers. The company had beaten market expectations in its latest earnings, cushioned by higher pricing and internal cost cuts. For firms with less pricing power, the calculus was grimmer.
The divergence between winners and losers in this crisis was stark. Companies that could pass costs directly to consumers or business customers—like TE Connectivity, which supplies components to manufacturers and would shift higher freight and resin costs to its clients—had a path forward, though not without risk. Those without that leverage faced a choice: cut guidance or watch margins erode. Travel companies found themselves in the worst position. Airlines and tour operators faced soaring jet fuel bills at the precise moment when geopolitical anxiety was making consumers hesitant to book trips. United Airlines, one of the world's largest carriers, warned that second-quarter and full-year profits would fall short of Wall Street's expectations. German tourism operator TUI suspended its revenue guidance entirely, citing both the immediate cost pressures and the longer-term damage from consumer caution.
The ripple effects extended into unexpected corners. Danone, the French food conglomerate, reported first-quarter sales that topped expectations on the surface, but the growth rate had slowed sharply compared to late 2025. The culprit: war-related disruptions to baby formula shipments, layered on top of a separate recall in Europe. Reckitt, the maker of Dettol soap and other household products, warned of lower margins in the first half of the year due to elevated oil prices, sending its stock to its lowest level since October 2024. Even industrial companies like Otis Worldwide, which manufactures elevators, saw new equipment sales decline because of shipping delays and tariffs.
What made this moment particularly precarious for investors and economists was the uncertainty baked into every forecast. Brian Madden, chief investment officer at First Avenue Investment Counsel, laid out the two possible futures: "The longer this war lasts, the more we'll see these companies with less pricing power reduce guidance. 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." In other words, the conflict was not simply a cost shock to be absorbed. It was a mechanism for transmitting that shock through the global economy—either as lower corporate profits and reduced investment, or as higher prices for consumers.
GE Aerospace offered a telling detail. Chief Executive Larry Culp said the company would have raised its full-year forecast were it not for the current uncertainty surrounding the conflict. The company had strong order books and pricing power. It had started the year well-positioned. Yet the inability to see beyond the next few months was enough to keep management from committing to growth. 3M, meanwhile, warned that higher oil prices could push its product costs up by 50 basis points—a modest-sounding figure that, multiplied across millions of units sold, represented real money.
The outcome, everyone understood, hinged on two unknowns: how long the conflict would persist, and whether the Strait of Hormuz would fully reopen to normal shipping traffic. If the disruption proved temporary, companies could absorb the costs and move forward. If it dragged on, the pressure to raise prices would intensify, potentially feeding a new round of inflation just as central banks were trying to bring price growth under control. For now, the world was watching—and waiting to see whether corporate resilience would hold or crack.
Notable Quotes
Our raw material basket is going to go up by something like the high teens, given the disruption of the Strait of Hormuz.— Greg Poux-Guillaume, CEO of AkzoNobel
The longer this war lasts, the more we'll see companies with less pricing power reduce guidance, and the more we'll see companies with pricing power pass increases to consumers, resulting in potentially higher inflation.— Brian Madden, Chief Investment Officer at First Avenue Investment Counsel
The Hearth Conversation Another angle on the story
Why does the Strait of Hormuz matter so much that one waterway can shake earnings across so many industries?
Because a fifth of the world's oil and liquefied natural gas flows through it. When shipping becomes uncertain, freight rates spike immediately. A paint company, an airline, a food manufacturer—they all depend on moving raw materials and finished goods. Block that route, and costs climb everywhere at once.
So companies are just passing these costs to customers? That seems straightforward.
Only if they can. A luxury paint brand can raise prices because customers need it and have few alternatives. But an airline can't easily charge more when consumers are already nervous about flying. That's where the real pain is—companies without pricing power have to choose between shrinking margins or cutting their forecasts.
What does it mean when a company like GE says it would have raised guidance if not for uncertainty?
It means the fundamentals are sound. They have orders, they have demand. But they can't predict what their costs will be in six months if the conflict drags on. That uncertainty freezes decision-making. You don't invest in expansion or hire aggressively when you can't see past the next quarter.
Is this just a temporary shock, or does it reshape how companies think about supply chains?
Both. In the immediate term, it's a cost shock that either gets passed to consumers as inflation or absorbed as lower profits. But longer term, companies are probably rethinking their dependence on single shipping routes and regions. That's expensive to fix, though. It takes years.
Why are travel companies hit harder than others?
Jet fuel is a direct input cost they can't avoid, and it's spiking. At the same time, the geopolitical tension itself makes people hesitant to travel. So they're facing both higher costs and lower demand simultaneously. That's a squeeze most industries don't face.
What happens if this conflict lasts another six months?
Then you'll see either widespread price increases—which feeds inflation—or a wave of guidance cuts and reduced investment. Probably both. Companies will raise prices where they can and cut forecasts where they can't. Either way, the economy slows.