How US-Israeli War on Iran Is Upending Global Business

How US-Israeli war on Iran is upending global business

Main Disruptions to Global Business

March 26 (Reuters) - The U.S.-Israeli war on Iran is rattling businesses worldwide, driving up energy prices, squeezing supplies of critical raw materials and raising questions about the reliability of trade routes critical to the flow of goods from food to car parts.

Below are the main disruptions so far:

Travel Chaos

The war has triggered tens of thousands of flight cancellations, reroutings and schedule changes worldwide, shutting much of ​the Middle East's airspace due to missile and drone threats.

Global aviation faces its worst disruption since the pandemic, hitting hubs such as Dubai International Airport, the world's busiest for international passengers, and straining alternative transit points.

Private jets are ferrying travellers out of the Gulf, whilst others have embarked on long taxi drives across the desert to Saudi Arabia to find flights home.

Time-sensitive air cargo has also been hit, with shipments ranging from fresh produce to airplane delayed as the conflict squeezes cargo capacity and pushes up freight rates.

Airlines

Global ​airlines have sounded an alarm over soaring jet fuel prices, warning of hundreds of ‌millions of extra costs, higher fares and cuts to some routes.

Discount airline easyJet expects ticket prices to rise towards the end of the summer, while Bloomberg News reported that United Airlines could hike fares by 20% to cope with the oil surge.

Prices of jet fuel, the second-largest expense for carriers after labour, have doubled since the start of the conflict, adding pressure on carriers.

Even airlines that use hedging contracts to protect ‌against sudden spikes in oil prices are rapidly announcing fare hikes, fuel surcharges and capacity cuts as they grapple with an unprecedented jump in refining margins.

Airspace restrictions in the Middle East have dealt another blow to Indian airlines, which count the region as ​a crucial corridor for flights to Europe and the U.S. since Pakistan banned Indian carriers from its airspace last year.

India said it would revoke temporary fare caps it had imposed on domestic air tickets in December, Reuters reported, citing a government order.

Germany's Lufthansa expects the Iran war to weaken the dominance of Gulf carriers such as Emirates and Qatar Airways on Asian routes.

Cruise

Cruise operators are bracing for rougher seas as rising oil prices push up fuel bills.

Analysts have warned Carnival Corp could see the biggest hit to its 2026 earnings since it is the only major U.S. cruise line that does not hedge its fuel costs.

Impact on Dubai

The conflict has put at risk the Middle East's carefully constructed image as a safe and high-end vacation hot spot. Tourism is worth some $367 billion annually to the region.

It has also laid bare how heavily global air travel relies on a handful of hubs led by Dubai.

In Dubai and other major Middle Eastern shopping hubs, many stores were closed or operating with a skeleton staff.

Defense Industry

The United States has deployed advanced weaponry against Iranian targets, including Tomahawk cruise missiles, stealth fighters, and for the first time in combat, low-cost one-way attack drones.

The Pentagon also used artificial intelligence services from Anthropic, including its Claude tools, during its attack.

On March 25, the Pentagon reached framework agreements with UK-based BAE systems, Lockheed Martin and Honeywell to ramp up production of defense systems and munitions with the aim to put the U.S. military on a "wartime footing."

Critical Metals and Raw Materials

Disruptions in the Strait of Hormuz are hitting metals and energy flows.

Aluminium producers in the Gulf have halted shipments, declared force majeure, or rerouted exports, sending prices and premiums sharply higher.

The Gulf region accounts for about 8% of global aluminium supply.

Helium prices have surged after the Iran war disrupted natural gas processing in Qatar, exposing the vulnerability of a small but vital market that underpins industries from semiconductor manufacturing to medical imaging.

Indonesian nickel makers reliant on the Middle East for sulphur face potential output cuts.

Chemicals firms Celanese, Dow and Ecolab have hiked prices for some products amid supply chain constraints.

Iranian attacks have also knocked out 17% of Qatar's liquefied natural gas export capacity, threatening supplies to Europe and Asia.

Policymakers around the globe are being forced to rethink ways to reduce long-term dependence on oil and gas imports. The rising price of gasoline from the Iran war could push consumers toward EVs and hybrids.

Brewers in India have also warned of shortages as a shortage of gas due to the Iran war drives up the cost of glass bottles and shipping delays hit imports of aluminium needed by can makers.

Medicine

The war in the Middle East is disrupting the flow of critical medicines into the Gulf, threatening supply lines for cancer therapies and other temperature-sensitive drugs and forcing companies to reroute flights and secure overland alternatives into the region.

Executives told Reuters that while there are currently few signs of major shortages, that could change if the conflict persists.

Food, Fast Fashion and Luxury

Some shipments of garments for major clothing retailers were stranded at airports in Bangladesh and India as the conflict impacted flights, Reuters reported earlier in March.

South Asia is a clothes manufacturing powerhouse and fast fashion brands around the world rely on factories in Bangladesh, India and Pakistan for a constant stream of new T-shirts, dresses and jeans.

The crisis is also adding pressure on the luxury sector, with groups such as Richemon