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How US-Israeli war on Iran is upending global business
The US-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 led to tens of thousands of flight cancellations, reroutings and schedule changes worldwide, shutting much of the Middle East's airspace, including Qatar's, due to missile and drone threats.
The fallout has hurled global aviation into its worst crisis since the pandemic, crippling operations at Dubai International Airport (DXB), the busiest hub for global passengers, straining other regional hubs that are critical transit points for long-haul travel.
Private jets have emerged as an alternative for marooned travelers to get out of the Gulf, whilst others have embarked on long taxi drives across the desert to Riyadh, Saudi Arabia, in the hope of flying home from there.
The conflict has also disrupted a key oil export corridor, igniting a surge in jet fuel prices that is driving up fares on several routes and stoking fears of a broader collapse in travel demand.
Time-sensitive air cargo was also heavily affected. Shipments ranging from fresh produce to airplane parts are in limbo as the Middle East conflict squeezes cargo capacity and pushes up freight rates.
Airlines
The shutdown of Gulf airspace rippled quickly across airline networks and battered the industry's shares.
Prices of flights between Asia and Europe have soared, some airlines including Wizz Air and Lufthansa have changed routes, and Ryanair has seen a jump in demand for short-haul flights.
Prices of jet fuel, the second-largest expense for carriers after labor, 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.
For pilots, the Iran war is making the skies even more perilous, ratcheting up pressure on those flying through them due to drone incursions.
Airspace restrictions in the Middle East amid the Iran war have dealt another blow to Indian airlines, which count the region as a crucial corridor for flights to Europe and the US since Pakistan banned Indian carriers from its airspace last year.
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 after billions of investment in recent years from Abu Dhabi to Dubai. 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, the world's busiest international airport.
In Dubai and other major Middle Eastern shopping hubs, many stores were closed or operating with a skeleton staff last week.
READ: Filipino businesses in Dubai feel the pinch of Iran war
Defense industry
The United States has unleashed an array of weaponry against Iranian targets, including Tomahawk cruise missiles, stealth fighters, and for the first time in combat, low-cost one-way attack drones modeled after Iranian designs.
The Pentagon also used artificial intelligence services from Anthropic, including its Claude tools, during its attack.
Last week, the Pentagon designated the AI lab a "supply-chain risk," barring government contractors from using its technology in work for the US military. That followed a months-long dispute over the company's insistence on safeguards that the Defense Department says went too far.
US President Donald Trump met executives from seven defense contractors on March 6, as the Pentagon works to replenish supplies drawn down by US strikes on Iran and other recent military operations.
Critical metals and raw materials
Qatari smelter Qatalum began shutting down operations last week, while Aluminium Bahrain said it had halted shipments and declared force majeure because it could not move metal through the Strait of Hormuz. The Gulf region accounts for about 8% of global aluminum supply.
Aluminum prices on the London Metal Exchange jumped sharply on the news, while physical premiums in Europe and the United States climbed to multi-year highs.
Nickel makers in Indonesia reliant on the Middle East for 75% of the sulfur they use may have to cut production as Gulf shipping is increasingly disrupted by the conflict.
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 last week.
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, which was already struggling to emerge from a slowdown in demand, with groups such as Richemont and Zegna seen among the most exposed.
Restaurants and hotels across India warned of disruptions and possible shutdowns as the Iran war constricts the supply of cooking gas, prompting authorities to set up a panel to review industry requests.
India's packaged water market is also seeing some manufacturers hike prices for distributors, as supply disruptions linked to the war impact everything from plastic bottles to caps, labels and cardboard boxes.
Rising oil prices have increased the cost of polymer, which is made from crude oil and is a key material in manufacturing plastic bottles.
Chips and data centers
South Korean officials have warned that a prolonged conflict could disrupt supplies of key semiconductor manufacturing materials sourced from the Middle East, including helium, which is essential for chip production and has no viable substitute.
Drone strikes that damaged some of Amazon's data centers in the United Arab Emirates and Bahrain raised questions about technology supply chains and Big Tech's pace of expansion in the region.
Banks
Citigroup and Standard Chartered have told Dubai staff to work from home, Reuters has reported, citing sources, as banks respond to Iranian threats against Gulf banking interests tied to the US and Israel.
HSBC has closed all branches in Qatar until further notice, according to a customer notice, saying the measure was to ensure the safety of staff and customers. — Reuters
