The U.S.-Israeli war with Iran is a wait-and-see situation that is fueling inflation fears for consumers, as well as supply chain disruptions over a longer time horizon.
The near-term rise in fuel prices due to warfare in the Middle East is not yet “economically threatening,” according to UBS chief economist Paul Donovan, who said the rise in oil and gas prices “would need to stay high for longer” before there’s any impact.
In the U.S., gasoline prices on Sunday were 23 percent above this year’s lows. That price level isn’t likely to disrupt GDP growth as it is below mid-2024 levels, but it will change inflation perceptions, the economist said.
He added that several high-frequency purchases have risen significantly in price since January 2025, with beef up 15 percent, for example, and coffee up 18 percent, noting that consumers tend to remember such increases. “Perceptions create the U.S. affordability crisis,” he said of the impact of oil at $100 a barrel.
Meanwhile, tensions remain high with the closure of the Strait of Hormuz, a narrow waterway located at the southern coast of Iran that transports one-fifth of the world’s oil exports, due to the joint U.S.-Israeli aerial military offensive that began Feb. 28. Many ocean carriers have been diverting containers that were already in-transit to alternative routes.
The closure has likely disrupted fashion supply chains. The disruption is not necessarily because they ship through the narrow waterway, but more because the closure has resulted in higher fuel and insurance costs.
Air freight costs have spiked by up to 50 percent in the past week. That has an impact on fast-fashion apparel suppliers in Bangladesh, which tend to rely on air freight to get goods quickly out to market.
Kane Footwear’s CEO John Gagliardi said air freight costs can be about “four times the cost” of sea freight. He said some brands might not have any choice but to fly goods over. “If you’re doing a launch and it’s delayed, you have to launch on time and you don’t have a choice. You’ve got to fly the first batch over until the rest of the [goods] shows up,” he said.
As for sea freight, sources said shoe manufacturers aren’t likely to ship goods through the strait. However, where they could feel the impact is in the textiles sector in connection with deliveries of the raw materials needed to make the footwear for summer shoe styles. For fashion, which doesn’t have as long a lead time as footwear, deliveries of apparel textiles for the spring and summer lines could feel some impact. And now with air costs up, along with rising fuel costs, there’s a chance sea freight rates may follow.
The National Retail Federation said on Monday that imports at major U.S. container ports are expected to remain below last year’s levels for the first half of 2026 amid ongoing tariff uncertainty, noting that it was too soon to gauge the impact of the conflict in Iran, according to the Global Port Tracker report released on Monday by NRF and Hackett Associates.
“In addition to tariffs, we are closely watching the situation in Iran and the potential impact it will have on retail supply chains,” said Jonathan Gold, NRF’s vice president for supply chain and customer policy.
“The immediate impact on containerized traffic to the United States is not likely to be substantial since little U.S.-bound container cargo is sourced from the region,” added Hackett Associates founder Ben Hackett. “While it is too early to measure in the monthly data, increasing oil and gasoline prices will inevitably drive structural inflation if the conflict persists. That, in turn, could squeeze consumer discretionary spending and U.S. manufacturing, and ultimately drive down import volumes in the longer term.”
In the U.S. equity markets, the Dow Jones Industrial Average traded down in early trading before recovering 0.5 percent, or up 239.25 points, to close at 47,740.80. The S&P 500 recovered its losses as oil prices eased to near $95 a barrel after spiking to as high as $119, and was up 0.8 percent, or 55.97 points, to close at 6,795.99.
Among the gainers were Oxford Industries Inc., up 3.9 percent to $38.94; StitchFix, up 2.5 percent to $3.31; Wolverine Worldwide Inc., up 2.4 percent to $16.81; Five Below, up 2.3 percent to $220.12; Capri Holdings Ltd., up 2.1 percent to $18.33; Ralph Lauren Corp., up 2.0 percent to $345.09, and J.D. Sports, up 1.6 percent to $27.45.
Fashion stocks that lost ground include Revolve Group Inc., down 4.8 percent to $24.02; Kontoor Brands Inc., down 3.8 percent to $73.40; Levi Strauss & Co., down 3.8 percent to $18.86; The RealReal, down 3.3 percent to $10.94; Under Armour Inc., down 2.3 percent to $6.26, and Kohl’s Corp., down 2.1 percent to $14.80.
RBC Capital Markets analyst Piral Dadhania last week issued a report that warned luxury stocks will come under pressure because “demand typically requires a ‘feel good’ backdrop” that’s supportive to consumer confidence, which will be impacted at least in the short term. And with military escalation on the rise 10 days into the conflict, retailers across several countries, such as those operated by the Chalhoub Group across the Middle East, are keeping in close tabs with respective government advisements on store closures to keep shoppers and employee safe.
Among the European stocks, Brunello Cucinelli was down 3.8 percent to 72.18 euros; Burberry Group, down 3.3 percent to 10.59 pounds; Salvatore Ferragamo, down 2.7 percent to 5.91 euros; Moncler, down 1.3 percent to 54.28 euros; Kering Group, down 1.0 percent to 254.75 euros; and LVMH Moët Hennessy Louis Vuitton, down 0.9 percent to 497.70 euros.
