Businesses are facing rising costs during the Iran war, and economists expect more strains ahead

NEW YORK– Costs are piling up for businesses during the U.S.-Israeli-led war on Iran — and many economists see a bleak outlook, with some bracing for a slowdown in hiring and investment in the months ahead.

Nearly half of U.S. business economists responding to a National Association for Business Economics survey say the conflict has had a negative impact on their operations, according to a report released Monday, and most (54%) say they have been affected by rising energy prices. More than two-thirds reported higher material spending in the past three months, the highest level NABE has seen since July 2022.

The war in Iran, which began with American and Israeli attacks on February 28, has plunged the world into an energy crisis. Crude oil prices continue to rise amid conflict between Washington and Tehran in the Strait of Hormuz, worsening soaring prices for businesses and households around the world. As fuel becomes more expensive, transportation costs place more of a burden on businesses’ daily operations. Supply disruptions for a range of other essential products, including fertilizers, are also causing growing tensions.

Consumers are increasingly footing that bill as companies pass on higher costs to their buyers, beyond the immediate sticker shock at the gas pump.

Nearly half (48%) of respondents in the NABE survey—who are economists from business, trade associations, and academia—said their companies were passing on at least some cost increases to customers, down from 60% in January. But NABE found that a growing number (16%) also expect prices to increase over the next six months, while none plan to lower them.

Most of those surveyed say their companies are now seeing strong sales and have stable profit prospects. That’s consistent with what traders are feeling more broadly on Wall Street, where eye-catching earnings from companies ranging from technology to big oil have recently helped propel markets to near-record highs.

Yet only 13% of NABE survey respondents said they expected their profits to increase in the near future. NABE says this is the lowest share seen since 2023.

Employment and spending could soon see more impacts. Nearly a quarter of respondents to the NABE survey said they planned to reduce investment and hiring over the next six months.

“Sales over the past three months have been flat, but material costs have increased and profit margins have declined,” Martha Moore, chair of the NABE survey, said in a prepared statement – ​​noting that expectations have “eased” on several indicators, while the outlook for prices continues to accelerate.

Moore, who is also chief economist and executive director of the American Chemistry Council, noted growing recession concerns. Half of respondents believe there is more than a 1 in 4 chance that the United States will enter a recession within the next year, compared to 44% of respondents who predicted such a chance in January, NABE found.