The trend: Retailers are beginning to quantify the near- and long-term impact of the war in Iran.

Next expects elevated fuel and freight costs to cut £15 million ($20 million) from its bottom line if the conflict lasts three months. That includes £8 million ($10.7 million) in additional air freight, £4 million ($5.3 million) in sea freight surcharges, and £3 million ($4 million) in higher UK energy costs. While the UK apparel retailer can offset those costs in the short term, a prolonged conflict would force price increases, raising the risk of softer demand. Even without price hikes, Next lowered its international sales growth forecast to 14.3% from 16.5% due to the conflict.

H&M warned that sustained conflict could drive up energy prices and further pressure already-strained consumers, despite having minimal direct exposure to the Middle East, which accounts for just 3% of its store base.

Why it matters: The fallout is expected to have broad global economic consequences, weakening growth, accelerating inflation, and delaying interest-rate cuts, per the OECD.

The group lowered its UK growth forecast to 0.7% from 1.2% and raised its inflation projection to 4.0% from 2.5%. It cut eurozone growth to 0.8% from 1.2% and lifted inflation to 2.6% from 1.9%.

While US growth is expected to edge up to 2.0% from 1.7%, inflation is projected to rise to 4.2% from 3.0%. That increase in prices is likely to offset strong Q1 momentum, as consumer spending slows amid declining purchasing power, weaker labor force growth, and depleted household savings.

Implications for retailers: In short order, an already tough environment has gotten significantly tougher. As consumers shift more of their spending toward energy, discretionary spending is likely to soften and price sensitivity will rise.

Retailers will need to lean into value—through pricing, promotions, or clearer positioning—to give shoppers a reason to spend. Those that don’t adapt risk losing demand as cost pressures build across the economy.

Go further: Read our Live FAQ: The Marketing & Commerce Impacts of the War in Iran on Europe.