A hefty price to pay, Iran conflict could lead to freight cost headwinds for retailers in Australia

Macquarie analysts warned on Tuesday that ongoing conflict in Iran could create significant freight cost pressures for Australian household retailers, particularly those exposed to furniture imports.

The conflict in the Persian Gulf has disrupted approximately 29% of global oil production through the closure of the Strait of Hormuz, while Houthi proxies have caused further disruption to Suez Canal shipping routes. Macquarie’s analysis indicates an immediate negative impact of more than 2% on fiscal year 2027 net profit after tax for retailers if current conditions persist.

The analysts identified three main direct impacts from the Iran situation. First, higher fuel costs from the Hormuz closure and potentially higher freight costs from reduced container availability due to Suez rerouting to the Cape of Good Hope. Second, longer transit times to the UK. Third, higher rates from Iran conflict inflation affecting both demand and the ability to pass through costs.

Household retailers face particular exposure due to the large size and low retail price density of furniture, with freight costs representing approximately 8% of cost of goods sold. Both companies mentioned in the analysis have upcoming freight cost renewals, creating risk in the event of sustained Iran-related disruption to Hormuz and Suez lasting more than three weeks.