Apr 16 (Reuters) – The United States and Israel’s war on Iran is clouding the prospects for European companies from airlines to retail, despite hopes of robust first-quarter profits, with higher energy prices, supply chain disruptions and slower growth weighing on forecasts.
The UK’s leading food retailer, Tesco, said uncertainty over the conflict could affect profits. French alcoholic drinks group Pernod Ricard warned that a decline in tourism would hurt sales, while chocolate maker Barry Callebaut cut profit forecasts, citing war-linked supply chain disruptions.
Britain’s easyJet warned of a wider first-half loss on Thursday, hurting its shares, while British retailer Dunelm said customers were reducing their spending due to conflict-related uncertainty.
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Much will depend on how long the war with Iran persists, with hopes growing for a peace deal that could open the Strait of Hormuz and ease oil flows that have driven up global prices.
Escalating regional tensions have roiled markets, raising concerns that a prolonged conflict could result in further increases in oil prices, driving up inflation and dampening consumer demand.
European companies are expected to report ‘relatively solid’ profits for the January-March quarter, said Ciaran Callaghan, head of European equity research at Amundi, despite the Iran war affecting around a third of that period.
‘It takes a while for higher oil prices to be passed on to the economy, so activity levels should not have fallen off a cliff,’ Callaghan said.
While investors estimate major European companies’ direct exposure to the Middle East to be in the low single digits, lower economic growth, supply chain disruptions, uncertainty and higher inflation are the real dangers.
Still, the magnitude of the impact will depend on the duration of the war. European stocks fell in the early weeks of the war but have since recovered as confidence improved.
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“I don’t think the first quarter numbers will disappoint, but the outlook for the rest of the year, set out in the first quarter, may disappoint,” said Ben Ritchie, head of developed markets equities at Aberdeen.
Some early reports from the chip sector already appear to support analysts’ expectations of relatively solid earnings for the quarter.
ASML, the world’s largest supplier of chipmaking tools, on Wednesday reported better-than-expected quarterly earnings and raised its annual outlook as the AI boom continues.
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German chip systems maker Aixtron also reported strong orders, raising its 2026 revenue guidance on Tuesday.
