Iran Conflict Impacts Corporate Finances

The conflict in the Middle East is hitting the global economy where it hurts most: its energy supply. Following the U.S. and Israeli attacks on Iran and the subsequent closure of the Strait of Hormuz, oil and gas prices have skyrocketed. For many companies in Germany, this represents a financial shock with immediate consequences for liquidity, margins, and investment capacity—and possibly even for their very survival. First and foremost, rising energy prices are having a direct impact on cost structures. Particularly energy-intensive sectors such as the chemical, steel, aluminum, glass, and paper industries are suddenly facing significantly higher production costs. But the effects extend far beyond these sectors: Higher energy prices drive up the costs of transportation, logistics, and numerous intermediate products, thereby pushing costs upward along the entire value chain.

For corporate finances, this means one thing above all else: a growing need for liquidity. Energy, transportation, and materials must be purchased at higher prices and pre-financed, while payment terms for customers and within the supply chain generally remain unchanged. Pressure on working capital is mounting sharply because more capital is tied up in ongoing operating costs and inventory.

Added to this is margin pressure: often, cost increases cannot be passed on to customers immediately, or only partially. Consequently, profits shrink and equity buffers thin out, which in turn significantly limits the financial leeway for investments. Companies may be forced to postpone planned projects in the areas of transformation, digitalization, or expansion, which would in turn have negative consequences for their long-term competitiveness. Uncertainty about the future trajectory of energy prices also complicates planning. Budgets, pricing strategies, and investment decisions are suddenly based on highly volatile assumptions. At the same time, banks and investors may become more cautious in such an environment and demand higher risk premiums.

In addition to the energy-intensive industries already mentioned, such as chemicals and steel, companies in the agricultural and retail sectors—which traditionally operate on very slim margins—are also coming under increasing pressure. Many of these companies are now facing a significant reduction in their financial flexibility.

In the short term, the primary focus is therefore on securing liquidity. Companies must be prepared to postpone non-essential expenditures or may even be forced to delay payments to suppliers. However, only a strong supply chain and timely or early payments to suppliers can build mutual trust and ensure the availability of goods. This makes it important to have tools that enable this while simultaneously improving working capital. In addition, they should review and replenish their liquidity reserves to cushion price spikes and, in close coordination with banks and suppliers, agree on flexible payment terms or bridge financing.

In the long term, the current crisis highlights just how important financial resilience has become. To achieve this, issues such as more diversified supply chains, strategic energy management, and early, data-driven liquidity planning must be on the agenda of every corporate leadership team. Companies that increase their energy efficiency, reduce their dependence on oil and gas through renewable energy, diversify their supply chain risks, and digitize their financial processes can respond more flexibly to future energy price shocks. Financial resilience is therefore no longer an option, but a key prerequisite for a company’s ability to act in an increasingly uncertain world.