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Companies across Australia and New Zealand are reporting early financial strain due to the ongoing U.S.-Israeli conflict involving Iran. Rising fuel prices, disrupted supply chains, and weak consumer sentiment are impacting sectors such as aviation, banking, construction, and retail. Airlines have increased fares and cut capacity, while banks are setting aside higher provisions. Businesses are also facing freight cost increases and operational challenges. Some firms have revised earnings forecasts, paused investments, or introduced cost-saving measures. The situation is adding pressure to inflation and slowing business activity across the region.
Companies in Australia and New Zealand have started reflecting the financial impact of the ongoing Middle East conflict, as rising fuel prices and supply chain disruptions continue to affect operations. Businesses across sectors are facing higher costs, weaker demand, and increased uncertainty, which is gradually impacting earnings and outlooks. Advertisement
Airlines have been among the most affected. Air New Zealand withdrew its full-year earnings guidance in the past months and increased ticket prices due to volatile jet fuel costs. It also reduced flight schedules for May and June, affecting a small portion of passengers. Similarly, Qantas raised its fuel cost forecast for the second half of the year by up to AUD800 million and delayed its planned AUD150 million share buyback. The airline is adjusting its network by focusing on stronger international routes while reducing domestic capacity. Virgin Australia also expects fuel costs to rise by AUD30 million to AUD40 million and indicated that fare adjustments are being made to manage higher expenses.
Airport operations have also seen a direct impact. Auckland International Airport reported a sharp fall in traffic on Middle East routes, with passenger numbers declining by 81% and seat capacity dropping by 73% compared to last year, highlighting the disruption in international travel demand.
Outside aviation, supply chain challenges are affecting several industries. a2 Milk lowered its fiscal 2026 profit forecast due to higher freight costs and temporary disruptions impacting product availability in China. Fonterra also indicated that the conflict could lead to higher inventory levels and increased costs, along with volatility in global commodity prices.
Construction and materials companies are facing indirect exposure. Fletcher Building stated that rising energy and freight costs would lead to price increases across its divisions, with plastics seeing hikes of up to 36%. The company expects to pass these costs on to customers, reflecting broader pressure on construction demand.
In the corporate sector, Cochlear reduced its profit outlook due to weaker demand and warned of risks such as order cancellations, delivery delays, and higher costs linked to the conflict. Cleanaway Waste Management lowered its earnings forecast by about AUD20 million due to increased costs and reduced activity.
Retail and consumer-facing businesses are also under pressure. Endeavour Group expects additional supply chain costs of AUD6 million to AUD8 million and has launched a three-year plan to save AUD100 million by fiscal 2027 through operational efficiencies. Woolworths highlighted uncertainty among customers and suppliers and said its earnings growth would fall short of earlier expectations. To manage rising costs, it has frozen prices on 300 essential items for three months starting May 1.
Logistics and packaging firms are dealing with operational disruptions. Qube Holdings expects an earnings impact of AUD10 million to AUD20 million but sees potential opportunities in alternative energy investments. Orora has cut its earnings forecast for its French unit and stopped bottle production at its UAE facility due to shipping disruptions.
Banks are also preparing for potential financial stress. National Australia Bank expects credit impairment charges of AUD706 million in the first half and plans to raise up to AUD1.8 billion through its dividend reinvestment plan. Westpac has increased provisions for bad debts to their highest level since the COVID-19 period, citing volatility in interest rates and energy markets.
Engineering firm Worley estimates that the conflict could reduce its fiscal 2026 earnings by AUD30 million to AUD40 million and indicated that growth in underlying earnings may not be achieved this year.
Source Reuters
5th Jun, 2025
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