The Iran war hits e-commerce three times

The Iran war is obviously bad for e-commerce. Why? It’s oil, but not just in the way you’d think. Higher oil prices hit e-commerce through shipping costs, then through production and input costs, and then through weaker demand and a worse rate environment. Three hits, not one.

About 20% of the world’s oil and LNG normally moves through the Strait of Hormuz right next to Iran, and the war has severely disrupted those flows. Brent briefly traded above $110 before falling back on ceasefire hopes, and even after that it was still around $100. That matters because higher oil prices do not just affect oil companies. They work their way through a large part of the e-commerce cost structure.

The first place this shows up is shipping

Higher oil prices raise the cost of bunker fuel for ocean freight, diesel for trucking, jet fuel for air cargo, and fuel more broadly for parcel networks. Those costs do not always hit immediately or all at once, but they do tend to work their way through the system. You can already see that in what carriers are saying. Hapag-Lloyd, one of the world’s largest container shipping companies, said this week that the war is costing it an extra $40 million to $50 million per week in higher fuel, insurance, and container storage costs, and that it expects to pass those costs on.

Insurance matters here too. When a major energy chokepoint becomes a war zone, carrier risk and insurance costs rise across the system — and carriers recover those costs broadly, not just on Gulf routes. Your goods don’t need to go anywhere near Iran for your shipping to get more expensive.

The second place it shows up is production cost

People often think of oil as just a transportation story. It is that, but it is also an input story. Oil and gas flow into plastics, synthetic materials, chemicals, some packaging, and factory energy. Reuters reported that U.S. import prices in February rose 1.3% (even before the war), the biggest monthly increase in nearly four years, driven by surging energy costs, with core import prices, capital goods, and consumer goods also rising. That is the more important point for e-commerce. Higher oil can make it more expensive not just to deliver the product, but to make and source the product in the first place.

To make this concrete: imagine a DTC brand doing $10M in revenue at a 15% contribution margin after shipping and COGS. A 5% increase in landed product cost and a 10% increase in outbound shipping cost doesn’t sound dramatic, but it can cut that contribution margin roughly in half, before you even get to the demand side.

Then you get to the second-order effects, which are also very meaningful.

If energy stays high, consumers have less room in their budgets. Gas costs more. Utilities can cost more. A lot of transported goods get a bit more expensive. That does not mean demand falls off a cliff. It just means the consumer gets a little tighter, a little more selective, and a little less willing to spend on marginal discretionary purchases. For e-commerce businesses, especially in more discretionary categories, that matters a lot. Reuters’ import-price report is a good early sign of how an energy shock can start broadening into the prices consumers face more generally.

And then there is the rate piece

If oil stays high, inflation gets harder to bring down. If inflation gets harder to bring down, rate cuts become less likely. Recently, U.S. mortgage rates rose to their highest level since October because the war pushed oil prices and Treasury yields higher and caused markets to scale back expectations for Fed cuts this year. That matters for e-commerce in two ways. First, weaker consumers. Second, a worse financing environment for e-commerce companies that borrow, finance inventory, or just generally need capital in a tighter rate environment.

That does not mean every e-commerce company is in trouble. If the conflict cools and oil keeps falling, a lot of this may fade. Recently oil dropped sharply on hopes of a U.S. peace proposal, which is why markets rallied this week.

But if the war drags on and oil stays elevated, e-commerce economics deteriorate fast. It’s not through one channel but three: higher shipping costs, higher input costs, and weaker consumers in a worse rate environment. That’s the combination that makes an oil shock different from ordinary cost pressure.