Retail firms are warning that the conflict in the Middle East is driving up costs and could lead to price hikes if the war continues beyond the short term. 

Instability in the Middle East region will not only restrain growth in the region but is also likely to have a knock-on effect on costs, selling prices, and consumer demand in the rest of the business, warned British retailer Next on Thursday. 

The company has accounted for £15 million ($20 million) of additional costs likely to arise from the conflict, such as fuel and air freight, assuming the disruption lasts for three months. Increased costs will not affect guidance as they have been offset by savings elsewhere, it added.

“Beyond the next three months, if we see these costs persist, then we will begin to pass costs through as higher pricing,” the company said early on Thursday as it reported results for the fiscal year ending January. The Middle East represents about 6% of Next’s total turnover. 

An extended war in the Gulf region could mean a double whammy for retailers as it may increase inflationary pressures and disrupt supply chains, leading to an overall higher cost base. It could also hurt demand as consumers are increasingly squeezed by the increased cost of living, resulting in less spending on discretionary items. 

The Iran war and effective closure of the Strait of Hormuz have sent oil and gas prices soaring since the first strikes on Feb. 28, and has upended inflation forecasts in Europe and beyond. 

Companies’ price-hike expectations and wages for new hires were some of the key inflation indicators that the European Central Bank will monitor, its Chief Economist Philip Lane said on Wednesday.

H&M said Thursday that “current geopolitical instability in the Middle East could, if extended, result in slightly additional cost pressure.”

H&M early Thursday reported first-quarter local currency sales that declined by 1%, but good cost control helped the company beat expectations on profitability, the company said. It was “a quarter marked by cautious consumption and large currency translation effects,” it said.

Shares fell 2.2% in late morning trading, partially paring earlier losses. 

Next shares, meanwhile, rose 5% after the London-listed fashion brand bumped up its pretax profit guidance by £8 million to £1.21 billion for the upcoming year.

“We see this update as reassuring on the strong UK trading and implied ability to pass-through costs, vs a well-known [Middle East] disruption,” Jefferies analysts said about Next’s print.

The U.S. is preparing to send thousands more troops to the Middle East, prompting speculation about a ground attack on Iran amid conflicting accounts of peace talks.

The Pentagon is reportedly preparing to send about 3,000 troops from the Army’s 82nd Airborne Division to the Middle East, alongside two Marine Expeditionary Units, to assist military operations in Iran. CNBC has contacted the White House and is awaiting a response.

Military experts said that the number of additional troops being deployed to the region appears to be consistent with plans for discrete and time-limited operations — rather than a sustained ground campaign.

It puts two strategic Iranian islands in the spotlight and raises questions about a potential move to seize the Islamic Republic’s nuclear materials.

Retired U.S. Army Lieutenant Colonel Daniel Davis estimated that there were likely only around 4,000 to 5,000 “trigger pullers” or ground troops.

“That is enough to seize a small target for a period of time. You’ve got to understand, even the 82nd Airborne Division, it’s an immediate reaction force to provide very quick reaction on the ground but only in advance of something bigger coming in behind that,” Davis, a senior fellow and military expert at Defense Priorities, told CNBC’s “Squawk Box Asia” on Thursday.

“I have seen no evidence that any kind of a force of size has been even considered, much less alerted, prepared, equipped, trained up that you would need to go … That takes months of time to do.”

Davis said that, from the limited number of ground troops being deployed, there were three possibilities that the U.S. could theoretically execute.

The first possibility is seizing Qeshm Island, which sits “in the horseshoe bend of the Strait of Hormuz,” Davis said.

Qeshm Island, off Iran’s southern coast, is the largest island in the Persian Gulf. Located near the strategically vital Strait of Hormuz, the arrow-shaped island has emerged as a potential U.S. target amid reports that anti-ship missiles, mines, drones and attack craft are being kept there in underground tunnels.

“All enemy movements are under the full surveillance of our armed forces,” Iran’s Speaker of Parliament Mohammad-Bagher Ghalibaf said on X, according to a Google translation.

“If they step out of line, all the vital infrastructure of that regional country will, without restriction, become the target of relentless attacks,” he added.

Ruben Stewart, senior fellow for land warfare at the International Institute for Strategic Studies (IISS) think tank, said the number of U.S. forces preparing to be deployed was not consistent with a sustained ground campaign.

“What is notably absent are the heavy armoured units, logistics depth, and command structures required for a prolonged land war. In practical terms, this is a force that can act quickly and selectively, but not one that could sustain operations deep inside Iran or over an extended period,” Stewart told CNBC by email.

“Seizing Kharg Island is technically feasible but escalatory, given its centrality to Iran’s oil exports. By contrast, securing Iran’s nuclear material would be the least realistic with this force as it would require a far larger, sustained ground presence,” he added.

The relatively limited level of deployment was perhaps best understood as a tool of coercive leverage, Stewart said, as U.S. President Donald Trump’s administration seeks to increase its bargaining power and signal that it has options if diplomacy fails.

The White House has said that Trump has been engaged in “productive” talks with Iran over the last three days, adding that the military operation in Iran was “ahead of schedule.”

Iran, however, has repeatedly denied holding talks with Washington.

The U.S. Postal Service on Wednesday said it is seeking to impose a temporary 8% fuel surcharge for package and express mail deliveries to deal with rising transportation costs, which include higher oil prices as a result of the Iran war.

If approved by the Postal Regulatory Commission, the surcharge would take effect April 26 and remain in place until Jan. 17, 2027, the Postal Service said in a notice on its website.

The 8% surcharge would apply to postage on Priority Mail Express, Priority Mail, USPS Ground Advantage, and Parcel Select products. First-class stamps and other mail services would not be affected.

Oil prices have jumped more than 40% since Feb. 28, when the United States and Israel attacked Iran.

“This temporary price adjustment will provide needed flexibility for the Postal Service by helping to ensure that the actual costs of doing business are covered, as required by Congress,” the Postal Service said in its announcement.

“Transportation costs have been increasing, and our competitors have reacted with a number of surcharges,” the notice said.

“We have steadfastly avoided surcharges and this charge is less than one-third of what our competitors charge for fuel alone, so even with this change, the Postal Service continues to offer great value in shipping with some of the lowest rates in the industrialized world.”

CNBC has reached out to the Postal Regulatory Commission for comment on the Postal Service’s request.

A trio of European energy CEOs has sounded a warning over energy supplies, amid the ongoing conflict in Iran and restricted access through the strategically vital Strait of Hormuz.

Amid volatile trade, crude prices have surged around 40% in recent weeks, at one point approaching $120 a barrel as investors raised concerns over a potential lack of supply.

Those concerns have been felt particularly in Asian countries so far, with the Philippines announcing an energy emergency, while South Korea says it is preparing for “worst-case scenarios.”

Japan’s Prime Minister Sanae Takaichi has asked the International Energy Agency to consider an additional release from global crude stockpiles, with the global energy watchdog having already coordinated the release of 400 million barrels of oil amongst member countries.

Japan will release national stockpiles on Thursday, with Takaichi confirming Tokyo will access the IEA stockpiles toward the end of the month.

But now there are fears the supply concerns will move westward.

“South Asia was first to get that brunt. That’s moved to Southeast Asia, Northeast Asia and then more so into Europe as we get into April,” Shell CEO Wael Sawan said at CERAWeek in Houston, Texas.

Sawan warned governments not to take actions that could magnify the impact of supply disruptions, adding that you cannot have “national security without energy security.”

Governments across Europe have already started introducing measures to shield households from rising energy costs.

Slovenia became the first country in Europe to introduce fuel rationing, Spain approved a 5-billion-euro ($5.8 billion) aid package, which included tax reductions on electricity and gas, as well as subsidies for transport operators, farmers and for the purchase of fertilizers.

European Union leaders have also discussed temporary measures to mitigate the impact of rising energy prices.

TotalEnergies CEO Patrick Pouyanné said the current oil products market is “dislocated,” telling CNBC that this is why “you see the impact in many countries, in Europe, on the gasoline price, diesel price, people being very unhappy.”

Private sector output in the euro zone sank to a 10-month low in March, amid mounting evidence of the impact the Iran conflict is having on the global economy.

The closely-watched S&P Global flash purchasing managers’ index (PMI) for the euro zone fell to 50.5 in March, marking a steep decline from the 51.9 reported in February.

Economists polled by Reuters had expected a shallower dip to 51.0. The 50.0 threshold separates expansion from contraction territory.

The reading prompted fresh warnings that the region is facing the specter of looming stagflation — a toxic combination of high inflation and unemployment, and stalling growth.

“The flash Eurozone PMI is ringing stagflation alarm bells as the war in the Middle East drives prices sharply higher while stifling growth,” Chris Williamson, chief business economist at S&P Global Market Intelligence, commented Tuesday.

“Firms’ costs are rising at the fastest rate for over three years amid the surge in energy prices and choking of supply chains resulting from the war. Supplier delays have jumped to their highest since mid-2022, largely linked to shipping issues.”

Euro zone companies surveyed by S&P Global scaled back hiring marginally during March, as bosses lowered output expectations for the year when compared with February forecasts, according to S&P Global economists.

“Stagflation” is often seen as a “worse case scenario” for economies and poses a dilemma for central banks because the tools they’d usually use to combat high inflation — higher interest rates — can stifle growth and employment, while lowering rates can boost growth but increase demand and inflation.

The euro zone is not alone in seeing private sector activity slow due to the Iran war, with PMI data from India earlier on Tuesday also showing output growth slowed to its lowest level since October 2022.

In revised forecasts released last week, the European Central Bank now expects economic growth of 0.9% in 2026, and headline inflation to average 2.6% this year.

That outlook could be optimistic, however, with S&P Global’s Williamson noting that the PMI survey’s price gauge was indicative of inflation accelerating close to 3%, “with cost pressure likely to add still further to selling price inflation in the coming months.”

“The outlook depends on the duration of the war and any potential lasting impact on energy and supply chains, but the flash PMI data underscore how the European Central Bank is no longer in a ‘good place’ with respect to growth and inflation,” Williamson said.

The March PMIs show the conflict in Iran is already having a significant impact on the euro area economy, J.P. Morgan’s Raphael Brun-Aguerre noted Tuesday.

“Overall, the survey points to a large near-term inflation impact from higher energy that could feed into core prices … The energy price shock could hit business profitability and has already damaged demand conditions and output more broadly in the region. Business sentiment is being hit significantly. European Commission data [out Monday] already showed a large hit to consumer confidence in March,” he noted in emailed analysis.

Early Tuesday, European Commission President Ursula von der Leyen said it was time for negotiations with Iran, given the “critical” nature of the global energy crisis.

“The situation is critical for the energy supply allies worldwide. We all feel the knock-on effects on gas and oil prices, our businesses and our societies, but it is of utmost importance that we come to a solution that is negotiated, and this puts an end to the hostilities that we see in the Middle East.”

President Donald Trump said in a Truth Social post Monday that, following talks with Iranian authorities, he ordered the U.S. military to postpone strikes on Iran’s power plants and energy infrastructure for five days.

He told CNBC’s Joe Kernen in a phone call shortly after the post that “we are very intent on making a deal with Iran.”

However, Iranian state media, citing an unnamed “senior security official” in a post on Telegram disputed Trump’s description of conversations, saying direct or indirect talks have not taken place between Washington and Tehran.

“There is been no negotiation and there is no negotiation, and with this kind of psychological warfare, neither the Strait of Hormuz will return to its pre-war conditions nor will there be peace in the energy markets,” state media reported the official as saying.

Trump countered later Monday morning that the U.S. and Iran “have had very, very strong talks” yielding “major points of agreement,” including that Tehran will “never have a nuclear weapon.”

Trump, speaking to reporters in Palm Beach, Florida, said his son-in-law Jared Kushner and U.S. special envoy Steve Witkoff participated in those talks Sunday evening with “a top person” in Iran.

“They want, very much to make a deal. We’d like to make a deal too,” he said. “We’re going to get together today by, probably, phone, because it’s … very hard for them to get out, I guess. But we’ll, at some point, very, very soon, meet.”

Trump said that if the five-day halt in strikes goes well, the parties could end up “settling this.”

“Otherwise, we’ll just keep bombing our little hearts out,” he said.

The president also said that he believes Israel will be “very happy” with the progress made with Iran so far.

He added that the Strait of Hormuz “will be opened very soon, if this works.”

Asked who would control the strait, Trump said it might be “jointly controlled” by himself and “whoever the ayatollah is,” suggesting that such a move would come as part of a “very serious form of regime change.”

In his Truth Social post earlier Monday, Trump said that the U.S. and Iran had “VERY GOOD AND PRODUCTIVE CONVERSATIONS REGARDING A COMPLETE AND TOTAL RESOLUTION OF OUR HOSTILITIES IN THE MIDDLE EAST.”

The U.S. president said these talks would continue through the week. It was not immediately clear who participated in the talks or when and where they were held.

U.S. stock futures rallied, the dollar fell against other major currencies, and oil prices tumbled on the news.

Speaking with Kernen, Trump said discussions with Iranian authorities had been very intense and that he remains hopeful something very substantive can be achieved.

The U.S. president also insisted on the same call that what is unfolding in Iran can be described as regime change, Kernen reported.

The White House did not immediately respond to CNBC’s request for additional information about the purported talks, and did not immediately respond to Iran’s claim that no such negotiations are underway.

The U.S. president on Saturday issued a 48-hour ultimatum to Tehran to reopen the Strait of Hormuz or face strikes on Iran’s power plants.

The narrow waterway is a key maritime corridor that connects the Persian Gulf and the Gulf of Oman. Roughly 20% of global oil and gas typically passes through it.

The deadline had been due to expire on Monday evening in Washington.

Iranian Parliament spokesperson Mohammad Baqer Qalibaf had said critical infrastructure and energy facilities in the Persian Gulf region could be “irreversibly destroyed” should Iranian power plants be attacked.

Shipping traffic through the Strait of Hormuz has virtually ground to a halt since the U.S. and Israel launched airstrikes on Iran on Feb. 28. Iran has retaliated by targeting ships trying to pass through the strait, with several incidents reported in recent weeks.

The Iran war has stoked global inflation fears and created what the International Energy Agency calls the largest supply disruption in the history of the oil market.

— CNBC’s Anniek Bao contributed to this report.

Supply measures alone won’t be enough to mitigate “the largest supply disruption in the history of the global oil market” amid an escalating conflict in the Middle East, the International Energy Agency warned on Friday.

Instead of waiting for disrupted production to recover, lowering demand could ease pressure on consumers and help bring prices down more quickly.

Minimizing road and air transport, working from home where possible, and switching to electric cooking could significantly help cushion the shock for consumers, the agency said.

Heightened geopolitical risk has rattled traders, sending not only crude prices higher but also sharply increasing costs for refined products such as diesel and jet fuel, which directly impact transportation, logistics and consumer prices.

Oil prices have surged more than 40% since the start of the U.S.-Iran war on Feb. 28, reaching their highest levels since 2022 as supply has been severely disrupted, mostly due to the effective closure of the Strait of Hormuz. 

The strait is a narrow maritime corridor off Iran’s coast that connects the Persian Gulf and the Gulf of Oman and normally carries about a fifth of global oil consumption. 

Countries have already begun tapping strategic petroleum reserves, with hundreds of millions of barrels slated for release. 

The IEA last week agreed to release 400 million barrels of oil to address the supply disruption triggered by the Iran war — the largest such action in the organization’s history — without providing a timeline for when the stocks would enter the market. 

“Addressing demand is a critical and immediate tool to reduce pressure [on] consumers by improving affordability and supporting energy security,” the IAE said Friday, as it laid out a range of measures that can be taken by households and businesses to lower demand.

Among the most impactful steps are encouraging remote work where possible, increasing carpooling and public transit use, and cutting back on non-essential air travel.

Measures focus primarily on road transport, which accounts for around 45% of global oil demand.

Working from home where possible reduces fuel demand for commuting, while lowering speed limits, shifting from private cars to public transport, and alternating private vehicle access in cities, could further reduce congestion and fuel consumption, the agency said. 

Measures to shift liquefied petroleum gas (LPG) use away from transport and towards essential applications like cooking can also help keep prices lower, as can adopting alternative clean cooking solutions that reduce reliance on LPG.

Countries are also looking to fiscal measures to ease the pressure on consumers and prevent sharp rises in fuel prices that could add to inflationary pressures.

Spain is planning to reduce the value-added-tax (VAT) on fuel to 10% from 21%, according to a local media report citing sources familiar with the matter. The government will also eliminate a 5% tax on electricity, according to the report. 

Italy on Wednesday cut excise duties on fuel, while Germany’s finance ministry has said it is looking at ways to shield consumers from rising fuel prices, such as introducing a windfall tax on oil companies. 

Early Friday, international Brent crude futures with May delivery rose 1.3% to $109.93 per barrel, while U.S. West Texas Intermediate futures with April delivery traded largely flat at $96.20.

— CNBC’s Sam Meredith contributed to this report

U.S. President Donald Trump on Wednesday warned that if Iran continued targeting Qatar’s energy facilities, America would “massively blow up the entirety of the South Pars Gas Field.”

Tehran has attacked a key energy facility in Qatar after Israel bombed the South Pars Gas in Iran, signaling a sharp escalation in the conflict and sending energy prices soaring.

Qatar said Wednesday that Iranian missiles caused “extensive damage” at Ras Laffan Industrial City, home to the largest liquefied natural gas, or LNG, export facility in the world.

Trump also denied any prior knowledge of Israel attacking South Pars, pushing back against reports that the strike was coordinated with and approved by his administration.

In a social media post Wednesday night stateside, Trump said that “the United States knew nothing about this particular attack, and the country of Qatar was in no way, shape, or form, involved with it, nor did it have any idea that it was going to happen.”

Trump also urged Israel to end attacks on the South Pars gas field, unless Iran “unwisely” decides to attack Qatar. In that case, the U.S. will “massively blow up the entirety of the South Pars Gas Field at an amount of strength and power that Iran has never seen or witnessed before.”

The attack on South Pars — the world’s largest natural gas reserve, shared between Iran and Qatar — marked the first time Israel has targeted Iranian natural gas production infrastructure since the conflict began on Feb. 28.

Iran has fired ballistic missiles at Qatar’s Ras Laffan Industrial City, with ​QatarEnergy saying the attack had caused “extensive damage” warranting deployment of emergency response teams to contain fires at the site. No casualties were reported.

Separately, Reuters reported Thursday that the U.S. government was considering deploying thousands of U.S. forces to the Middle East, raising the prospect of further escalation.

As tensions spiral, world leaders are scrambling to contain the Middle East conflict amid fears of deepening the turmoil in global energy markets.

German Foreign Minister Johann Wadephul on Wednesday warned of a “crisis of the gravest order” if global supply chains continued to be disrupted, calling for a path toward de-escalation and a cessation of hostilities once U.S. and Israeli military objectives are achieved, according to local media reports.

The United Arab Emirates called the targeting of energy facilities linked to the South Pars field in Iran a “serious escalation,” posing “a direct threat to global energy security” with severe environmental repercussions.

The UAE Ministry of Foreign Affairs also called Iran’s targeting of its Habshan gas facility and Bab field a “terrorist attack,” risking a “dangerous escalation.”

Qatar’s foreign ministry spokesperson Majed al-Ansari described the Israeli strike on South Pars as “a dangerous and irresponsible step” amid escalating regional tensions.

The Gulf nation has declared Iranian military and security attachés and their staff at the Iranian embassy in Doha “persona non grata,” ordering them to leave the country within 24 hours.

Saudi Arabia’s Foreign Minister Prince Faisal bin Farhan Al Saud also appeared to toughen the tone, reportedly saying that “what little trust there was before with Iran has completely been shattered.” Both political and non-political responses to Iran remain on the table, he added.

Iran’s Islamic Revolutionary Guard Corps on Wednesday threatened to escalate hostilities by targeting oil and gas facilities in Saudi Arabia, the UAE, and Qatar.

In a post on X, Iran’s President Masoud Pezeshkian condemned the strikes on Iran’s energy infrastructure, saying that they “could have uncontrollable consequences, the scope of which could engulf the entire world.”

The attacks on Middle East energy production facilities have further deepened supply disruption triggered by the conflict. Brent crude May futures rose 4% to $111.77 a barrel as of 10:25 p.m. ET , while U.S. West Texas Intermediate futures for April climbed over 1.3% to $97.56 per barrel.

Oil tanker traffic through the Strait of Hormuz — a vital chokepoint for one-fifth of global oil supply and a significant share of LNG exports — has plunged since the war began, with the waterway effectively closed to most commercial shipping.

A fresh wave of attacks on the United Arab Emirates’ energy infrastructure has ramped up concerns over prolonged supply disruptions amid the Iran war.

It comes after the world’s largest ultra-sour gas development was struck by a drone, a fire broke out in the UAE’s Fujairah Oil Industry Zone, and another tanker was hit near the strategically vital Strait of Hormuz.

The UAE also reopened its airspace on Tuesday after a brief shutdown following a fire caused by an Iranian drone attack hitting a fuel tank.

Operations at the UAE’s massive Shah gas field remained suspended on Tuesday following a drone attack, which caused a fire at the facility, according to Abu Dhabi authorities. No injuries were reported from the incident.

The Shah gas field is located 180 kilometers southwest of Abu Dhabi and is operated by a joint venture between ADNOC and Occidental Petroleum Corp. It has the capacity to produce 1.28 billion standard cubic feet of gas per day and 4.2 million tons of sulfur per year.

Separately, a drone attack sparked a fire at the Fujairah Oil Industry Zone, a critically important hub for the UAE’s crude exports and bunkering operations. The Fujairah government’s media office said on Tuesday that no casualties were reported.

Fujairah, one of the world’s top hubs for storing crude and fuels, is located on the eastern seaboard of the UAE and serves as a key shipping hub for the wider region.

It has faced repeated attacks in recent weeks, underlining the vulnerability of the UAE’s only export route that bypasses the Strait of Hormuz.

Shipping traffic through the Strait of Hormuz, one of the world’s most important energy choke points, has virtually ground to a halt since the U.S. and Israel launched strikes against Iran on Feb. 28. Iran has retaliated by targeting ships trying to pass through the maritime corridor.

Spanning around 248 miles from onshore oil facilities at Habshan to Fujairah, the UAE’s Abu Dhabi Crude Oil Pipeline (ADCOP), or the Habshan–Fujairah oil pipeline, is estimated to handle 1.5 million barrels per day, with a reported total capacity of close to 1.8 million barrels per day.

A tanker was also struck while at anchor by an unknown projectile about 23 nautical miles east of the UAE’s Fujairah in the Gulf of Oman, according to an update published Monday from the United Kingdom Maritime Trade Operations (UKMTO) center.

The incident caused minor structural damage, with no injuries to the crew and no environmental impact was reported, the UKMTO said.

The latest report comes after six vessels sustained damage in and around the Persian Gulf, Strait of Hormuz and Gulf of Oman last week as Iran warned oil prices could climb to $200 a barrel.

Oil prices were higher on Tuesday as energy market participants closely monitored ongoing supply disruptions.

International Brent crude futures with May delivery advanced 2.2% at $102.36 per barrel, while U.S. West Texas Intermediate futures with April delivery rose 2.2% at $95.55.

Prices have surged about 40% during the U.S.-Iran war, reaching their highest levels since 2022, as shipping through the Strait has been severely disrupted. Brent closed above $100 for the first time in four years last week.