Britain’s biggest bank has issued a stark warning that the war in Iran is already corroding global business confidence, as a growing chorus of UK company bosses sound the alarm over spiralling costs, supply chain disruption and the threat of renewed inflation.
Speaking at HSBC’s Global Investment Summit in Hong Kong, chief executive Georges Elhedery told Bloomberg Television that the Lebanese-born banker was “saddened and concerned” by events in the Middle East, and increasingly worried about how long the conflict will drag on. He cautioned that uncertainty had begun to weigh on sentiment and warned the ripple effects would be felt well beyond the region, pushing up the price of oil, refined fuels, fertilisers and metals.
The comments came as Brent crude, which had breached the $100 (£74) a barrel mark on Monday, slipped 0.9% to $98.50 on Tuesday morning, even as an American blockade of Iran’s ports took effect. US and Iranian negotiators are understood to be preparing to return to Islamabad this week after 21 hours of weekend talks in the Pakistani capital closed without a breakthrough.
In London, the FTSE 100 edged 22 points higher, up 0.21% to 10,605. Imperial Brands, owner of the Davidoff and West cigarette labels and a growing stable of vaping products, was among the biggest fallers after it flagged a “more uncertain geopolitical and macro environment”.
Recruiter PageGroup added to the gloom, describing conditions across Britain, Europe, the Middle East and Asia as “tough” and warning that the Middle East crisis was driving an increasingly murky outlook for the remainder of the year. The firm noted that salaries had slipped below levels seen in 2022 and 2023.
HSBC itself is among the European lenders most exposed to the region, thanks to its 31% holding in Saudi Awwal Bank. Analysts at JP Morgan Chase estimate the Middle East generates roughly 4% of the group’s pre-tax profits. However, Mr Elhedery insisted the bank had so far seen only “very benign movement” of capital out of the region, even as some wealthy Gulf-based investors have begun scouting relocation options in Singapore and Hong Kong since Washington and Israel launched strikes on Iran on 28 February.
HSBC chair Brendan Nelson, speaking alongside his chief executive, was blunter still. A peace settlement, he argued, was essential to restoring the flow of global energy supplies, with oil-driven inflation now shaping up as one of the most serious threats facing the world economy. “The longer the disruption continues, the more the indirect effects from higher energy costs will lift inflation and depress growth,” he said.
The warnings are landing hard on Britain’s small and mid-sized manufacturers, particularly those dependent on petroleum-derived inputs. Tom Beahon, co-founder and co-chief executive of sportswear firm Castore, which kits out Premier League football sides and the England cricket team, told BBC Radio 4’s Today programme that input costs had already jumped by 10% to 15%. If the conflict rumbled on for another couple of months, he said, some of that pain would have to be passed on to consumers.
For Mr Beahon, the volatility has been even more corrosive than the headline rises. Polyester and other synthetic fabric prices, he said, had at times leapt by as much as 40% in a single day before tumbling back, making it all but impossible to plan. Logistics has proved just as fraught, with carriers thinning out flight schedules and vessels still stuck in the Strait of Hormuz, though he expressed cautious optimism that a swift resolution could spare customers the worst of it.
Virgin Atlantic chief executive Corneel Koster struck a similar note in comments to the Financial Times, revealing that jet fuel prices were now running at more than double their pre-war levels. Whatever the outcome in the Gulf, he argued, a portion of the energy price shock was likely to prove permanent.
The political temperature is also rising. As chancellor Rachel Reeves flew into Washington for the spring meetings of the International Monetary Fund and the World Bank, she called for a coordinated international response, declaring that the Iran conflict “must be a line in the sand on how we deal with global crisis and instability”.
For Britain’s SME community, already navigating sticky inflation, a sluggish recovery and a tight labour market, the message from boardrooms and bank chiefs alike is unambiguous: the longer the guns sound in the Gulf, the harder it will be to shield balance sheets, margins and, ultimately, customers from the fallout.
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HSBC warns Iran war is shaking global confidence as UK business leaders count the cost