Supply shock, demand destruction cause consumer outlook cuts

KEY TAKEAWAYS

• Conagra Brands trimmed its full-year earnings outlook, and Nike warned of a sales decline of as much as 4%, as the Iran oil shock drives up costs across consumer supply chains and threatens to curb demand.
• Analysts have slashed 2026 consumer staples earnings growth forecasts to 2.2%, down from 7% a year ago, while gasoline prices topped $4 a gallon for the first time since 2022.
• Rising fertilizer costs from the Strait of Hormuz closure could push food inflation higher in the second half of 2026, echoing the pattern that followed Russia’s 2022 invasion of Ukraine.

Background

Americans are paying more for gasoline than at any point since 2022, and the pain is just starting to reach store shelves. The war against Iran has upended one of the world’s most important energy-producing regions, sending costs surging for everything from fuel to fertilizer to packaging materials.

The International Energy Agency called the conflict “the largest supply disruption in the history of the global oil market.” The effective closure of the Strait of Hormuz has choked off oil and gas flows through the waterway, forcing Gulf producers to shutter output and sending Brent crude above $100 a barrel.

The issue

The Iran oil shock is driving up costs across supply chains and risks curbing consumer spending just as companies head into a new reporting cycle. Conagra Brands and Nike both cut their outlooks in late March, flagging what could be a difficult earnings season for consumer companies caught between rising input costs and weakening demand.

Conagra trimmed its full-year earnings outlook to $1.70, from a range of $1.70-$1.85, while Nike predicted a quarterly sales drop of as much as 4%. The Russell 3000 consumer staples index lost 10% in March, more than the 8% losses for industrials and basic materials. Only the energy sector rose. Analysts have cut 2026 earnings forecasts for the sector to imply growth of just 2.2%, compared with 7% a year ago. Bloomberg Intelligence estimates a prolonged conflict could squeeze gross margins of consumer staples companies by 200 to 500 basis points if oil stays above $100 a barrel.

A look at Conagra’s supply chain shows the pressure rippling through. Suppliers like Amcor and customers such as Sysco saw double-digit stock losses in the past month. Diesel prices jumped 95% over three months, fish 26% and wheat 19%. Nike faces similar headwinds, with a 30% jump in polyethylene costs and warnings that Middle East disruptions would cause elevated inventory.

Nike CEO Elliott Hill told staff he was frustrated with the pace of the company’s turnaround. “I’m so tired, and I know you are too, of talking about fixing this business,” Hill said during an all-hands meeting. Revenue is expected to decline for the rest of the calendar year, with the war adding to headwinds in Europe and the Middle East.

Rising fertilizer costs take six to nine months to feed through to food inflation. Crop-nutrient costs jumped about one-third in 2026, and a United Nations report warned that higher energy, fertilizer and transport costs will “increase food costs and intensify cost-of-living pressures, particularly for the most vulnerable.” About a third of global seaborne fertilizer trade passed through the Strait of Hormuz in 2024.

After a 30% surge in March, gasoline crossed $4 a gallon, up more than $1 since fighting began. Stanford researchers found that for every $1 rise in pump prices, consumer sentiment drops by 4.5 index points or more. In 2022, after Russia’s invasion of Ukraine, it took five months for gasoline to fall back below $4.

A 30-40% surge in energy costs in 2022 pushed the headline CPI rate from 7.5% to 9.1% and drove food inflation to 11%. Consumer staples stocks fell 11% that year. The macroeconomic environment is different, but the supply uncertainty is similar.

Tracking

Track consumer price index trends with the ECAN (World Economic Analyzer) function:

• Type “ecan” in the command line and select ECAN – World Economic Analyzer.
• Set the first amber box to US CPI. The shortcut is ECAN US CPI.
• Set Dimension to Percentage Change and periodicity to 01/2022 – 07/2022.

For more information on this or other functionality, click here to request a demo with a Bloomberg sales representative. Existing clients can press <HELP HELP> on their Bloomberg keyboard.