Businesses up and down the county sound alarm over supply, cost and demand problems from Iran war

Thursday, 16 April 2026

Business is sounding the alarm about impacts being felt in the wake of fuel and supply disruption - and believe much of the momentum seen prior to the US and Israeli attacks on Iran in late February has now been derailed.

Westpac’s Regional Roundup’s detailed findings are due to be reported next week, but in the meantime, the bank has released the upshot of conversations held with businesses around the country, many of which say they have seen a stark rise in cost pressures and uncertainty in the past month.

The concerns businesses are raising centre on supply chain risk, the difficulty of passing on higher costs, signs of softening demand and a knock to overall confidence.

Forestry stands out as particularly vulnerable, the research says.

“Many operators expect harvesting to slow sharply, especially among small to medium crews, as higher diesel, freight and shipping costs make harvesting uneconomic. This has flow on implications for ports, shipping, logistics, and regional employment.”

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A spike in fuel prices, as charted in The Post’s Under the Pump series, is having a widespread impact. Westpac said transport services, construction materials, forestry, agriculture and food processors are among those reporting sharply higher diesel and bunker fuel costs.

“However, pricing agreements are often complex. And combined with soft demand in many cases, that’s limiting the ability to pass cost increases through to customers for now.”

As previously reported, cost pass through is uneven and often incomplete, especially for small businesses with less market power. Fuel-related freight surcharges, increased fuel adjustment factors, and urgent price increases by suppliers are being implemented.

“In many cases businesses report that this is flowing straight through to pressure on margins, rather than output prices. Transport operators are beginning staged recovery plans, but acknowledge that sustained diesel price rises are unsustainable.”

And supply chain risk has escalated materially. Disruptions linked to the Middle East conflict have affected insured shipping capacity, rather than physical fuel availability at this point.

Fertiliser importers highlight severe impacts on availability, with prices having risen sharply higher. Similar concerns are emerging in relation to meat exports, feed imports and log shipping, where two way freight economics are breaking down.

Most worrying of all for business is the potentially long-term impact of soft demand. In the same week that tourist numbers were found to be nearing pre-pandemic levels, tourism businesses report cancellations and growing concern over fuel driven airfare and travel cost increases.

“In regions like Otago that have benefited from the recovery in international tourism, this is raising concerns about the strength of arrivals over the coming months. Locally, retailers and discretionary sectors worry fuel inflation will further constrain household spending, with sectors like restaurants already reporting a drop in sales.”

And confidence has taken a knock. Even where physical fuel supply remains adequate, uncertainty over shipping, insurance, currency depreciation and duration of disruption is driving conservative behaviour: delayed orders, reduced production, inventory planning for worst case scenarios, and a sharp focus on cash preservation.

“Many businesses now view fuel not just as a cost risk, but as a potential constraint on economic activity if elevated prices persist,” Westpac said.