On February 28, the US and Israel launched joint strikes on Iran, with explosions seen across Tehran and in multiple cities across the country. In return, Tehran retaliated by launching waves of missiles and drones at Israel and towards several military bases in the Middle East where US forces operate. In the wake of this ongoing political conflict, retailers across the world have been racing to respond to avoid getting caught in the crossfire and avoid further financial losses. In D
In Dubai and other major Middle Eastern shopping hubs, many retailers, such as Chalhoub Group, which runs 900 stores for brands including Versace, Jimmy Choo and Sephora, have shut down stores, while others are continuing to operate shops with skeleton staff.
Amazon shut down its fulfillment center operations in Abu Dhabi and has temporarily suspended deliveries across the region, and has instructed its employees in Saudi Arabia and Jordan to remain indoors for the time being.
Meanwhile, many retailers across global markets are experiencing supply chain disruptions as shipping through the Strait of Hormuz – the narrow sea access to the Persian/Arabian Gulf – has almost entirely stopped in light of ongoing tensions.
This is particularly financially devastating, as the Strait of Hormuz is critical to about 25 per cent of global exports that pass through this narrow waterway, not only between Iran and Oman and the UAE, but also through other areas, including Kuwait, Iraq, Saudi Arabia, and so on.
Last week, multiple financial experts, such as Wells Fargo’s chief economist Tom Porcelli, noted that, absent a prolonged war and major long-term disruptions to key shipping routes in the Strait of Hormuz, the impact on US economic growth, inflation and monetary policy should remain modest.
How retailers need to respond in the wake of potential supply chain disruptions
Retailers and brands need to expect the best but prepare for the worst in the coming weeks.
As crisis communications expert Megan Paquin told Inside Retail, “If there’s one lesson we can take from this new military action, it’s that all businesses must remain prepared for the unexpected.”
She pointed out that, with numerous geopolitical conflicts disrupting access to affordable fuel, costs will inevitably rise, and retailers will need to decide whether to absorb the increased costs or pass them on to customers.
“When communicating how an issue affects customer experience, pricing or availability, remember to tailor your statements to the audience. It’s not about the disruption you’re facing. Keep your customers informed and empowered so they feel confident making strong purchasing decisions,” said Paquin.
Supply chain expert Isaac Hetzroni, the CEO and founder of Imprint Genius, advised that retailers should start preparing for supply chain volatility when geopolitical tensions escalate in regions tied to major shipping lanes or energy markets.
“In the wake of a geopolitical conflict, the first thing brands watch is energy and freight costs,” said Hetzroni. “Oil prices directly impact ocean freight, trucking and air cargo, so even a short disruption can start showing up in supply chains within weeks.”
Hetzroni advised retailers to make some practical moves:
Building additional buffer inventory where possible
“After the lessons of the pandemic, brands know that running extremely lean inventory can backfire when logistics suddenly tighten.”
Diversifying sourcing and manufacturing locations as part of a longer-term strategy
“Situations like this serve as another reminder of why that matters. Over the past few years, companies that once relied heavily on a single country have been gradually spreading production across multiple regions to reduce exposure to geopolitical risk, tariffs and shipping disruptions.”
Locking in freight and logistics earlier than usual
“When markets become unstable, freight capacity can tighten quickly. Securing space on vessels earlier helps avoid last-minute cost spikes.”
Staying very close to suppliers and logistics partners
“Good suppliers often see problems before retailers do. Businesses that maintain strong relationships can adjust production schedules or reroute shipments faster when disruptions occur.”
For smaller or newer retailers, Hetzroni also recommended avoiding overcomplicating their strategy and broke down three steps these players should follow:
“Start by avoiding dependence on a single factory or country. Even having a second supplier in another region can dramatically reduce risk. Second, plan lead times more conservatively. In uncertain environments, shipments often take longer than expected.
“Maintain some financial flexibility. Many disruptions don’t stop supply chains entirely – they just make them more expensive for a period of time. Retailers that have healthy margins and cash reserves are much better positioned to adapt when costs temporarily rise. Global trade has always operated alongside geopolitical uncertainty. The companies that perform best are the ones that treat supply chain resilience as a long-term strategy, not just a reaction to the latest headline.”
How retail leaders need to respond in times of crisis
In challenging times, it can be difficult for consumers and retailers to know how to respond, whether that involves shifting supply chain operations or marketing moves.
However, as Cornelia Choe, a Geneva-based leadership strategist and CEO of The Leaders Alliance, told Inside Retail, it is important, above all else, to be fully informed about the situation before making any quick decisions.
“As geopolitical tensions escalate, many business leaders are focusing less on predicting outcomes and more on strengthening their ability to adapt,” Choe said. “When the environment shifts quickly, reacting to headlines alone can narrow leaders’ thinking rather than expand it. In uncertain times, the biggest risk isn’t a lack of information. It’s assuming you already see the full picture.”
When uncertainty is high, information can change quickly from many directions, noted Choe.
“Organizations that create clear channels for sharing updates and perspectives are better able to respond quickly and thoughtfully. The strongest leaders deliberately gather perspectives across their network, including suppliers, distributors, employees, customers and other key stakeholders.”
Choe explained that this helps retailers understand how global disruptions may affect operations, supply chains, costs and demand in real time across their organizations.
She also pointed out that currently, many leadership teams are revisiting contingency plans.
Rather than relying on a single forecast, these retail leaders are preparing for multiple possible developments, such as logistics disruptions or cost fluctuations, so they can respond quickly without being forced into rushed decisions.
For retailers on the smaller, more indie side of the spectrum, Choe outlined three practical steps that can make a significant difference in handling potential disruptions ahead.
First, Choe recommended staying in close contact with stakeholders, such as suppliers, distributors, and logistics partners, to identify potential disruptions early. Second, create communication channels with customers to understand their perspective and how their priorities are shifting. Third, retailers should communicate openly with employees about possible changes that will affect them. This transparency, in turn, will build trust and will allow organizations to adapt more smoothly as conditions continue to evolve.
“In unpredictable times, perspective is power. The leaders who gather perspectives across their network aren’t only the most informed, they’re also the most adaptable.”
Further reading: Caastle clothing tech founder pleads guilty in $300 million fraud case
