Mena companies hike prices to cover cost of Iran war

• Input costs rising across region
• Businesses passing cost on to consumers
• PMI down in UAE and Egypt, up in Saudi

Middle Eastern companies have raised prices, passing on higher input costs to consumers as a result of the US-Israeli war with Iran, according to the latest monthly surveys.

In a report, S&P Global said that non-oil businesses in the UAE increased selling prices at the sharpest rate in almost 15 years as supply disruptions stemming from the conflict compressed margins.

The UAE non-oil private sector signalled a further loss of momentum in April, with operating conditions showing their weakest performance for more than five years, said David Owen, senior economist at S&P Global Market Intelligence.

The subsequent rise in selling prices underscored the growing inflation risks to the non-oil sector, he added.

The seasonally adjusted purchasing managers’ index (PMI) fell from 52.9 in March to 52.1 in April, marking the softest improvement in operating conditions since February 2021.

A PMI score above 50 represents growth, while a reading below 50 indicates contraction.

Non-oil companies, however, were upbeat about output projections for the coming 12 months, driven by strong business opportunities, sales pipelines and technological innovation.

Egypt

Input prices in Egypt rose at the sharpest pace since January 2023, as the war drove up the prices of a range of inputs, most notably fuel, S&P Global said in a separate report.

Around 27 percent of surveyed businesses said their input prices had risen since March, resulting in the quickest rate of overall cost inflation in more than three years. 

The survey pointed to a contraction in sales volumes as companies subsequently raised their selling prices at the fastest rate since August 2024.

The headline PMI dropped from 48 in March to 46.6 in April, the steepest contraction rate since January 2023.

Saudi Arabia

In its own report, Riyad Bank said that the April data indicated a substantial increase in cost burdens for Saudi Arabian non-oil companies. 

Uplifts in raw material prices and transportation costs resulted in the steepest rise in business expenses since the survey began nearly 17 years ago. 

Similarly, output charges rose at the second-fastest pace on record behind August 2009, as companies looked to pass on higher costs to their customers.

The headline PMI increased from 48.8 in March to 51.5 in April, returning above the 50.0 neutral threshold, signalling a modest recovery in operating conditions after the regional conflict.

Kuwait

Companies in Kuwait increased their output charges modestly as input costs fell again in April, according to S&P Global. 

Selling prices rose for 14 consecutive months, with several respondents indicating that airfares surged ahead of the resumption of air transportation.

Kuwaiti airlines restarted a limited number of flights from the country’s international airport late last month following its closure due to the Iran war.

The headline PMI in Kuwait was unchanged at 46.3 in April, posting below the 50 no-change mark for the second consecutive month, suggesting a solid deterioration in business conditions.

“There was little respite for non-oil firms in Kuwait during April as the impacts of the war in the region continued to hamper operations,” said Andrew Harker, economics director at S&P Global Market Intelligence.

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The US-Israel and Iran war began on February 28. The conflict led to a near closure of the Strait of Hormuz, a key waterway for nearly a fifth of the world’s oil and gas supplies. 

The US and Iran have imposed blockades on the strait. Tehran is reviewing the US response to its peace proposal.