If the branded merchandise world was hoping that the Strait of Hormuz blockage is unlikely to affect the industry, that unfortunately may have been wishful thinking.
Merch firms have weathered external global factors for well over a year. Just as global tariffs were deemed unlawful by SCOTUS – signaling the potentially drawn-out process of undoing many import penalties and even issuing refunds for paid tariffs – a major conflict arises in the Middle East involving the U.S. that could spell shifting conditions for business.
- Since the war in Iran began, the most immediate domino to have consequences reaching essentially the entire globe, including the U.S., is the blockage of the Strait of Hormuz.
- The strait is a passage between the Persian Gulf and the Gulf of Oman. Nearly 20% of the world’s oil production (among some other key shipments) runs through it. After the U.S.’s attacks on Iran, the Strait of Hormuz has been used as leverage by the latter, which blocked its passage, disrupting oil production and causing global ramifications.
Through its proximity to the passage, Iran has been extremely effective at stopping ships from passing, and the most immediate consequence has been rising gas prices.
Gas prices are just the most direct part of the cause and effect in this disruption, however. The global economy and global supply chain are accustomed to the Strait of Hormuz being open and functional, so there are likely to be ripples beyond just the oil and gas industry. It’s not necessarily about whether or not a company is importing products through the straight as much as it is about the holistic logistics of running a business affected by global factors.
- As things stand, there is no clear end point to the strait being cleared with President Trump issuing Iran a March 27 deadline to clear the passage, but Iran responded that it will not acquiesce to the demand.
- The longer the strait is blocked, the more likely the ramifications will be felt by businesses in branded merch.
“For companies that import branded merchandise, giveaways, event materials and custom products, disruptions in this region can have very real consequences – even if their cargo never physically passes through the strait,” says Claudia Sanchez, customer care manager at Exhibitions Cargo, a PPAI member business service provider that logistics, shipping and customs broker consulting.
In other words, the disruptions are more indirect than, say, a tariff, which would be easier to budget for (though, to be fair, tariffs over the past year have been used as sudden and unpredictable trade tactics).
Claudia Sanchez
Customer Care Manager, Exhibitions Cargo
“This disruption does not occur in isolation,” Sanchez says. “The promo industry is already operating in an environment shaped by cost pressures, tariff exposure and supply chain volatility. A geopolitical shock like this adds another layer of complexity rather than creating an entirely new problem.”
- To Sanchez’s point, PPAI Research indicates 57% of suppliers reported increased procurement costs, with most increases in the low to mid single-digit range for the months of January and February.
- This bubbling, steady rise in costs – due to a number of factors – is the undercurrent with which the Iran conflict has now further complicated. The initial attack on Iran by the U.S. was February 28.
Below are some of the ways that merch firms may be vulnerable to the effects of tensions in the region.
Skyrocketing Fuel Prices
This is the most direct result of the fallout. It is fairly clear cut: Oil production is being disrupted as shipments are being prevented from passing through the Strait of Hormuz, sometimes being attacked, and at times, oil facilities are ceasing their production altogether as a result.
- The U.S. does not rely primarily on oil obtained from this region of the world, but the price of oil is essentially set by a complex futures market, making it extremely volatile to a disruption in production like this.
When the cost of fuel rises, then that means that anything that requires fuel to be transported will cost more, which is essentially everything. In other words, all along the supply chain, prices could tick up as fuel becomes a higher cost point for all transporters. “Prices are unlikely to come down to pre-conflict levels any time soon without a credible end to hostilities or at the least, a significant reopening of the Strait of Hormuz,” reported Deloitte on March 18.
Deloitte
No business or employee has missed rising gas prices of late. On a practical level, this puts a strain on workers commuting to the office and will create circumstances that push many employees toward work-from-home or hybrid work environments in order to stop losing their paycheck at the gas pump, creating dilemmas for employers.
- More than pain at the pump, some experts are sounding louder alarms.
- The International Energy Agency has claimed “The Iran War is the greatest threat to global energy in history.”
Inflation And The Economy Are Vulnerable
In 2022, the war in Ukraine led to oil prices soaring and, in turn, caused annual inflation rates to go up 0.5%. That half a percentage point is essentially why the entire world knew the world “inflation” over the following year or two. Similar conditions are happening with the price of oil at the moment. An increase in inflation of 0.5% or anywhere near that would have significant impacts on the lives of many Americans, especially following the report that the U.S. labor market lost 92,000 jobs in February.
- The branded merch industry has already gone through this before: As inflation rises, budgets shrink and firms have to fight harder to convince brands that merch is an essential advertising solution and not a “nice to have.”
Currently, PPAI Research indicates that more than half of branded merch firms report margin pressure, even as a majority report revenue growth. Coming into the Iran conflict there was already a growing disconnect between revenue and profitability.
The World Trade Organization is now forecasting a major downturn in global trade for 2026. After a 4.6% increase in 2025, the WTO predicts that it will drop to 1.4% in 2026 when factoring the ongoing war in Iran.
It is also worth noting that there are catastrophic possibilities to these dominoes beyond inflation and an economic crunch. Beyond oil, one of the primary shipments that passes through the Strait of Hormuz is fertilizer, which ultimately, needs to reach its destination in order for agriculture to grow the food that the world relies on.
- Some experts warn the situation could cause a global food shock if the current situation continues.
- For now, energy costs, inflation and agriculture are tightly connected, all of which are being squeezed by the blockage of the Strait of Hormuz and will inevitably put pressure on U.S. consumers as time passes.
Planning Will Be Important… Flexibility Remains Even More Important
As has been the case with tariffs and other external factors, this is another situation beyond the control of the branded merch industry.
Sanchez from Exhibitions Cargo says that branded merch companies are liable to feel the impact through “higher landed costs, added surcharges, tighter capacity, less flexibility on urgent shipments and more pressure to commit earlier on production and delivery timelines.”
Still, preparation and flexibility will be the best way to serve customers and partners if the circumstances do affect your firm.
“We see this as a planning issue more than a panic issue,” Sanchez says. “The companies in the strongest position are usually the ones that build in more lead time, stay flexible on routing and sourcing and communicate early when market conditions begin to shift.”
