An initial impact assessment on Automotive

The situation remains fluid, and continued volatility is likely to strain consumer confidence, business sentiment, and cross-border trade activity in the near term. For the automotive sector, this typically translates into delayed purchases, tighter credit appetite and greater caution among fleet operators and distributors. OEMs and dealers may also face higher logistics and insurance costs, as well as greater difficulty forecasting demand and managing inventory.

The baseline global LV forecast of growth in 2026 remains intact, at this stage. That is, GlobalData sees a market climbing from 92m vehicles in 2025, the best year this decade, to 93 m vehicles sold this year.

While downward adjustments have been made since the conflict began, amounting to around half a million units for 2026, the focus has been on the Middle Eastern markets themselves, and the sizeable market of Iran, in particular.

Elsewhere, the focus of any significant reductions in the LV markets in other regions will primarily come from the economic drag due to an energy-price shock. Disruption of the supply channels for oil and gas in the region is already impacting prices of those commodities. This will inevitably lead to some feed through into CPI elsewhere, including, but not limited to, Europe and North America. Added to this, higher inflation would apply pressure to interest rates, whether that be slowing the decline or reversing monetary easing. Meanwhile, the costs associated with vehicle production will also climb. All of this is an added headwind to vehicle sales.

All of that said, at this stage, the baseline forecast assumes that such an energy price shock would be fairly limited in nature. However, an escalation in the energy crisis, through higher prices still and a longer timeline of reversion to lower levels, could have somewhat stronger implications for the LV market.

GlobalData puts the risk in the order of 2-3m vehicles this year in such an event, with the drag carrying through for the next few years.

The Middle East conflict comes at a time when the auto industry is already facing significant industrial and commercial pressures. These include the cost of technological transition, new protectionist tariff policies, DRAM chip supply challenges, lacklustre demand in core markets, and enduring vehicle manufacturing overcapacity.

Aside from the direct impact on vehicle demand in the Gulf Cooperation Council (GCC) economies, the increase in global energy prices will add another layer of cost pressure to the auto industry’s highly energy-intensive supply chain.

Steel and aluminium make up a significant proportion of vehicle and powertrain composition. Steel foundries and aluminium smelters are amongst the most energy-intensive processes. In addition, plastic and polymer components are also widely used in all vehicles, and this content is almost entirely petrochemical in origin.

Military threats within the Strait of Hormuz and transit constraints elsewhere are already adding cost to logistics, with Drewy Maritime research highlighting a trebling of Very Large Crude Carriers (VLCC) rates in March since the start of 2026.

Much depends on the timeline development of the conflict. While at this stage most are assuming a short duration of disruption, there is potential for wider escalation with significant and enduring ramifications for deeper pressure on an already challenged auto industry.

“Middle East conflict: An initial impact assessment on Automotive” was originally created and published by Just Auto, a GlobalData owned brand.

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