When tensions escalate in the Middle East, New Zealand’s distance from the conflict doesn’t insulate us from the economic consequences. Rising fuel costs, shipping disruptions, and inflationary pressure are already being flagged by analysts — and hospitality businesses, with their tight margins and reliance on some imported goods, are particularly vulnerable.
Why does this affect New Zealand?
The Strait of Hormuz — one of the world’s most critical oil corridors — and most Gulf and Middle Eastern airspace remain closed or heavily restricted, with Dubai, Abu Dhabi, and Doha airports operating only limited flights.
New Zealand is heavily reliant on global supply chains. The Strait of Hormuz carries around a fifth of the world’s oil, and shipping lanes there have been largely suspended during the current conflict. One New Zealand logistics company has reported the equivalent of 4,000 cargo containers in transit in that trade lane, all affected by the disruption.
What does this mean for hospitality businesses?
The impacts are not yet fully flowing through, but there are several areas to watch:
- Fuel and energy costs — Rising petrol prices don’t just show up at the pump. They flow through the entire economy via transport costs and imported inputs, and higher business costs are likely to be passed on downstream.
- Food costs – Shipping delays have a ripple effect on ingredient and supply costs. The primary concern is not production, but the halting, or slowing, of shipments, which could suppress imports for weeks. Grain and wheat-based products, sugar, and some vegetables may also be affected, as the Middle East is the world’s largest producing and exporting region of sulphur, a key ingredient in fertilisers used for these crops. For hospitality businesses already managing tight margins, even modest increases across multiple ingredients can add up quickly.
- Inflation — A sustained rise in oil prices would likely add further pressure to annual inflation, at a time when many hospitality businesses are still recovering from several years of difficult trading conditions.
- Consumer spending — If household budgets tighten as a result of higher fuel and living costs, discretionary spending — including dining out — may soften.
Tourism — risk and opportunity
The conflict also has implications for inbound tourism, and the picture is mixed. In the short term, the closure of key gateway airports such as Dubai and Doha is disrupting flight routes into New Zealand, and some travellers may remain reluctant to travel through the region even once the conflict eases.
However, there is a potential upside. With the impacts of the conflict being keenly felt on the other side of the world, travellers are looking elsewhere — and New Zealand’s reputation as a safe, welcoming, destination could work in our favour. European carriers are already shifting capacity toward alternative long-haul routes, and there is an opportunity for New Zealand to attract visitors who may have otherwise headed to the region.
For hospitality businesses, it’s worth keeping this in mind when thinking about marketing and capacity planning over the coming months. If inbound visitor numbers do increase what will that mean for your business?
Is there anything we can do?
The situation is still developing and the full impact on New Zealand remains uncertain. It’s worth keeping an eye on your key supply costs over the coming weeks and factoring potential price increases into your forward planning where you can.
Further information:
MFAT has published analysis on the trade and economic implications of the conflict, which is worth reading.
Further reporting from RNZ and the NZ Herald also provides useful context.