Lego Navigates Rising Costs Amid Middle East Conflict

Lego A/S is preparing for increased energy and raw material costs as oil prices surge due to ongoing conflict in the Middle East. The company's chief executive highlighted that Brent crude oil prices have risen by as much as 65% since the United States and Israel conducted airstrikes on Iran on February 28, pushing prices above $100 a barrel. This volatility echoes challenges faced during the COVID-19 pandemic and the 2022 Russian invasion of Ukraine. The CEO stated, “The real impact is if it stays for a long time,” indicating that prolonged instability could significantly affect operations.

The Straits Times

In addition to energy costs, Lego is grappling with tariff volatility following recent changes in U.S. trade policy. The U.S. Supreme Court recently invalidated some of former President Donald Trump's tariffs, leading to the imposition of a new blanket 10% tariff that could escalate to 15%. Lego's strategy of maintaining production facilities close to key markets has helped mitigate some of these cost pressures. The company plans to open its first manufacturing plant in the United States in Virginia by 2027.

The Straits TimesReutersBloomberg

Despite these challenges, Lego reported robust growth across all regions and product categories in 2025, with total revenue increasing by 12% to 83.5 billion kroner (approximately $12.9 billion). This growth outpaced the global toy market, which grew by only 7% during the same period. The company experienced a 16% rise in consumer sales, driven by strong demand in the U.S., Europe, and Asia Pacific. Notably, China returned to growth after two years of stagnation.

Bloomberg

Lego is also expanding its product offerings, launching interactive "smart bricks" and collaborations with popular brands such as Formula One and Nike, as well as children's shows like "Bluey" and Pokémon. The company has no immediate plans to raise prices, focusing instead on reaching a broader consumer base and anticipating high single-digit revenue growth in 2026.

Reuters

Lego's leadership remains optimistic about the U.S. market, asserting that consumer spending continues to thrive despite geopolitical tensions. The CEO remarked, “There is momentum in the US market. It hasn’t stalled. It’s growing.” The company is committed to flexibility in navigating the volatile global environment while closely monitoring developments in the Middle East.

Bloomberg

While Lego's growth strategy appears robust, some analysts express concern over the potential long-term impacts of geopolitical instability on consumer behavior and supply chains. Critics argue that reliance on volatile energy markets and tariff fluctuations could pose risks to sustained profitability.

Reuters

There is a discrepancy regarding the potential impact of the Middle East conflict on consumer behavior. While Lego executives report no current adverse effects, some market analysts suggest that prolonged instability could eventually dampen consumer confidence and spending.

Bloomberg

• “The real impact is if it stays for a long time.” — Lego CEO

The Straits Times

• “Right now, we are more interested in managing the new tariffs,” — Lego CEO

The Straits Times

• “There is momentum in the US market,” — Lego CEO

Bloomberg