Impact of US-Israeli War on European Logistics Companies

European logistics companies are poised to report increased profits for the first quarter of 2025, largely due to the disruptions caused by the ongoing US-Israeli war with Iran. Analysts from Jefferies noted that while heightened supply-chain complexities typically benefit logistics firms such as DHL, DSV, and Kuehne+Nagel, the long-term implications of the energy crisis and broader economic repercussions could negatively impact demand later in the year. Kuehne+Nagel's management has indicated no anticipated yield pressure in their sea or air business for the first quarter, suggesting a stabilization and potential improvement in earnings.

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Airfreight volumes are projected to grow at a high single-digit rate, contrasting with seafreight volumes, which are expected to rise only at a low single-digit pace year-on-year. Bernstein analysts attributed the sluggish growth in seafreight to challenging comparisons following a surge in cargo shipments ahead of US import tariffs in April 2025. The ongoing conflict in the Middle East has exacerbated these trends, as ships increasingly avoid the Strait of Hormuz, a critical trade route, leading to heightened uncertainty in freight markets.

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The escalation of the Middle East conflict has resulted in significant disruptions to regional transport networks, causing air cargo costs to rise sharply. This increase is driven by strong demand coupled with elevated jet fuel prices and limited capacity due to ongoing disruptions. The ramifications extend beyond the Gulf region, as tensions have also affected the Red Sea, delaying the expected resumption of transits through the Suez Canal.

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Rico Luman, a senior economist at ING Research, stated that the full resumption of normal shipping routes is now delayed by several months, potentially extending until the end of the year. This situation is expected to provide short-term support for logistics companies. Major global shippers, including Maersk and Hapag-Lloyd, have begun rerouting vessels around the Cape of Good Hope since the conflict's onset, a move that has kept freight rates elevated and improved margins as higher prices quickly impact shipping lines' largely fixed cost structures.

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Despite the current profitability, analysts caution that even if the conflict resolves, global freight markets are unlikely to return to normal quickly. The ongoing geopolitical tensions and their impact on supply chains continue to cloud the future outlook for logistics companies, suggesting that the sector may face challenges ahead as the situation evolves.

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• "Full resumption is now pushed back multiple months and perhaps even until the end of the year." — Rico Luman, Senior Economist, ING Research

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• "Higher prices flow quickly through shipping lines' largely fixed cost bases." — Ben Slupecki, Analyst, Morningstar

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