Middle Eastern war flames spread to McDonald's

Ask AI · How does the Middle East conflict chain react to drive up the operating costs of fast food giants?

More than a month after the US and Israel attacked Iran, hamburgers and fries have also been affected.

According to the latest research report from Bernstein, an American investment research firm, fast food giants McDonald’s and Restaurant Brands International (the parent company of Burger King and Popeyes) are facing a double squeeze of “rising costs + cooling demand.”

Photo: A McDonald’s restaurant located in Austin, Texas.

According to Bloomberg, Bernstein stated during a management meeting with McDonald’s and Restaurant Brands International last Wednesday: “The Iran war could negatively impact demand and supply in the restaurant industry, leading to increased energy and commodity operating costs, some restaurant closures, and supply chain disruptions.”

The cost of bullets is being spread to every fry.

After the outbreak of hostilities, traffic through the Strait of Hormuz plummeted. The International Energy Agency had to launch the largest coordinated release of reserves in history, releasing about 400 million barrels of oil. International oil prices once approached $120 per barrel.

Rising oil prices directly pushed up two costs for the restaurant industry.

First is transportation costs. Carl Skau, Deputy Executive Director of the World Food Programme, pointed out that due to the current conflict, rising oil prices have caused food transportation costs to increase by 18%.

Gasoline and diesel refined from crude oil are the main fuels for trucks, ships, and aircraft. Rising oil prices directly lead to higher raw material transportation costs, which are usually passed on downstream through fuel surcharges and other means.

Additionally, the cold chain transportation and storage relied upon by restaurant ingredients also consume large amounts of fuel or electricity, and power generation may depend on fossil fuels, so their costs will also rise with energy prices.

Second is packaging costs. Plastic cups, wrapping films, and other food containers commonly used in fast food are derived from petrochemical raw materials. The Middle East is precisely a major global producer of petrochemical products.

According to the Ralph Lowe Energy Research Institute at Texas Kirstein University, Gulf Cooperation Council (GCC) countries produce 150 million tons of petrochemicals annually, accounting for about 12% of the global total, and these outputs are almost entirely exported through the Strait of Hormuz.

The shortage of plastic products caused by the blockade is sweeping the world. In South Korea, a plastic film factory that previously produced about 100 tons per day now can only produce 20 to 30 tons daily. Several foreign media reports indicate that residents in many countries and regions have launched a “plastic rush.”

Data from supply chain analysis firm Altana shows that the total value of petrochemical raw materials, intermediates, and finished products passing through the Gulf region is about $733 billion annually, accounting for 22% of global supply. The blockade of the Strait of Hormuz will directly impact downstream goods valued at up to $3.8 trillion, including the food industry.

Altana co-founder Peter Swartz analyzed, “The long-term effects are now a certainty. Companies are preparing for an uncertain future by seeking diversification in investments, which will undoubtedly drive up operating costs.”

In addition to direct cost increases, the “grain of grain” of food—fertilizer, an indirect raw material—costs are also rising.

The Persian Gulf region accounts for 46% of global maritime urea trade and 30% of maritime ammonia trade. About 16 million tons of fertilizers are shipped annually through the Strait of Hormuz, accounting for one-third of global maritime fertilizer trade.

Currently, many fertilizer producers in Gulf countries have suspended shipments, with over 20 fertilizer ships stranded in the strait, carrying nearly 1 million tons of fertilizer. According to U.S. Potash Corporation, by mid to late March, the offshore price of granular urea in the Middle East had risen to $604–$710 per ton, an increase of over $110 compared to before the conflict.

It is now spring in the Northern Hemisphere, and farmers face higher planting costs, which will ultimately be reflected in the wheat and corn harvests in a few months. When these rising raw materials enter the supply chain, companies like McDonald’s that rely on economies of scale to keep prices low will be the first to feel the pressure.

The consumer side is also not optimistic. According to Yahoo Finance, because low-income consumers in the U.S. spend a high proportion of their income on fuel, rising oil prices effectively impose a tax on discretionary spending like dining out. And for McDonald’s and Burger King, which emphasize value for money, their core customer base in the U.S. is precisely these people.

Although McDonald’s has a robust energy and commodity hedging program to help franchisees temporarily withstand price hikes, Bernstein warns that if energy prices remain high into the second half of 2026, these hedges will eventually expire at higher market prices. By then, franchisees’ burdens will suddenly explode, and plans for store renovations and digital expansion may be forced to slow down.

Both supply and demand are under pressure, and fast food companies like McDonald’s and Burger King will be caught in the middle, unable to move.

Their only hope now may be for the smoke in the Middle East to clear sooner.