What A World, What A World: How The War In Iran Could Heavily Disrupt The Toy Business In 2026
- 20 hours ago
- 8 min read
What A World, What A World: How The War In Iran Could Heavily Disrupt The Toy Business In 2026
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WAR IN THE MIDDLE EAST – IMPACT ON THE TOY INDUSTRY
Sadly war is ongoing in the Middle East. The human cost of the conflict is devastating — and that must always come first. But for the Toy industry, the timing and location of this war strike at the heart of our supply chain, energy costs, and some key shipping routes, threatening what was shaping up to be a fairly good year.
EXECUTIVE SUMMARY OF DISRUPTION TO THE TOY INDUSTRY FROM THE WAR IN IRAN
OIL PRICES
The oil price has soared. At the time of writing Brent Crude (the oil industry pricing benchmark) is sitting around $96 USD per barrel, versus c. $65 before the war began. Oil prices matter to the Toy industry for a few very critical reasons:
1. Cheap plastic (as used to produce the majority of Toys) is derived from Oil. If Oil prices go up, the price of plastic resin will go up - it’s a fairly direct correlation. Raw material price inflation leads to higher factory gate pricing, and therefore either higher retail pricing or lower margins for Toy companies. Having seen a couple of bad years due to Covid induced inflation coming out of the pandemic, yet more upward pricing pressures is what the Toy industry really could do without.
2. Transportation prices increase as most transportation used to transport our products is powered by Diesel fuel. Increased transportation costs will directly lead to price inflation or margin erosion.
3. This cost inflation won’t just affect the Toy industry however, it will affect so many other areas of our lives, from travel costs to and from work or school, food costs and so much more. And so, if we see overall inflation increase, then disposable incomes drop, and this could lead to a drop in demand for Toys.
SHIPPING DISRUPTION LEADING TO HIGHER COSTS & POTENTIAL SUPPLY DISRUPTION
The Middle East region is not just critical for fuel; it’s also a major transportation hub and portal. The Strait of Hormuz has been declared ‘closed to shipping’ by Iran’s government. This is not a statement and implied threat that shipping companies will take lightly. This will mostly affect the movement of Oil only, but that’s not something to be taken lightly…something like 20-25% of the world’s Oil supply passes through this strait. Constraining that level of supply will again be a major upward pressure on Oil prices – discussions are already reportedly under way for G7 nations (and potentially others) to release strategic Oil reserves to counter upward pricing pressures, but there is a real risk of a cost ‘shock’ here.
Beyond that though, the broader salvos of missiles and drones hitting out around the Middle East has caused serious delays to the movement of goods, with the Suez Canal seeing traffic slow to a mere dribble of what is usual. At least three major shipping companies have paused their container ships from going through the Suez Canal, redirecting them mostly around the Cape Of Good Hope – an elongated journey which again costs more due to increased fuel consumption AND takes 10-15 days longer. A collective shudder can be felt when looking at the impacts of ships and containers taking longer than usual and being out of position at the wrong time after the ludicrous shipping cost increases of c. 2021 into 2022, when costs went from c. $2000-2500 per container to 10 times that much.
So far (at the time of writing), Iran has not targeted either Egypt or specifically the Suez Canal, but that does not mean that shipping companies - and perhaps most importantly their insurers – are willing to crack on and presume all will be well. The Suez Canal is a key portal to European Toy markets, and so any disruption will for sure have an effect on Toy companies around the world.
The other freight disruption is to air freight, with many airports in the Middle East currently closed or running at fractional capacity. Not that most Toy companies can afford airfreight on all but the most time critical shipments, but nevertheless a sudden and significant reduction in airfreight capacity will put all alternative means of transportation capacity under higher demand, which is again likely to increase shipping costs.
A THREAT TO CHINA’S ENERGY (AND THEREFORE) PRODUCTION CAPACITY?
China has made huge strides in the last couple of decades on rapidly expanding energy usage from renewable sources while still maintaining economic growth. China is now not far away from 50% of energy usage coming from renewable sources. BUT that still leaves a gigantic amount of energy requirements coming from fossil fuels, with Oil representing c. 18-20% of China’s total energy usage. That is a massive contribution.
The following charts from the excellent Politico website show how important Iran and other shipments coming through the Strait of Hormuz are to China:
We don’t need to repeat all the stats you can see in the infographics, but let’s be clear that China could see an energy deficit due to any reduction in Oil supplies from Iran and the Straits of Hormuz. This would be likely to increase energy prices from other sources as per the laws of supply and demand, which in turn would put up prices. It’s probably not enough to cause power cuts or power rationing (thankfully), but prices will go up for sure.
You can also see that it is not just China relying on Oil passing through the Strait of Hormuz – other major Toy consuming and Toy producing countries are also reliant on this region – not least of which would be Japan (the world’s 3rd biggest Toy market) and Vietnam (Asia’s second biggest Toy manufacturer).
RISK OF SPREAD OF WAR
Just to continue the unhappy news, there is of course a much bigger risk of conflict spreading further, which would be a catastrophe for humankind. There are enough geopolitical experts out there to analyse this better than we can here, but one of the key commentaries seems to be that the start of smaller more regionalised conflicts became the precursor to WW2, and that we could be in a similar period now with smaller regional wars building up into truly global conflict. Before we get lost in a doom loop of what could happen though, let’s look at clear facts:
1. Iran’s ability to spread direct military conflict more broadly seems to be diminishing by the day.
2. Despite various claims of close partnership with Iran, both Russia and China appear to be staying out of this conflict and appear to have taken very measured and careful positions in regards to the current conflict. The only broader question is whether China’s leadership will feel that such aggressive military action taken without the agreement of the world’s major powers can be used as a justification to sally across the Taiwan Strait…let’s desperately hope not, as that would truly be a massive disaster for the Toy industry.
LOWER SUPPLY OF AND POTENTIALLY LOWER DEMAND FOR TOY INVENTORY
This one is obvious, but let’s state the obvious to be sure it’s captured. If it is hard to ship critical supplies of Oil out of the Middle East right now, it isn’t going to be easier to ship in Toy inventory. People in the region have more important concerns currently, but from the perspective of our industry supply of Toy inventory is likely to be disrupted while the conflict is ongoing.
WHAT CAN TOY COMPANIES DO ABOUT THIS SITUATION RIGHT NOW?
There are a number of actions Toy companies can be considering now – we can’t stop the war, but we can start to deal with the impacts. Here’s some things to consider to stay ahead of potential disruption: Sourcing teams could start working on material authorisations with their factories to lock in lower resin pricing wherever possible, reforecast freight costs for the remainder of 2026, and review safety stock levels for key SKUs. Thinking about if and when to bring forward Christmas commitments should also be under review. Diversifying ports of exit and boosting manufacturing closer to home where feasible should be an ongoing process anyway in these crazy times. For Finance teams, stress‑testing cashflow against a 10–15% cost increase would also be prudent.
CONCLUSION – IS THERE ANY GOOD NEWS…?
Wars don’t last forever, that seems to be the only good news here. Eventually this conflict will end or at least smoulder to a less direct military confrontation. Objectively, Iran’s ability to continue to fire missiles and drones towards regional neighbours is clearly diminishing – although any ongoing capacity to launch will be perceived as a risk by shipping companies.
Without getting into the Politics of why the war started, it’s abundantly obvious that from the perspective of the Toy trade, the quicker peace comes, the better. In the meantime, the only bright side is the timing – shipments are usually way off peak at this time of the year, but if this conflict did roll on into the summer, it would have a detrimental effect on many Toy companies.
If the conflict stabilises within weeks, the Toy industry will no doubt absorb the shock. If it drags into summer though we could see meaningful disruption to Q4 inventory, freight pricing, and retailer buying patterns, which would not be good.
The industry can’t control Geopolitics — but we can prepare to manage the volatility.
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This article is copyright 2026 RG Marketing Ltd, all rights reserved. All contributors to this article contributed under a work for hire basis on behalf of RG Marketing Ltd. Please also note, this article was written and published in the United Kingdom.
