Iran war deals new blow to Europe's industrial heartland

KLEINKARLBACH, Germany: In a spartan office adorned with plastic pots and detergent packaging at German chemical company Gechem, owner Martina Nighswonger feels she's running out of options.
After years battling the fallout from the global pandemic, the spike in energy costs triggered by Russia's invasion of Ukraine and then punishing U.S. tariffs, war in the Middle East is ramping up the cost of key raw materials once again.
'There's just no letup. Every year profits get a little smaller, and eventually they're gone,' Nighswonger said at the firm's plant in Kleinkarlbach, where she now holds daily crisis meetings and takes out her frustrations on a punching bag. 'It's exhausting, and you just don't know what to do anymore.'
Gechem, which mixes chemicals for household cleaning products and bottles brake fluid for the car sector, is at the sharp end of the latest crisis to hit industries in Europe, from chemicals and plastics to metals, textiles and toys.
While the fallout from war in the Gulf is hitting companies worldwide, it's punching harder in Europe where energy prices are already higher than other regions, according to a dozen executives across Germany, France, Denmark and Switzerland.
Iran's blockade of the Strait of Hormuz following attacks by Israel and the United States had already hit oil exports before tit-for-tat strikes on huge gas installations in Iran and Qatar last week propelled crude to almost $120 a barrel, double the price at the start of 2026.
Germany's economy alone could face a 40 billion euro ($46 billion) hit over two years if oil stays at $100 a barrel, according to the IW German Economic Institute, underlining how exposed Europe's industries have become after years of high energy costs, fierce Chinese competition and plant closures.
Europe's biggest economy, still reeling from the fallout from the Ukraine war, has some of the highest wholesale power prices worldwide at $132 per megawatt hour (MWh), significantly above $48 per MWh in the United States and also higher than the $120 EU average, according to International Energy Agency data.
'Europe is on the chopping block for this and clearly does not have the margin to take a second energy hit in such a ⁠short period of time,' said Ipek Ozkardeskaya, senior analyst at Swiss bank Swissquote. 'Germany and the UK look like the most vulnerable to the energy shock.'
FULL CRISIS MODE
Founded in 1861, Gechem is emblematic of Germany's Mittelstand, a term for the 3.4 million mid-sized firms that employ over 33 million people and generate more than half the economic output in the world's third largest economy.
Gechem had sales of 46 million euros last year and employs 165 people but has frozen hiring and, for the first time in two decades, is no longer ruling out job cuts, Nighswonger said.
Plans to add a bottling machine and expand its solar power plant, two projects together worth millions of euros, are on hold.
That's partly because the price of sulfamic acid, which Gechem gets from Asian suppliers and puts in toilet and dishwasher tablets, has risen by a fifth, already adding 300,000 to 400,000 euros to its costs this year, Nighswonger said. — Reuters