The Israel-Iran Conflict: Its Impact on the Footwear Industry through Tariffs, Fuel Prices, and Consumer Spending

The ongoing Israel-Iran conflict has had a significant impact on the global economy, particularly the footwear industry. The rise in crude oil prices has led to potential fuel surcharges for shippers and freight carriers, which could result in higher retail prices for shoes. Firms that brought goods in early before the July 9 global reciprocal tariff deadline have secured a small buffer from any immediate fuel surcharges, but the situation remains uncertain, and firms may face some fuel surcharges depending on when those orders are sent out. In addition to the potential for fuel surcharges, firms have also implemented “strategic” price increases on some items, including Steve Madden Ltd., Nike Inc., and Caleres Inc. These price increases could result in a single-digit uptick in retail prices, which is not necessarily an issue for premium brands but is a concern for consumers in lower-income households. According to data from the Footwear Distributors and Retailers of America (FDRA), shoe prices in May slid 1.6 percent as overall inflation remained “tame.” However, FDRA’s chief economist, Gary Raines, warned that higher prices are coming due to higher duties that could push the average landed cost of footwear imports higher. This could result in higher retail prices for shoes later this year. Despite these challenges, U.S. retail sales in May totaled $715.4 billion, down 0.9 percent from April. Retail trade sales were also down 0.9 percent for the month. However, retail sales excluding auto and gas grew about 4.6 percent in May versus 2024, demonstrating good growth albeit a modest slowdown from recent months. This will raise questions about consumer sentiment and demand pull-forward in advance of potential tariff-related inflation later this year. EY-Parthenon senior economist Lydia Boussour expects tariff and policy turbulence to lead to “softness in consumer demand to extend into the summer months and beyond.” While momentum in retail sales remains robust, it is “rapidly slowing.” The early boost from tariff-related buying is fading, with households shifting focus to essentials and value. To keep momentum through the summer, retailers will need to stay agile by adapting their product offerings, fine-tuning pricing strategies, and closely monitoring changing consumer preferences. Another potential headwind for footwear firms is the impact of fuel prices on consumer spending. While inflation and price increases due to tariffs are a concern for consumers, gas prices at the pump are also impacting discretionary spending. Gas prices over the next few months are expected to rise amid the backdrop of the ongoing Israel-Iran conflict, which could further impact consumer spending and discretionary categories for 2025 as consumers reign in goods spending. However, FDRA president Matt Priest told Footwear News that shoes are “recession-proof.” While consumers might choose not to buy a big-ticket item, “they will buy a pair of shoes,” he said. This could be a silver lining for the footwear industry as consumers focus on essentials and value during uncertain times. As the ongoing conflict continues to impact the global economy, it will be interesting to see how the footwear industry navigates these challenges and adapts to changing consumer preferences and spending habits.