Dunelm expects annual pre-tax profits at the lower end of market expectations of between £210 million and £217 million. The retailer warned that profits could fall if consumer confidence remains low, attributing this to softened trading in March as shoppers delayed purchases amid uncertainty caused by the conflict. Dunelm expects only a small direct cost impact from the war.
Sales for the three months to 28 March were up 2.1% at £472 million, a slowdown from the 6.3% rise in the same period in 2025. Dunelm reported a drop in profits in the run-up to Christmas in what it called a challenging environment. Dunelm's turnover grew 1.6% to £490 million in the 13 weeks ending 28 December. Dunelm's online sales share grew to 40% in the second quarter. Dunelm runs 203 stores across the UK. Shares in Dunelm are down 27% in the year-to-date, having fallen 4% this morning. Dunelm faces an additional cost headwind from a rise in National Insurance rates from April.
Tesco also expressed caution about the impact of the Iran war on sales and widened the range of its profit guidance. The broader retail sector faces pressure from rising mortgage costs, with the average new five-year fixed-rate mortgage in the UK hitting 5.19%, a near 12-month high, up from 4.95% just before the conflict. For a typical £180,000 two-year fixed-rate mortgage, the rate increase adds £336 to annual repayments. The number of fixed mortgage deals in the UK has crashed by 530 since the conflict began. The lowest available mortgage rate in the UK rose from 3.51% at the start of March to 3.78%.
Iran has launched ballistic missiles targeting Israel, US military bases, oil depots, and infrastructure across the Gulf region. Iranian attacks on vessels in the Strait of Hormuz have dramatically reduced traffic, affecting about 20% of global oil and gas supplies. QatarEnergy suspended LNG production after an Iranian drone attack on March 2. QatarEnergy declared force majeure on all exports after the Strait of Hormuz closure.
Brent crude oil price rose to $106 per barrel, up more than 40% from $72 on February 27. The closure of the Strait of Hormuz has caused Brent crude to surge past $120 per barrel. Oil production of Kuwait, Iraq, Saudi Arabia, and UAE dropped by at least 10 million barrels per day as of 12 March.
LNG prices have risen almost 60% since the start of the war. About 84% of crude oil and 83% of LNG passing through the Strait of Hormuz in 2024 was bound for Asia. China, India, Japan, and South Korea accounted for nearly 70% of oil shipments through the Strait of Hormuz.
Dunelm navigated an 'uncertain consumer environment.'
Despite the escalation, there is consensus among oil market participants that the correlation between oil price and Middle East regional risk is broken. Oil prices have remained in a range despite escalation in the Israel-Gaza war since October 7, 2023. Oil shipments have found workarounds despite Houthi threats, with marginal effects on energy products and goods.
If the conflict is short-lived, oil prices could fall to $65 per barrel by year-end. In a longer war, oil prices could rise to around $130 per barrel in Q2.
Lebanon will suffer a 9.2% loss of GDP this year due to the conflict. Egypt has suffered revenue losses of billions per year due to decreased Suez Canal traffic.
70% of the Gulf region's food imports were disrupted by mid-March, causing a 40-120% spike in consumer prices.
Global commodity prices are set to fall through 2026 amid an historic oil glut. Global oil supply is expected to exceed demand by 1.2 million barrels per day in 2025. OPEC+ has significant spare capacity of 7 million barrels per day. Energy prices are expected to drop by 6% in 2025 and 2% in 2026. Assuming no intensification, Brent crude is expected to average $73 in 2025, down from $80 in 2024.
Key unknowns include the conflict's duration, its full impact on supply chains beyond oil and LNG, and how long consumer confidence will remain depressed. Other unknowns are whether more retailers will issue profit warnings and how long oil shipment workarounds can be sustained.