Straits of Hormuz blockage means business needs alternative supplies or new capabilities. M&A is a likely strategic response in the medium term to the present crisis.

The latest Iran war is having an economic impact on the world economy.

Less fuel is passing to the world through the Straits of Hormuz. That means not only less travel but also less petroleum products. The result is shortages, inflation and interest rate rises. The parties may eventually reach an agreement, but what happens if they don’t or a fuzzy (less than certain) agreement emerges?

What are petroleum products, and what is petroleum used for?

Quite a lot according to the US Energy Information Commission. Petroleum products include transportation fuels, fuel oils for heating and electricity generation, asphalt and road oil, and feedstocks for making the chemicals, plastics, and synthetic materials that are in nearly everything we use. So we can expect a ripple effect into many economic sectors.

Looking ahead:

The only certain thing is uncertainty. What is business going to do? Here are a few possibilities for consideration.

In the short term, shortages of petroleum products may be expected driving up prices. Multinational corporations (MNCs) may be expected to look for alternative sources of raw materials to supply onwards or incorporate in products for onward sale.

But can higher prices be passed on to customers? If not, will other cost savings be needed to maintain profitability? In particular, will employees be laid off? How can demand be maintained if there are more unemployed?

The US and Israel have their own energy resources but their customers don’t always.

Mergers and acquisitions (M&A):

M&A deals are used to increase MNC’s capacity fast by buying other useful companies, rather than spend time building up their own capacity, which can take years.

In order to help meet demand and avoid laying off management and other personnel, we anticipate an uptick in M&A deals. The aims may be: (1) buy new sources of supply unconnected to countries on the Hormuz Straits, (2) buy up competitors in order to raise prices, (3) achieve vertical integration in the supply chain – raw materials, production, storage, distribution, retail sale.

The M&A process requires reasonable valuation of a target company and due diligence to check out what the target is worth before buying it.

There are many ways of structuring an M&A deal and the consideration to pay for it. For example, the buyer may buy shares in the seller company or its assets. The buyer may pay with cash or shares, The price may be fixed or variable (earnout). Each possibility has pros and cons.

Other ways of structuring a deal include joint ventures and contractual relationships. These may cost less than an outright purchase but typically result in reduced or no control – not the way to increase certainty of supply.

New Capabilities Caused By Adversity:

Over the years and centuries, adversity has resulted in many technological advances from equipment to communications to pharmaceuticals.  For example, the global warming climate crisis has led to the development of sustainability solutions. These include electric and hybrid vehicles. The latest Tesla Semi truck claims to have a range of 500 miles/800 kilometers and is battery powered. Little or no gulf state oil is needed, substitutes have been developed.

War is never good, but every war cloud has a silver lining – new developments that companies go on to sell to the world. Some then get acquired by a multinational group. Recent examples in the cyber protection field include the $32bn Google-Wiz M&A deal and the $25bn Palo Alto Networks-CyberArk M&A deal.

If there is any uncertainty, earn-outs (consideration contingent on results) are often used.

M&A to acquire new sources or new capabilities?

Many innovative solutions are developed by start-ups founded by technical geeks who lack all-important marketing abilities. The result has been a wave of M&A deals in which US MNCs with marketing muscle acquire innovative start-ups or their intellectual property.

What else motivates an MNC in an M&A deal? Often it is a fear of falling behind their competitors. Shortage of raw materials at reasonable prices due to the Iranian war may spur a wave of M&A deals as MNCs seek to fix that shortage and catch up with competitors. From crisis to strategic moves.  

To Sum Up – Expected Outcome:

The present blockage of the Straits of Hormuz in the Iran war has triggered an economic crisis which necessitates finding alternative sources of supply in the short term.

In the medium term, a wave of substitute capabilities may emerge followed by a wave of acquisitions by larger MNCs that cannot afford to wait to develop their own solutions.

 Concluding remarks:

• Peace may emerge, but a fragile peace. Business needs alternative supply sources or new capabilities. M&A is a likely strategic response in the medium term to the present international crisis.
• Readers are advised: to review the issues of valuation, motive and business requirements with advisors in each country concerned.
• For more general M&A information: Please read the book “M&A  This Way! “available at https://mergeacq.ai/ma-book/.
• For advice or assistance in specific cases: please email: [email protected]

© Leon Harris, MergeAcq.com, 24.3.2026