Iran War Has Major Impact on European Businesses in China
This article was originally published in Italian on Class on 9th June 2026.
Please note that this is a courtesy translation of the Italian language article originally published on Class Issue at: https://www.classxhsilkroad.it/news/industria/forte-impatto-dalla-guerra-all-iran-per-le-imprese-europee-in-cina-202606091612034352
A survey by the European Chamber of Commerce in China reveals that four-fifths of the managers interviewed have experienced negative repercussions on their operations in the country, and 81% reported supply difficulties severe enough to cause production haltings in some cases.
For European companies operating in China, the consequences triggered by the US and Israeli missile strikes against Iran on February 28, 2026, are no longer merely theoretical. Beyond the unfolding human tragedy, economic repercussions are now rippling through global supply chains, investment flows, and boardrooms worldwide.
To assess the impact on its members, the European Union Chamber of Commerce in China conducted a rapid survey between late April and early May. The results paint an alarming picture: four out of five respondents stated that the conflict has negatively affected their operations in China.
Disruptions are most acute in sectors heavily reliant on inputs from the Middle East. Among the affected companies, 81% reported supply difficulties severe enough to cause production stoppages in some cases, with further disruptions expected over the coming six months. Two-thirds cited logistical issues stemming from rising transport costs and longer delivery times, while the same proportion reported a surge in energy-related expenses.
Particularly striking is the speed at which geopolitical instability is reshaping corporate strategies within China itself. More than a quarter of respondents (28%) have already altered their supply chain strategies in China. In the chemical and oil sectors, among the hardest hit, this figure rises sharply to 64%.
However, no single corporate response model has emerged from the crisis. In the chemicals and oil sector, 35% of companies are doubling down on China by further localizing their supply chains, while 29% are adopting a "dual-track" strategy: expanding operations in China while simultaneously building alternatives elsewhere. Companies in the machinery sector are following a similar pattern. Of the 35% adjusting their supply chains, 14% are increasing domestic production in China, while 21% are both deepening their presence in China and diversifying outside of it.
The emerging picture is less about companies choosing between China and the rest of the world, and more about firms experimenting with different formulas to balance resilience and efficiency. For some, this means strengthening their presence in China for various parts of the supply chain while building alternative capabilities elsewhere. Rather than adopting a one-size-fits-all strategy, companies are increasingly turning to hybrid models designed to reduce exposure to geopolitical shocks without sacrificing competitiveness.
Investment decisions are also beginning to shift under the weight of uncertainty. One in five respondents has already altered, or is considering altering their investment plans for China. Most have not yet taken decisive action, preferring instead to put projects on hold while waiting to see how the conflict unfolds.
However, not all sectors are reacting in the same way. Notably, no respondents from the transport, logistics, and distribution sector reported changes to their supply chain strategies, illustrating the uneven way in which geopolitical shocks are absorbed across different sectors of the economy.
The conflict in the Middle East is not an isolated crisis; it is an additional layer of instability compounding an already fragile global trade and investment environment. Trump’s visit to China yielded meager or unclear results: no agreement on export controls, no clear conclusion regarding tariffs, and no significant progress on the situation in the Middle East.
For multinational corporations, uncertainty continues to pile up. The challenge is no longer simply about managing costs or chasing growth; it is about learning to operate in a world where geopolitical risk has become a permanent feature of doing business.
By: Avv. Carlo D’Andrea, National Vice President of the European Union Chamber of Commerce in China and Chairman of the Board of the Shanghai Chapter, Founder and Managing Partner of D’Andrea & Partners Legal Counsel
