-- US automotive companies could lower outlooks in the second half of this year in case of a prolonged Middle East conflict or if the latest oil price shock "adversely" affects consumer confidence, RBC Capital Markets said in a note e-mailed Monday.
The US-Israel war with Iran that started at the end of February has sent energy prices surging amid the closure of the Strait of Hormuz, the world's most important chokepoint for crude flows. Oil prices hovered around $100 a barrel intraday Monday as the start of a US blockade of maritime traffic around Iran's ports reportedly became effective.
As most auto suppliers typically maintain one to two quarters of inventory, they are likely to be shielded from increasing raw materials costs in the near term, RBC analyst Tom Narayan said in a note to clients, adding that potential cost hikes in the future can be passed along to original equipment manufacturers. Overall, US suppliers have "negligible exposure" to the Middle East, according to the note.
"Importantly, we think neither OEMs nor suppliers (will) cut guidance in (the first quarter)," Narayan wrote. "That said, if the Iran conflict is prolonged or if higher oil prices adversely impact consumer confidence, we could see guidance cuts in (the second half of 2026)."
Last week, a survey by the University of Michigan showed that US consumer sentiment hit the lowest on record this month, reflecting heightened worries about higher prices and the overall economic fallout from the Middle East conflict.
Compared with suppliers, US OEMs could face "greater macro sensitivity," considering higher difficulty in passing along commodity inflation costs and a potential delay in the resolution to the US-Mexico-Canada trade pact due to the Iran war, RBC said.
"In China, the revised subsidy framework and reduction of the EV purchase tax credit could adversely impact mass-market players, where western suppliers remain structurally under-indexed," Narayan said.
In the long term, RBC projects Brent crude prices to be around $80 per barrel, with West Texas Intermediate oil seen at $75 a barrel, according to the note.
"While elevated fuel prices may support (electric vehicle) adoption in Europe, we expect limited mix shift in the US, where government incentives have been the primary demand driver for EV sales," Narayan said.
RBC said it likes Autoliv (ALV), Dauch (DCH) and Aptiv (APTV) on a risk/reward basis. The brokerage reduced its price targets on the shares of several companies, including Ford Motor (F), General Motors (GM), Tesla (TSLA), Mobileye Global (MBLY), and Lucid Group (LCID).
Earlier this month, Tesla's first-quarter deliveries missed Wall Street's estimates, with Wedbush Securities flagging a challenging demand environment for the EV maker.
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